US Virgin Islands' property market mixed
April 20, 2016
In St. John, where most high-value properties are located, the average home sales price increased modestly by 3.4% y-o-y in 2015, to US$1,074,847, according to Islandia Real Estate. This is in sharp contrast from price declines of 1.5% in 2014, 10.9% in 2013, and a decline of no less than 31.3% in 2012. In contrast, the average condominium sales price in St. John did not maintain the significant rises of the years 2011-2014 and actually declined by 49.2% y-o-y in 2015, to US$363,054, according to Islandia Real Estate. Despite this, St. John condo prices remain far higher than those in St. Croix. Condo prices peaked in St. John in 2014, reaching an all-time high of US$714,924. St. John also saw lower land prices in 2015.
In St. Croix, the largest of the U.S. Virgin Islands, the average home sales price surged by 21.2% to US$403,550 in 2015 from a year earlier, after a modest annual rise of 4.23% in 2014, and y-o-y drops of 18.8% in 2013, 10.1% in 2012 and 2.9% in 2011, based on figures released by Re/Max Team San Martin. Average condo prices rose by 28.5% in 2015 to US$192,440, the highest level since 2011, according to Re/Max Team San Martin.
In recent years there has been strong demand for condo units in St. Croix, with more condominiums built near hotels and resorts in St Croix and St Thomas.
In St. Thomas, where the USVI’s capital Charlotte Amalie is located, the average home sales price fell 27% in 2015 to US$658,460, according to Re/Max Team San Martin.
Home sales in all the territory’s major islands continued to fall in 2015.
- In St. John, home sales fell by 2.6% y-o-y in 2015, according to Islandia Real Estate
- In St. Croix, home sales declined by 7.9% y-o-y in 2015, according to Re/Max Team San Martin
- In St. Thomas, home sales were slightly down by 1% y-o-y in 2015
In terms of value:
- In St. John, the value of home sales increased slightly by 0.8% y-o-y in 2015, to US$40.84 million.
- In St. Croix, the value of home sales rose by 11.7% y-o-y in 2015, to US$56.5 million
- In St. Thomas, the value of home sales dropped 27.8% y-o-y in 2015, to US$61.9 million
US Virgin Islands’ property prices remain far below their pre-crisis levels.
St. John remains the US Virgin Islands’ most expensive island, even though square metre prices of houses have fallen in the past four years, according to Global Property Guide's research of April 2015. In 2011, house prices ranged from around US$5,300 to US$8,400 per square metre in St. John. Now, the price range is around US$4,500 to US$5,700 per square metre.
The same downward trend is observable in St. Croix. In 2015, the average square metre price of houses in St. Croix was around US$1,800, sharply down from around US$3,400 four years ago.
Likewise, in St. Thomas, the average price per square metre of a 120 sq. m. condo fell to US$2,950 in 2015, from US$3,200 in 2011.
The USVI’s property market is expected to continue to recover this year, as more visitors are now coming back. However the USVI remains vulnerable to the overall state of the global economy.
Prices have fallen significantly over 4 years - now for the rebound?
St. John remains the US Virgin Islands’ most expensive island, even though square metre prices of houses have fallen. Four years ago (in 2011), house prices ranged from around US$5,300 to US$8,400 per square metre. Now, the price range is around US$4,500 to US$5,700 per square metre. That’s a significant fall - though we seem to be about to see a turnaround.
The same downward trend is observable in St. Croix. In 2011, the average square metre price of houses in St. Croix was around US$3,400. Now, it’s around US$1,800.
House prices in St. Thomas have been more stable; but they too have fallen in price from an average price per square metre of a 120 sq. m. condo of US$3,200 in 2011, to US$2,950 now.
Unfortunately, data on long-term rentals is too scarce to allow us to estimate rental yields.
Property transaction costs are reasonable in US Virgin Islands, by the admittedly expensive standards of the Caribbean.
US Virgin Islands taxes are low
Rental Income: Rental income considered “not effectively connected income” is taxed at a flat rate of 10% on the gross amount, withheld by the tenant. Nonresident foreigners electing to consider their rental income as “effectively connected income” are taxed on their net income at progressive rates.
