Owning in paradise can be simple process

Amazing Grace, an eight-acre estate on 280 feet of Grace Bay beach, is for sale for $14.5 million.Tourism attracts about 1 million visitors to the Turks and Caicos annually, but for some travellers, a room at a resort for a week is just the beginning.

 

Tourism attracts about 1 million visitors to the Turks and Caicos annually, but for some travellers, a room at a resort for a week is just the beginning.

For those who wish to purchase their own piece of the islands, laws in the Turks and Caicos make that process far easier than in some other jurisdictions, according to Kathryn Brown, proprietor of ERA Coralie Properties Ltd. and president of the Turks & Caicos Real Estate Association (TCREA).

Buying property here is a straightforward, simple procedure, Brown said, and buyers have guaranteed ownership – a benefit of Turks and Caicos’ association with the United Kingdom. There are no restrictions on foreign property ownership and no imposed requirements to develop land within a stipulated time.

Additionally, the Turks and Caicos tax system is attractive to many buyers, and mortgages and insurance are available to natives and new arrivals alike, she said. Buyers pay a one-time stamp duty on new purchases, but don’t pay annual property taxes or eventual capital gains taxes on property appreciation profits or income tax on rental income.

“Property owners like that they don’t have to pay a tax every year,” Brown said.

While the global economic crisis depressed the real estate market for several years, indicators improved markedly in the fourth quarter of 2012, and stabilized in early 2013. A recent decline in the number of listings serves as confirmation that last year’s increases in prices and transactions convey a trend that’s gathering strength. The majority of foreign buyers continues to come from the United States, but Canadian purchasers have risen from 5 percent to 15 percent of the market since 2008.

For Brown, the basis for optimism is obvious. Despite global losses in the real estate sector, the local market “has not lost any of what we value highly: sun, sea, and sand,” she said.

“This is a stable economy, and that’s what attracts people (to purchase here).”

A growing number of property purchasers are Canadian.

Sales of high-end single-family homes led the local market out of the recession, said Joe Zahm, Broker/ Owner, Turks & Caicos Sotheby’s International Realty, who has been involved in real estate development on the island for over two decades. He has also witnessed a real demand for upper-level ($1 million and above) condominiums for the first time in years.

While luxury homes and prime beachfront locations continue to drive the recovery, Zahm sees opportunities in sectors that haven’t bounced back as quickly. “There remain some great buys and some hangover distressed and stressed values for second- and third-tier land on Providenciales, and first tier land on outer islands.”

Zahm anticipates the announcement of new condo projects in 2013 as the existing inventory shrinks. He believes the arrival of European Plan hotels, such as the announced JW Marriott on Grace Bay, will drive continuing expansion of Providenciales’ airlift capacity – with associated benefits for property values. And, he foresees increased demand for managed single-family developments and enclaves.

750,583 Average price of property* sales from July 2012-13

Source: TCREA * homes, condos and vacant land

“The market loves this concept of purchasing a managed home, with no muss or fuss, with terrific rental income potential, if desired.”

Financing availability has loosened up a bit since the depths of the crisis, but all the local banks still carry some defaulting properties on their books, said Simon Taylor, a chartered quantity surveyor and the manager of the Turks and Caicos branch of BCQS International, a property and development consultancy with offices across the West Indies and Caribbean.

“It’s still a very tight market credit-wise,” Taylor said. “But all of the high-street banks we have here are Canadian banks, and they were generally more conservative (before the crisis than their American counterparts), and so fared better.”

Still, the financing picture in Turks and Caicos is a mixture of caution and opportunity.

“I think the banks are more careful now about wanting to know the person... and their ability to pay. You’re probably getting no more than 70 to 75 percent (financing), so you’re still looking at a significant deposit,” Taylor said. “But because lenders are still liquidating... there is opportunity to pick up property of a desirable nature at a price that’s less than it was during the boom. So, all the signs are good that things are going to improve.”

Providenciales remains the engine of the real estate sector, Brown said, but developments are popping up on South Caicos and other islands as the recovery gathers steam. Additionally, a new fractional ownership ordinance is expected to pass the House this summer, opening the door for a limited number of investors to purchase properties together.

“Fractional ownership has existed for some time in other luxury-product industries, such as jets and boats,” she said. “Why not homes?”

“[ Turks and Caicos] has not lost any of what we value highly: sun, sea, and sand. This is a stable economy, and that’s what attracts people.”

Kathryn Brown, President, TCREA

With its roots in English Common Law and traditions, property insurance in the Turks and Caicos looks largely familiar to most foreign purchasers. The local industry is regulated by the Financial Services Commission, and the companies represented by local agents and brokers undergo constant international review. There’s also a national insurance association that selfpolices industry standards.

In addition to there being no restrictions on policies for foreign property owners, insurers have worked to amend standard international rules to reflect the needs of local market.

“For example, all home policies contain exclusions for periods while the insured residences are unoccupied,” said Dwain Bayles, general manager of the Insurance Centre on Providenciales.

“As many of our foreign clients purchased their homes for use as short-term rental or as a holiday home, we have agreed with underwriters to remove the standard exclusions as long as certain basic procedures are adopted.”

With tropical storms an annual fact of life in the West Indies, local insurers retain a relatively small proportion of the risk underwritten in the Turks and Caicos. Bayles said all insurance companies in the TCI purchase reinsurance from overseas markets.

“This allows the local companies to spread their exposure, and in the event of a major hurricane our local underwriters can call on their reinsurers to contribute to their loss,” he said. “Our local industry has more than enough resources to deal with any major catastrophe.”

 

Stamp Duty Rates:

In Grand Turk, Salt Cay, South Caicos, Middle Caicos and North Caicos:

  • 5 percent or $5 for every $100 where the amount or value in consideration is $25k-100k
  • 6.5 percent or $6.50 for every $100 where the amount or value in consideration is greater than $100k

Elsewhere in the Turks and Caicos:

  • 6.5 percent or $6.50 for every $100 where the amount or value in consideration is $25k-250k
  • 8 percent or $8 for every $100 where the amount or value in consideration is $250k-500k
  • 10 percent or $10 for every $100 where the value in consideration is greater than $500k
 

Image: TC Sotheby’s International Realty/Tropical Imaging