Supply is greater than demand, says terra caribbean CEO
A review of commercial and residential house spots in Barbados has found that the land inventory is outstripping demand.
As such, the price has fallen over the past five years. And while more land today has been approved for development than any other time, most of the land has not yet been built on.
These were some of the findings published in The Red Book, which is in its seventh year of publication. The free property guide is produced by local real estate firm Terra Caribbean and is designed to help readers as they navigate the Barbados property market.
“In the last 20 years, the amount of arable land in Barbados has fallen by 4,000 acres to stand at 12,000 today. Much of this land has been granted change of use from agricultural to either residential or commercial or it just lies idle waiting for change of use,” reported chief executive of Terra Caribbean Andrew Mallalieu.
He said the inventory of land lots was growing and the supply was increasing at a higher rate than demand or the growth in demand.
“There is an over supply of residential land, excluding beachfront, on the market which has caused a reduction in price at the retail level. The reduction in retail price for land has flowed through to a reduction in the value of underdeveloped land by as much as 40 per cent in the last five years.
“Over that period, annual inflation has averaged just about six per cent. All things remaining equal, the growth in residential land value over the next five years will likely not outpace inflation,” he said.
According to Mallalieu, over the past three years there have been little or no new beachfront apartments started either on the South or West Coasts. Over that period, he said, there were 52 sales from the developers stock, leaving 167 units available at the end of 2013.
“Of these units, 128 are concentrated in three projects, leaving just 39 units spread around more than 15 other projects,” he added.
Mallalieu said prices of beachfront apartments were expected to recover during this year by five to 15 per cent “purely based on the scarcity of supply”.
“It is likely that within the next three years we will have effectively no stock of new units in this category. Port Ferdinand is excluded from this data set as it is considered a marina . . . . It is also important to note the high number of resale units on the market that are absorbing some of the new entrants,” he added.
Mallalieu also stated that Barbados was in need of a robust hotel room stock. He said the addition of Sandals would help “a great deal but it cannot end there”.
He said the Barbados economy could take a number of years to recover and it was hard for him to see any appreciation in property values within traditional neighbourhoods given the layoffs in the private and public sector and “the threat of increased taxes”.
“Without population growth, the driver for value will be wealth creation in the market. That unfortunately is not happening now. While I continue to believe in real estate as the favoured asset class, I caution that the appreciation in value in the short term will not match traditional norms,” he reported.