Property: Property taxes are imposed at 1.25% of the property’s assessed value. The assessed value of the property is generally 60% property’s fair market value.
Capital Gains: Capital gains received by taxpayers within the 10% and 15% tax brackets are taxed at a flat rate of 10% as of 01 January 2011. For all other taxpayers, capital gains are taxed at a flat rate of 20%.
Inheritance: Foreigners and non-permanent residents of the United States are not subject to inheritance taxes in the US Virgin Islands.
Residents: US citizens and US permanent residents living in the islands are taxed on their worldwide income.
Buying costs are moderate in the US Virgin Islands
Roundtrip transaction costs range from 10% to 14.6% of property value. The transfer tax ranges from 2% to 3.5% depending upon property value. The real estate agent's fee, at around 6%, accounts for the greater part of the costs. Legal fees are at 1% to 2%.
US Virgin Islands law is pro-tenant
Rent Control: Rents in the US Virgin Islands are frozen at their 1947 level be the Rent Control Act.
For existing housing accommodations prior to July 1947, the maximum rent ceiling is the rent imposed on July 1947. For properties built afterward, the maximum rent allowed is the initial rent charged for the property.
Tenant Security: For reasons other than rent default, the landlord must give the tenant a month’s notice of termination and must apply for a court approval prior to evicting the tenant. If the landlord is given the right to repossess the property, the tenant can delay the eviction for up to six months to give him ample time to look for alternative housing.
Three Virgin IslandsThe US Virgin Islands is composed of three main islands: St. Croix, St. John, and St. Thomas. The archipelago is an unincorporated US territory. Most federal laws apply, though customs policies differ.
Island belongers are considered American citizens and enjoy all the benefits and rights of this status. They are represented in the US House of Representatives, but not in the Senate, and are not allowed to participate in US presidential elections. But the Island government acts with relative autonomy.
St. Croix is the southernmost and the largest of the three islands. It has many isolated beaches, dense forests, and fertile lowlands. It used to be one of the region’s wealthiest islands, with a multitude of sugar plantations and a successful slave trade. Colonial ruins lie amidst the beautiful scenery.
St. John, on the other hand, is the smallest and most serene. Two-thirds of the island is a protected National Park that is a favored tourist destination. There are about 40 beaches to relax in and numerous water sports to enjoy.
St Thomas is the most developed of the US Virgin Islands. St Thomas’ capital, Charlotte Amalie, is the commercial center of the territory. Every year, more than a million cruise passengers alight in the harbor to tour the towns and indulge in duty-free shopping.
Tourism is the US Virgin Islands’ main industry. It generates 2 million visitors every year, and accounts for 80% of GDP. In 2015, the number of stay-over visitor arrivals rose by 5.3% y-o-y to 769,158 while the number of cruise passenger arrivals fell by 9.8% y-o-y to 1,878,847 people.
For the first two months of 2016, the total number of stay-over visitor arrivals in the territory dropped slightly by 0.2% y-o-y to 145,644 people, according to USVI Bureau of Economic Research, and cruise passenger visits increased 5.6% to 433,750 people over the same period.
The last few years have been very tough for the USVI’s economy, despite robust visitor numbers.
USVI’s GDP dipped 5.5% in 2009, based on figures from the U.S. Bureau of Economic Analysis. After a short-lived recovery in 2010 (GDP up 1.3%), GDP plunged again by 7.5% in 2011. Real GDP then fell by a huge 13.8% in 2012, and by 5.4% for both 2013 and 2014, mainly because of the closure of the HOVENSA refinery in 2012, which caused the layoff of around 1,200 employees.
No figures are yet available for 2015, but the economy remains weak. In January 2015, the overall unemployment rate in the U.S. Virgin Islands stood at 11.6%, down from 12.1% in the previous year, according to the USVI Bureau of Economic Research. In St. Croix, the jobless rate fell to 12% from 13.6% over the same period. In contrast, in St. Thomas/St. John, the jobless rate rose to 11.2%, from 10.7%.