Real Estate Development Is On The Rise

One of the key indicators that the local island economy is trending upwards is the amount of foreign investment currently taking place in the real estate market. Judging from the increased number of projects that one local architect is experiencing, it seems that the amount of investment in residential developments particularly shows that this sector of the economy is doing well.

TEXT BY KATY BRANUM

IHC Architects, have been providing architectural services on the island for almost 10 years, during which time they have seen fluc tuations in the amount of investment activity in Curaçao, from the positive investment climate prior to 2008, to the weakening in demand after the crash of that same year. The period leading up to independence in 2010, saw some investors leave the island, while other investors hesitated to enter into the Curaçao market until they were confident that the political changes occurring on the island would not affect Curaçao’s status as an attractive investment. Since then, many have returned and continue to invest. From these experiences, IHC has observed over the years that there is a direct correlation between political stability and investor confi dence. When there is a perceived high potential for sovereign risk default, then investors lack confidence to invest. When the political landscape is stable, then perceived risk is low and the international investment community, have an appetite to invest in the island. This is especially important when it comes to invest

ment from abroad, such as the Netherlands, USA and UK, etc. Once political stability is in place, the second important factor is the government’s policies to encourage investment, and the processes that are involved to secure permits, etc., to be able to complete the project. The local gov ernment here in Curaçao has been proactively addressing this challenge both from a proce dural perspective and from a macro-economic perspective. From a business-owner’s perspective, IHC has also seen that government departments have become a lot more efficient when it comes to assistance with business requests, like for example, the timely processing of local paperwork required for the submission for international tenders. Of equal significance is the government’s macro perspective towards foreign investment, which includes topics such as re-zoning. It is important that government nurtures an open environment where develop ers feel that they are able to have a transparent discussion on this topic, especially when it comes to rezoning dormant land, such as former farmland. If the government views certain projects as important for the island’s economic development, then the developer will require a timely response as to whether or not the re-zoning plans have been approved. Currently IHC sees about 40% of the projects that they are involved in are investment pro jects where most of the clients are preparing for long-term retirement to the island. These folks tend to be foreigners and are first time investors; they are planning to build a home that they can rent out in the short-term, with a view to move permanently to the island upon retirement. For recurring investors, a key factor for con sideration is the island’s track record, and how successful previous investments have been. Specifically, did these projects deliver the level of return-on-investment expected? This undoubtedly affects the investor’s level of optimism when looking toward the next. IHC also works with investors that are currently on their 2nd and even 3rd project after having enjoyed a positive return on their 1st develop ment. Often these investors are continuing to build houses specifically for holiday rentals. This is preferred, as long-term rental does not have the same return on investment as holiday rental. There is also a trend for people to build a second holiday home and then rent it out on Airbnb or similar sites. Another area of development that is growing in Curaçao, is where a developer will seek to find a group of investors to provide the capital to build a small number of holiday apartments. In this case, apartments are sold individually; the new apartment owner then places it in an apartment rental pool to be rented to vaca tioners. This provides the owner with income, making the decision to purchase more attrac tive. It also gives them access to the apartment when it is not being rented out. IHC is also seeing the renovation of older historical buildings being transformed into apartments, such as the buildings in Punda and Pietermaai. This creates its own spe cial challenges, as often the main structure requires structural renovation, prior to its interior transformation. This is a trend that is also seen elsewhere in the world, where older spaces with renovated apartments inside are in high demand, such as the classic NYC lofts renovated from old warehouse spaces. The challenge for the developer and the architect is to create an apartment with modern amenities, which a renter would find desirable, delivered cost-effectively, so that the investor gains a very competitive return on the investment. All these types of investments are an impor tant factor in the developmental progress of the island. In general, the local population tends to be very cautious about investing, and some times it takes a foreign investor to come to the island, see the potential and invest. Once this has happened, others see the possibilities and also begin to invest. IHC experiences a lot of optimism in their sector, which is exciting for the island from an investment perspective. Attracting interna tional investors to Curaçao through maintaining a positive investment environment is vital as it injects capital to the economy, creates jobs and is fundamentally vital for Curaçao to real ize its economic growth objectives.