The revitalization of real estate in the Caribbean, specifically the Bahamas, is in full swing. Recovery from Hurricane Dorian in 2019 and COVID not too long after putting a damper on the market, but since 2021, the real estate market in the Bahamas has skyrocketed with few signs it is going to slow down anytime soon.
As more restrictions and regulations are lifted, the real estate market, especially in places like the Bahamas, will remain hot. It’s reportedly the hottest market in Bahamas real estate history, and luxury home sales have seen an incredible push.
To understand why it’s so hot, first, you need to understand the value, yes value, of inflation in the real estate market–for the seller side of the equation.
Inventory Versus Supply: An Inflationary Tale
When demand outpaces supply, scarcity occurs, and costs rise. This is the basic formula for inflation, and depending on whether you’re on the demand or supply side of the equation, inflation can be seen polemically differently.
For real estate, being on the supply side is in a great position when supply, in this case, inventory, is limited and demand begins to heat up.
As inventory remains low, it requires more and more competitive offers to be accepted, giving added leverage to the seller and driving higher prices. These market functions are what we call a seller’s market, where there are more offers than homes for sale.
While inflation can be seen as a burden to some people (buyers), it can also be a boon for suppliers (sellers). Since the Bahamas have limited space to build, inventory will always remain limited, continuously driving prices upward.
Factors Why Real Estate In The Bahamas Is Hot
One contributing factor to the luxury real estate market in the Bahamas is the lower amount of inventory available.
There are plenty of other factors as to why the real estate market is so hot, and among the islands of the Caribbean, the most significant uptick is with luxury real estate in the Bahamas.
In fact, the appreciation rate of luxury homes in the Bahamas, which average 37% higher than the rest of the Caribbean, far outstrips the interest rate hikes we’ve seen recently.
Desirability: Of course, warm climates, good people, and proximity to the United States are contributing factors, but the desirability of beachfront property takes on its inertia.
Once a beach-front market percolates, especially in the luxury market, it tends to take off from the “keeping up with the Joneses” syndrome.
This syndrome describes the core impetus behind consumerism, that we compare ourselves with others in our sphere, and once they act, we have to keep up or overcompensate to stay in good competitive graces.
The “Great Disruption” that the pandemic caused with the decentralized, untethered business model that allowed for a massive migration to remote work made it possible for people to live far removed from their traditional office and headquarters, heightening the desirability of exotic living spaces.
As more and more people embrace this transformation of the traditional workplace, there will be greater mobility, and more desirable markets will remain competitive for home prices.
Location dependence is becoming a thing of the past; people are more fluid in their living situations and are less likely to be near their working environment. As this exodus continues, it will further drive the desirability index higher.
Appreciation: Another critical factor in the hot real estate market is undoubtedly driven by investment opportunities. With double-digit appreciation, homes in the Bahamas take on even more desirability as an opportunity to leverage some debt (mortgage) and make outsiized returns on that investment.
Location, Location, Location: Being in close proximity to the United States and Mainland Mexico makes the Bahamas extremely desirable for ex-pats from countries all around the area. But what is most impressive is the pure beauty of the region, which drives most tourists and creates envy for visitors to put living in the Bahamas on a “wish list.”
Being close to the mainland U.S., especially Florida, increases the desirability of destinations like the Bahamas, which in turn drives the local real estate market boom.
Adding fuel to that is the continued practice of remote work and virtual offices, making location dependence a thing of the past, further driving the supply-side issues of housing in some geographic regions that are more desirable than large, overcrowded cities.