The slow recovery of the world economy and global real estate market including the St. Lucia real estate market, following the US housing market crashhas left the eyes and ears of real estate investors in the Caribbean and around the world glued to the market. It seems that the global real estate market has or is about to bottom out. Speculation among the pundits is rife, and there is even talk of a possible double dip. This spells bad news for many investors, who have reacted adversely to the market and causing market conditions to worsen. Some others like me have breathed a sigh of relief that the current economic cycle is nearing its peak and by all measure round the bend into another cycle. I like to think of it as marking an important turning point in the industry, cause when you hit rock bottom the only way is up.

Recent house price data as released by the Halifax showed that UK house prices have plunged by more than 20% from the peak of August 2007 and despite the 2012 Olympics, London is expected to fall as much as 25% according to Elliott Wave International, one of the world's largest market forecasting firms. According to their report, UK house prices slipped in February, as recorded by the closely-watched, Halifax House Price Index, which recorded a 0.9 per cent drop in average prices, unwinding the 0.8 per cent rise in January.

BBC News reports that leading economist, Alan Bridle predicts further decline in 2011 as the average house price in Northern Ireland fell by 7.7% last year, saying that 2011 may yet see the market bottoming out of the market. In the US the real estate investment outlook is equally daunting with some states such as Riverside-San Bernardino-Ontario, California reporting as much as a 39.40% decline in the value of a home from 2007 to 2008 according to the US Home Housing Update. CNN Money reported that the home price index continued to show weakness despite very low mortgage interest rates and tax incentives to encourage home purchases. Even now in 2011 the US housing market situation has yet to inspire real estate investor confidence. According to a report by the Irvin Housing Blog earlier this month, housing markets around the country are plunging to new lows, and renewing the debate as to how low the market will plunge and for how long. Many are predicting an economic double dip and with it a plunging of the US real estate market.

According to Property Newswire the latest real estate index shows that the UK residential property market has been hit by a lack of demand, with the West Midlands and Northern Ireland areas registering the highest declines in home prices.  Unsold properties appear to be remaining on the books longer while the average number of home sales has also decreased.  In commenting on the situation, a representative of RICS, an organisation of property professional worldwide, Ian Perry is quoted as saying that “There was little change in the housing market in November; prices continued to edge lower and sales levels generally remained subdued. Despite some better economic data, fears over how future spending cuts will impact on the jobs market are clearly still weighing heavily on potential purchasers’ minds, with many deciding to ‘wait and see’ until the new year. Meanwhile, the lack of mortgage finance continues to deter first time buyers.”

A report by the Financial Times quotes one UK housing market official as indicating that “ The big picture remains a housing market with extremely low turnover and modestly falling prices, with constrained mortgage availability and economic uncertainty depressing demand, with labour market stability and a manageable interest burden also keeping the supply of property coming on to the market low,”

According to Property News Wire the lack of demand from buyers continues to stifle the market, and new buyer enquiries fell for the sixth consecutive month. First-time buyers are in particularly short supply, as large deposits required by lenders and availability of mortgage finance keep many from getting a foot on the property ladder.

European investors who cushioned the shock of the initial UK housing market crash are taking their cash elsewhere, determined not to sustain any more losses in that market. They are now looking to emerging markets that show greater prospects for recovery or at the very least more stable housing prices or a less significant decline in the value of homes.  Prior to the US housing market crash Saint Lucia in particular had seen a huge boom in its real estate market, and recorded a huge increase in the real estate sector. This increasing was surprisingly higher than Barbados where real estate prices were comparably higher or neighbouring St Vincent & the Grenadines which had not experienced as significant an increase in mainland property purchases as compared to St Lucia.

The interest of US and especially UK buyers in purchasing property abroad increased at an amazing rate over the past five years. This has been mainly attributed to a boom in the UK domestic housing market over that period as well as other European markets, making overseas properties seem both affordable and valuable. UK tv programmes such as `A Place in the Sun' are viewed to have made buyers believe that owning a property abroad is no longer just for the rich and famous. A larger group of people have now become interested in purchasing a home overseas for a variety of reasons, and the Caribbean market and in particular St Lucia became very attractive. The region’s hosting of the World Cup Cricket in 2008, although dismal in its turnout still managed to expose many European visitors to the island’s real estate offerings. The island recorded a significant increase in real estate purchases by both local and overseas investors in the period preceding Cricket World Cup and in the months to follow, up until the US housing market crash. This resulted in increased and much welcomed interest in the St Lucia property market.

