Press release
13 Apr 2009
Barbados
Mr. Mallalieu's New Red Book by Patrick Hoyos - Business Authority
LAST WEEK I NOTED the tremendous contribution of the offshore sector to the local economy and mentioned the new publication put out by Invest Barbados, the fairly new Government agency set up to promote inward investment.
I also noted that the magazine was put together in association with the local offshore sector association, the Barbados International Business Association (BIBA).
Just before I move on today, please allow me to make a few corrections to that article: the contribution to the Treasury by the offshore sector in terms of corporation tax in 2007 was around $265 million, I have been reliably informed, not the $50 or $60 million I suggested, although it is expected to be less in 2008.
Another error, I have been informed, occurred when I suggested that offshore companies can buy cars duty free. Not so, apparently.
And finally, the president of BIBA) right now is not James Gardiner, but Lisl Lewis.
Thanks for setting me straight on those matters. Now, at the risk of committing similar blunders, I want to look at the 2009 edition of the Red Book published by Terra Caribbean.
I said it last year and am happy to repeat, that whenever a business goes to the trouble of putting out hard data and straight-talk commentary on its sector over and above its usual marketing and advertising materials, it deserves huge kudos.
Second edition
This is Terra's second edition of the Red Book and it is as packed with complex, serious discussion on the real estate sector as was the first. Most of it is way above my head, and my few comments here do not attempt to constitute a comprehensive review or summary but just point to a few facts which caught my eye as I browsed the articles.
One of the most interesting points was raised by Terra's managing director Andrew Mallalieu in his lead-off article Supply And Demand - Trends In 2009, in which he notes that real estate agencies would have 30 per cent less condominium stock to sell this year than they did last year.
This was written in late 2008, before the work stoppage at Four Seasons.
The supply of condo units has dropped, Mr. Mallalieu says, because some of the ones sold in 2008 were not replaced with new stock as "existing projects were shelved" and "new projects were cancelled".
Pre-Four Seasons, Terra was estimating that 250 units had been removed from the market based on "market conditions" as opposed to actual sales.
Apartment Sales
Demand also fell in 2008. Apartment sales in the vacation market fell from almost 400 in 2007 to almost 300 last year - a one-third drop.
The fall-off occurred despite prices remaining roughly the same as they were since 2007, with average prices of sold units staying around US $l 000 per square foot, notes Mr. Mallalieu (on the South Coast it's half that, so that gives you an idea of the spread in prices between South and West).
He also noted that since late last year some vendors had been willing to discount their beachfront apartment prices by up to 25 per cent in United States dollars, explaining that "while this appears significant to us in Barbados, the developers are generally UK-based, where a 25 per cent fall in US dollar price equates to the same return in pounds. From their perspective, they have held firm on the price".
Finally, Mr. Mallalieu predicts a "structural break" with the past, noting that "over the last ten years many of the projects in Barbados have been led by investors who have made their fortune in other industries, only to dabble in the development business in Barbados almost as a hobby".
He continues: "We believe that the market will shift to developers who are sufficiently capitalised and experienced to build out projects using their own finances and trusting their vision."
Strong words, which could completely change the way real estate projects for the vacationmarket are handled in this country.
If we completely cross that threshold it might become harder to get public support fora much-needed foreign exchange-producing industry which is seen by some to be destroying the very coastal beauty which attracted it in the first place.
West Coast condos
A few weeks ago after the Test match finished in Barbados, a few articles appeared in the London papers written by journalists who had been covering the match, extolling the virtues of the island. The only fault they found was the build-out of condos on the West Coast, and they struggled to find words to describe how ugly they had made the
coastline. Isn't it ironic?
However, it may be some time before the change predicted by Mr. Mallalieu takes hold. As Hayden Hutton notes in an accompanying article, Beachfront Condo Market, there are still 185 units for sale on the South Coast, almost all of them developed by locals, or about 4 1/2 years' supply at current sales levels.
And to return for a moment to the negative comments by the British journalists about all that West Coast development, there may be hope.
Contributor Euan Cresswell, managing director of Westmark, writes in A Flight To Quality that "a quick look at an aerial photograph of the West Coast shows that there are now very few sites for development which meet the town and country planning authorities' stipulation that no buildings should be constructed within 100 feet of the high-water mark.
"This, and a growing awareness of the need to keep and improve links to public beaches for all, will inevitably mean that the amount of beachfront development, particularly on the West Coast, will reduce in the coming years."
I highly recommend the Red Book 2009 edition. It is not the kind of book you read for entertainment, but as a professional update on the state of the real estate business in Barbados, it is an extraordinary document; and I congratulate Terra Caribbean for doing it one more time.
