Trinidad & tobago: an investment guide

After enormous price increases from 1991 to 2006, the property market in the twin-islands of Trinidad and Tobago has slumped during the past two years, partly due to a new law that requires foreigners to acquire a license in order to buy property...

In 2008, the median house price dropped by nine per cent to about £99,500 from a year earlier, according to figures from the Central Bank of Trinidad and Tobago (CBTT). When adjusted for inflation, the median house price actually fell by about 19 per cent over the period.

In January, the collapse of CL Financial, one of the Caribbean's largest conglomerates, hit confidence. So has the chaos following the February 2007 Foreign Investment Tobago Lands Acquisition Order, which in effect stopped foreigners buying property in Tobago. The stock market has declined sharply. Some steel and iron plants have also been shut down. Construction activity has ground to a halt.

Sales volumes have dropped by 20 per cent, according to Stuart Spiers, Owner of Stuart Spiers Real Estate Services. "Valuators are dropping the cost of property in line with the current economic downturn, and still sales are low," said Spiers.

In the first half of 2009, prices and transactions fell further.  "As the wider economy contracts, so too does the real estate industry," said Richard Saunders, president of the Association of Real Estate Agents (AREA). "Real estate rentals and sales in the West have dropped while there remains no movement in the East.

Property prices in Trinidad and Tobago are likely to fall further in 2009, and to remain stagnant during most of 2010.  New mortgage loans are down. Prices of construction materials, especially cement and steel, are also dropping sharply.

Property prices in the islands rose by a spectacular 477 per cent (157 per cent in real terms) from 1991 to 2006, mainly due to economic growth caused by buoyant petroleum industry, and the boom in tourism and construction.

Economic slowdown

GDP growth in Trinidad and Tobago slowed in 2008 to only 3.4 per cent, down from 5.5 per cent in 2007 and 13.3 per cent in 2006. In 2009, the economy is projected to grow by just 0.5 per cent.

Trinidad and Tobago was previously one of the Caribbean's fastest growing economies. It has one of the region's highest per capita incomes, with GDP per capita in 2008 of more than £11,500.

Oil and gas contribute about 40 per cent of GDP and 80 per cent of total exports. However, energy sector growth was only 0.4 per cent in 2008, down from 1.7 per cent in 2007. 

The country has also a thriving tourism industry and financial institutions, though not as important as in many other Caribbean islands, and this non-energy sector growth has also declined somewhat, from 7.7 per cent in 2007 to 4.8 per cent in 2008.

Rising interest rates

Most real estate purchases in Trinidad and Tobago are made in cash. The mortgage market is small and slow to innovate.

In 2008, real estate mortgage loans outstanding amounted to about £1 billion, up 20.6 per cent from a year earlier, according to the Central Bank (CBTT).  However the size of the mortgage market has declined from 11.1 per cent of GDP in 1995 to around seven per cent of GDP in 2008.

Loan-to-value (LTV) ratios typically range from 75 per cent to 90 per cent of the appraised value of the property, with loan term period of 25 years.

The mortgage interest rate rose to 13 per cent in the first quarter of 2009, up from 10.9 per cent in the second quarter of 2008. In 2008, the CBTT raised benchmark interest rates several times to meet its single-digit inflation target.  Inflation rose to 12 per cent in 2008, from 7.9 per cent in 2007 and 8.3 per cent in 2006. In 2009, inflation is expected to fall slightly, to about seven per cent.

Small rental market

Most long-term rental apartments are in Trinidad, the more developed island.  The long-term rental market has been sluggish due to the contraction in offshore businesses. The short-term rental market is now much more appealing to investors, because rentals paid by short-term vacationers are now much higher than the rents paid by long-term tenants.

In 2008, the average monthly rent for a three-bedroom apartment in Port of Spain dropped by 0.3 per cent to £1,900, a setback after a spectacular 40.2 per cent increase in 2007, according to the UN International Civil Service Commission (ICSC).

New law freezes Tobago real estate

In Tobago, foreigners who want to purchase land must first obtain a license from the Tobago House of Assembly, since the February 2007 Foreign Investment Tobago Lands Acquisition Order.

Because no proper system is in place for property applications, the new law has almost grounded Tobago's entire real estate market. In effect, foreigners can only buy property in Tobago with great difficulty.

The property sales of Sea Jade Investments (SJI) plummeted by 90 per cent in 2008, said Dawn Glaisher, Owner of (SJI). About 40 per cent of the decline was attributed to the global crisis while the around zero per cent was blamed on the new law.

Global Property Guide

Picture of Trinidad Valley by bingbing