However, demand for St Lucia real estate has since declined. In St Lucia the property market remains in decline despite reductions in mortgage interest rates. Buyers generally appear to be in very short supply while the numbers of properties on the market appear to have increased. Unsold properties generally seem to be remaining on the books longer while the average number of home sales has also decreased. Despite some leniency by the banks, the number of mortgage foreclosures appears to be on the increase while banks have also tightened up on the issuing of loans. Construction is generally in decline with new real estate sales very low.

The demand for home rentals has increased among prospective buyers as bank lending conditions become more stringent with mainly supersavers currently being considered for approved loans. First time home owners appear to be postponing their purchases and reverting to renting, at least in the short term and until the economy and banking sector recovers. Low income houses have increased in popularity as first time buyers find their purchasing power reduced by inflation, despite low mortgage rates.

The economy remains in a general state of decline and appears to be in further decline since the start of 2011, as evidenced by rising unemployment rates. Job losses increased in late 2010 to early 2011 as a number of larger employers including major airlines as well as small businesses continued to lay workers off. Major construction projects such as Le Paradis in the South and the popular Raffle’s Resort with its Jack Nichols Golf Course a development in Cap Estate in the north have yet to resume construction. Although Hotel Chocolate recently opened its doors to its first guests while on the other hand the controversial Soufriere Malgretoute development project slated to have commenced since 2009 and later postponed to 2010, and promising to provide an injection of employment in the Soufriere area and to reve the economy up a little, is yet to show any signs of that promise.  

With an election round the corner, it is expected that there will be some cash injections into the economy as some major government projects get underway. With large construction projects such as the US$ 4 Billion Hewanorra Airport development project slated to commence this year, it’s expected that the slugging economy will receive an election cash injection into the local economy and the real estate market will witness simultaneous short term growth.

But whilst the St Lucia real estate market appears to be in a slump, the market still appears to remain an attractive real estate investment destination for both local and foreign real estate investors looking towards emerging real estate markets for their investments. St Lucia nationals living abroad have been returning home after job losses in the US and Canadian market creating an increase in unemployment rates while also creating an increased demand for rental properties. In addition St Lucians abroad have been transferring their savings towards real estate investments in St Lucia, as they view this as a more stable and secure financial investment, although some have been capitalizing on decline in US housing prices in order to purchase their first home. Land sales are generally on an increase in contrast to the demand for houses, because of a decline in purchasing power especially among first time buyers.

In contrast to the US and UK real estate market, St Lucia appears not to be recording the huge declines in property prices, and prices have generally remained stable in contrast. However properties appear to be remaining longer on the market, with the exception of low to middle income houses, falling below EC $300,000 to $350,000. The relative stability of the St Lucia real estate market has provided additional security and confidence to investors looking for stable markets for their investments, while trying to avoid the volatility as seen in the US and UK markets. Canadian, German and especially Russian investors continue to look favorably at the St Lucia real estate market.

Speculations are ripe that once the economy recovers and the real estate market fires up again, some investors who were smart enough to invest during the slump and cash in on declining property prices, may realise as much as a 50% increase in the value of the property, if not more. So some local and foreign investors who still have some measure of liquidity are stealthy exploring the market for property deals. Many higher end properties, particularly luxury homes, estates and land for sale have come within buyer's reach. Some new areas are becoming real estate hotspots almost overnight. So that while property prices are declining in some areas, others have seen a steady increase in price.  In particular, Soufriere, Choiseul and Vieux Fort are becoming areas of interest. So that while the real estate market appears to be in a global slump, emerging markets such as St Lucia still appear to be viable and attractive options to those who still have the ability to take advantage of affordable island properties. Investors still appear to have St Lucia as one of the prime real estate markets within the Caribbean. It appears hat the demand among North Americans and Europeans for second homes in the Caribbean has not died out altogether and still remains very promising. It remains to be seen which investors would have lucked out, when the market again recovers. No doubt some savvy real estate investors will be laughing all the way to the bank.