Patrick Hoyos
Business Authourity
Nation Publishing Company
I also noted that the magazine was put together in association with the local offshore sector association, the Barbados International Business Association (BIBA).
Just before I move on today, please allow me to make a few corrections to that article: the contribution to the Treasury by the offshore sector in terms of corporation tax in 2007 was around $265 million, I have been reliably informed, not the $50 or $60 million I suggested, although it is expected to be less in 2008.
Another error, I have been informed, occurred when I suggested that offshore companies can buy cars duty free. Not so, apparently.
And finally, the president of BIBA) right now is not James Gardiner, but Lisl Lewis.
Thanks for setting me straight on those matters. Now, at the risk of committing similar blunders, I want to look at the 2009 edition of the Red Book published by Terra Caribbean.
I said it last year and am happy to repeat, that whenever a business goes to the trouble of putting out hard data and straight-talk commentary on its sector over and above its usual marketing and advertising materials, it deserves huge kudos.
Second edition
This is Terra's second edition of the Red Book and it is as packed with complex, serious discussion on the real estate sector as was the first. Most of it is way above my head, and my few comments here do not attempt to constitute a comprehensive review or summary but just point to a few facts which caught my eye as I browsed the articles.
One of the most interesting points was raised by Terra's managing director Andrew Mallalieu in his lead-off article Supply And Demand - Trends In 2009, in which he notes that real estate agencies would have 30 per cent less condominium stock to sell this year than they did last year.
This was written in late 2008, before the work stoppage at Four Seasons.
The supply of condo units has dropped, Mr. Mallalieu says, because some of the ones sold in 2008 were not replaced with new stock as "existing projects were shelved" and "new projects were cancelled".
Pre-Four Seasons, Terra was estimating that 250 units had been removed from the market based on "market conditions" as opposed to actual sales.
Apartment Sales
Demand also fell in 2008. Apartment sales in the vacation market fell from almost 400 in 2007 to almost 300 last year - a one-third drop.
The fall-off occurred despite prices remaining roughly the same as they were since 2007, with average prices of sold units staying around US $l 000 per square foot, notes Mr. Mallalieu (on the South Coast it's half that, so that gives you an idea of the spread in prices between South and West).
He also noted that since late last year some vendors had been willing to discount their beachfront apartment prices by up to 25 per cent in United States dollars, explaining that "while this appears significant to us in Barbados, the developers are generally UK-based, where a 25 per cent fall in US dollar price equates to the same return in pounds. From their perspective, they have held firm on the price".
Finally, Mr. Mallalieu predicts a "structural break" with the past, noting that "over the last ten years many of the projects in Barbados have been led by investors who have made their fortune in other industries, only to dabble in the development business in Barbados almost as a hobby".
He continues: "We believe that the market will shift to developers who are sufficiently capitalised and experienced to build out projects using their own finances and trusting their vision."
Strong words, which could completely change the way real estate projects for the vacationmarket are handled in this country.
If we completely cross that threshold it might become harder to get public support fora much-needed foreign exchange-producing industry which is seen by some to be destroying the very coastal beauty which attracted it in the first place.
West Coast condos
A few weeks ago after the Test match finished in Barbados, a few articles appeared in the London papers written by journalists who had been covering the match, extolling the virtues of the island. The only fault they found was the build-out of condos on the West Coast, and they struggled to find words to describe how ugly they had made the
coastline. Isn't it ironic?
However, it may be some time before the change predicted by Mr. Mallalieu takes hold. As Hayden Hutton notes in an accompanying article, Beachfront Condo Market, there are still 185 units for sale on the South Coast, almost all of them developed by locals, or about 4 1/2 years' supply at current sales levels.
And to return for a moment to the negative comments by the British journalists about all that West Coast development, there may be hope.
Contributor Euan Cresswell, managing director of Westmark, writes in A Flight To Quality that "a quick look at an aerial photograph of the West Coast shows that there are now very few sites for development which meet the town and country planning authorities' stipulation that no buildings should be constructed within 100 feet of the high-water mark.
"This, and a growing awareness of the need to keep and improve links to public beaches for all, will inevitably mean that the amount of beachfront development, particularly on the West Coast, will reduce in the coming years."
I highly recommend the Red Book 2009 edition. It is not the kind of book you read for entertainment, but as a professional update on the state of the real estate business in Barbados, it is an extraordinary document; and I congratulate Terra Caribbean for doing it one more time.
Patrick Hoyos
Business Authourity
Nation Publishing Company
