With Florida Real Estate Too Expensive, Investors May Turn to the Bahamas
The Bahamas and other Carribbean nations are close in proximity to Florida, and may present a more appealing set of investment possibilities than South Florida real estate before long. A senior executive with a noted real estate firm in the United States said that the region’s real estate market for American buyers is strong and is getting stronger.
“Purchasing properties in the Caribbean could be a good hedge against a domestic market that is slowing down. Property values are low in many areas, but are appreciating rapidly, so a relatively small investment can yield good returns,” said Richard Cardenas, Vice President and Regional Director of RE/MAX for the Caribbean and Central America.
The Bahamas Real Estate Association has already confirmed that real estate is becoming a hot commodity for second home buyers, especially those who are seeking tax breaks. The government is trying to evaluate the impact of the second home market on the Bahaman economy, particularly on islands like New Providence, Exuma and Abaco where real estate is really taking off.
It’s not as hard to invest abroad as you might think. Unlike Mexico, which prohibits foreigners from owning property near its coasts or international borders, the Caribbean does not pose logistical obstacles. According to Cardenas, purchasing a second home in the Caribbean region is a relatively easy and low-risk process.
“There are few legal limitations on Americans buying homes. If you plan to use a second property for short vacations, up to 30 days, typically no visa is required. Many islands have a U.S. or British title system and there are no restrictions on full ownership,” he said.
Cardenas identified the growing markets in the region as Turks and Caicos, Belize, Grenada, St. Croix, St Kitts and Nevis, St. Vincent and the Grenadines and the Dominican Republic. He also mentioned that the eastern coast of Central America as a place to find a potentially great deal with little to no risk.
“In Honduras, you can purchase up to three quarters of an acre of land in your own name without forming a trust,” Cardenas said. “Many people think of the Caribbean as the string of islands running from Florida all the way to Venezuela, but Central America also has a Caribbean coast with generally low prices there. You can find some surprisingly affordable homes in Panama, Costa Rica and Honduras.”
More mature markets such as the Cayman Islands, St. John in the U.S. Virgin Islands, Puerto Rico and Jamaica have established a tourism base for years and are more expensive as a result. Real estate is booming in these areas and five star hotels and other amenities can easily be found. High-end properties in the Caribbean range from high six figures to $40 million.
The Bahamas boast prime real estate that is viewed as an especially hot commodity, particularly by foreign residents enamored with what they believe to be Paradise — at a fraction of the coast, and relatively close to the United States. The island nation is only a few hundred miles east of Florida, and investing as much as half a million dollars in a home there guarantees permanent residency status.
Paradise Island, Grand Bahama, Exuma, Abaco and Eleuthera are all gaining traction as budding real estate hotbeds. The President of the Bahamas Real Estate Association, Pat Strachan, has told the Bahama Journal that Abaco has the strongest market for second home purchases.
For the most part, the country stands to benefit economically from this real estate boom. In some situations, however, small hotel operators have expressed concerns about second homes sometimes being rented out, posing direct competition with their businesses. The government is considering changes that would require certain government fees or property taxes to be paid in that regard. It is also revising its entire land administration policy.
Prime Minister Perry Christie has conceded that his government has to be very meticulous in its planning of second homes, but enthusiastically referred to the real estate sector’s potential to help spur economic diversification. A year after the formation of the Ministry of Financial Services and Investments, the prime minister reported that the sector had flourished — to the benefit of Bahamian realtors and contractors.
The key to any real estate investment is the element of risk and the potential for steady, long-term gains. If investors conclude that the Florida real estate market has peaked (thanks to rising inventory and pricier Florida home loans), it’s only a short jaunt for them to move their operations overseas. With potential tax breaks for Americans at home, and foreign governments receptive to investors, the Bahamas and other offshore markets could really take off in the coming years.
