Trinidad and Tobago's property prices are now rising modestly
May 22, 2016
Property prices fell 20% from 2007 to 2009 due to the global crisis. Trinidad and Tobago’s property prices started to rise again in 2014, after a lacklustre performance over the past several years, according to the Association of Real Estate Agents (AREA).
The country did not recover as quickly as some Caribbean nations mainly due to a government mandate issued in 2007 requiring foreign investors to obtain a license for all land purchases in Tobago. Foreign homebuyers, who mostly come from Britain, Germany, the United States and Canada, declined sharply. The problem was exacerbated by the global crisis, according to Walter Zephirin of Seventh Heaven Properties.
House prices in the islands range from around TT$1.5 million (US$240,000) to TT$8 million (US$1.26 million), depending on size, location and amenities - though of course there are super-luxurious and also low-end houses that fall well outside this range.
In Trinidad, the price of three-bedroom single-storey home starts at around US$310,000 in January 2016, according to Sarah Joseph, a real estate broker with Sunrise Properties. In the more desirable neighborhoods of West Trinidad, modern homes are priced from about US$550,000.
At The Crossings, located on the outskirts of the bustling town of Arima in Trinidad, three bedroom houses are currently being offered from around TT$1.76 million (US$265,000) to TT$2.2 million (US$330,000). On the other hand, residential land in The Crossings sells for less than TT$120.5 (US$19) per square foot (sq. ft.).
In Tobago, the price of small condominiums starts at around US$390,000 while single-family homes start at about US$550,000.
Despite improving conditions, falling oil prices may hinder a full-scale recovery of the housing market this year, according to local real estate experts. The economy is largely dependent on the country’s large oil and gas reserves, particularly in Trinidad.
In 2015, the economy contracted by 1.8%, after falling 1% in 2014. Before that, there was growth of 1.7% in 2013 and 1.4% in 2012. The economy is projected to contract again by 1.1% this year, according to the International Monetary Fund (IMF).
In Trinidad, foreign real estate buyers can buy up to one acre of property for residential use without a license. In Tobago, by contrast, no license have been issued to foreign buyers since a requirement for licenses was introduced in October 2007.
Buyers are required to pay 5% to 10% stamp duty, plus legal fees.
Landlords of Jamaican residential rental property unhappy
During 2010 rents fell quite dramatically in Trinidad. Rents are now in some cases half what was offered only 1 year ago. To take a couple of examples, rents now average US$1,000 for 120 square metre apartments, and US$1,800 for 300 square metre apartments – nice for tenants, disappointing for landlords. Gross rental yields levels are lower than ever seen in Jamaica, during 6 year history of data-gathering at the Global Property Guide.
Rental income tax is very high
Rental Income: Rental income is taxed at a flat rate of 25%.
Property: For residential properties, real property tax is levied at 3% of the property’s market value.
Capital Gains: Generally, no capital gains tax is levied, except on properties sold within one year of acquisition which is taxed at a flat rate of 25%.
Inheritance: There are no inheritance taxes in the islands.
Residents: Residents are taxed on worldwide income at a flat rate of 25%.
Buying costs range from moderate to high in Trinidad and Tobago
Roundtrip transaction costs range from 7% to 16% of the property value. The wide variation is mainly due to stamp duty at 5% to 7.5%, with the first TTD850,000 (US$126,300) tax-exempt. The realtor's fee is around 3% to 5% paid by the seller.
Buyer and seller pay for their own lawyer. Legal fees are 0.5% to 1.5%, plus 15% VAT.
In Trinidad and Tobago, law is pro-tenant
Rent Control: Rents can be freely agreed, except for very small rentals covered by the Rent Restriction Act.
Tenant Security: The landlord needs an eviction notice from the courts to evict a tenant. It takes an average of 192 days to evict a tenant in Trinidad and Tobago, according the the Lex Mundi project.
The economy continues to struggleTrinidad and Tobago is one of the Caribbean’s richer nations. The island of Trinidad is world-famous for the Trinidad Carnival, but unlike many of its Caribbean neighbours, which rely on tourism, Trinidad depends heavily on oil and gas production. The energy sector accounts for more than 40% of GDP and 85% of merchandise exports. Its sister island Tobago, which has a wealth of secluded beaches and rainforests, benefits from the larger island’s prosperity.
However wealth does not bring immunity from recession. In 2009 Trinidad and Tobago’s GDP contracted by 4.4%, followed by a 0.1% contraction in 2010. There was recovery in 2012 with 1.4% GDP growth and 1.7% growth in 2013. However, the economy contracted again by 1% in 2014 and by another 1.8% in 2015. The economy is projected to contract again by 1.1% this year before expanding by 1.8% in 2017, according to the International Monetary Fund (IMF).
In March 2016, the country’s overall inflation rate stood 3.3%, from 3.4% in the previous month and 6.6% from a year ago, according to the Central Statistics Office, according to the IMF. Inflation is expected to be 4.1% this year.
The construction industry is getting a boost from the government’s development plan “Vision 2020”, which consists mainly of construction projects.
In the past several years, the government has prioritized economic diversification, focusing its efforts not just in the energy sector, but also in the non-energy sector and services sector.
During the September 2015 general elections, the opposition People’s National Movement (PNM) led by Keith Rowley won 23 seats of the 41-seat parliament, ousting the incumbent ruling United National Congress led by Mrs Kamla Persad-Bissessar, the former lawyer who became the country’s first woman Prime Minister in 2010. Persad-Bissessar captured the remaining 18 seats.
The current Prime Minister Keith Rowley is now facing pressures to fight corruption and reduce crime. Moreover, he also needs to make tough budget decisions over spending on social programs due to lower oil prices.
While many local residents in Trinidad and Tobago are prosperous, 17% of the population lives below the poverty line. Crime involving drugs, guns, and gangs remains a challenge, particularly in Trinidad, with murders and kidnappings topping the list.