The gem of the Caribbean, as Barbados has been so fondly referred to, has always enjoyed soaring property values. That is until post 2008 when the bubble burst and served us up a very painful lesson in real estate economics with a serious market correction.
The market correction has created what is known as a buyer’s market. That is, markets are in oversupply and therefore because of the laws of demand and supply, many sellers are re-pricing their properties downwards and following the market trend. Years ago, the older generations touted capital gain from the sale of a piece of this rock as one of the most reliable investments. However, that is no longer the case, and the aged romance between Barbadian properties and sellers is now a thing of the past.
It is interesting to note that the re-pricing is not just in the lower priced market segment, such as the humble one-bedroom dwellings in the countryside, but it straddles all stratums of the housing market, including the luxury beachfront properties. In the absence of re-pricing, the volume of inventory, which has been sitting on the market in excess of five years, is noteworthy. This is evidenced by the for sale signs that can be seen all over the island for extended periods of time. Some sellers have persisted in holding out on the preferred asking price on their properties despite market forces, and have therefore had to sustain continued market losses while keeping these properties for prolonged periods of time.
In 2017 it was reported that property prices had fallen by almost 30% and 7% on the foreign and domestic market segments respectively, and at the beginning of this year that figure had risen to a 45% fall off.
Economic conditions have driven in part this buyer’s market due to the fact that more and more mortgagees have been defaulting on their loans with lending institutions. As a result, these institutions, only eager to recoup the arrears of the mortgage, have allowed properties to be sold at sometimes below market prices. The marketing and selling of these distressed properties are seen in the daily paper as auctions.
With property prices at the level they are presently at, Terra Caribbean has made some predictions for Barbados based on what they perceive to be the drivers of value in markets across the region. The drivers of value include the fact that since 2017, recorded tourismnumbers are said to be up 5% and the US
Dollar is weakening relative to the Pound Sterling. Our Gross Domestic Product for the last three years has been between 0.7% and 1.8%, our offshore industry is down, and our population growth has been level. Given these factors, Terra has predicted that property values will improve over the next five years for foreign investors due to the stronger world economy.
However, the local market, due to the economic situation, will remain stagnant at least for the next three to five years until confidence can be regained and government debt is reduced to a more manageable level.
So sellers, be aware; and buyers, enjoy the spoils of the market for now!