Unpacking the Turks & Caicos Islands Short-Term Rental Market
The stunning Sandy Bottom villa located on Turtle Tail, Providenciales
The short-term rental market in Providenciales is often misunderstood. It’s a high-demand market for affluent visitors seeking memorable, unique, personalized experiences in bespoke villas in one of the most desirable destinations worldwide. To better understand this dynamic short-term market, we need to dive into the larger real estate environment and the data behind tracked rentals.
The Big Picture
Turks and Caicos’ property market bounced back strongly since 2018, from the previous year’s hurricane season that severely damaged North Caicos and the island of Grand Turk, and again since the 2020 pandemic. Property sales are now at record highs, thanks to strong foreign demand. As a result, land and residential real estate prices are rising robustly again.
There are no income taxes on revenue from property, no capital gains tax on property transfers; no estate or inheritance taxes; and no corporate taxes or exchange controls. Indirect taxation only comes in the form of customs duties, stamp duty on specific transactions, and departure tax, according to Sotheby’s International Realty. However, vacation rental property income is subject to a 12% hospitality tax, payable to the Turks & Caicos Islands Treasury.
Furthermore, after payment of a one-time stamp duty charge payable to the Turks and Caicos Government upon purchasing property, the buyer is no longer burdened by taxes. Currently, there are no restrictions on foreign investment in real estate.
As a British territory, the Turks and Caicos Islands’ political environment and legal system are considered more stable than other Caribbean neighbors. Another attractive factor is that Turks and Caicos use the United States dollar, further contributing to the low-friction investment environment.
By the Numbers
Location clusters of short-term rental properties in Providenciales courtesy AirDNA
AirDNA, data acquisition and analytics firm for AirBNB and VRBO, currently tracks over 1,400 active rental listings, and ranks Providenciales an A+, or 100/100 score when compared to all ultra-premium short-term rental markets globally. This score comprises four key performance markers.
Rental Demand = 67
How often are rentals booked throughout the year? Using a combination of annual occupancy and listing growth rates, this metric shows the relative travel demand in this market.
High Score = High Travel Demand
Providenciales enjoys a high occupancy rate, 67% across all tracked properties annually, For short-term rental properties, this is excellent. According to AirDNA, the average booking lead time for stays is 103 days, meaning reservations are typically made more than 3 months in advance. These can be years in advance for the highest demand times, late December / Early January.
Revenue Growth = 97
Did properties earn more this month than they did in the same month last year? This is calculated by looking at the change in year- over-year RevPAR for properties that received bookings in both time periods.
High Score = Increasing Revenue per Property
This number drives home the investment potential in Providenciales through short-term rentals of custom villa properties. A score of 97 indicates 97% of active listed properties increased their year-over-year revenue, or their ROI on the villa itself. Combined with the rapid increase in sale prices, investors enjoy increased revenue and rapidly increasing equity.
Seasonality = 84
How much does travel demand differ between peak season and low season? This is the percentage difference between the minimum and maximum monthly RevPAR in the past year.
High score = Low seasonality impact
Ask anyone who lives in Turks and Caicos if there’s a seasonality in short-term rentals, and they will almost definitely say yes. However, the data suggests there is less of a seasonal impact compared to other ultra-premium markets worldwide. Providenciales enjoys a relatively constant influx of visitors; however, the pricing for short-term rentals spikes significantly in the summer and holiday periods.
Regulation = 66
An algorithm that looks at host and property behaviour to identify signs of regulation.
High score = Low regulation
What does this all mean?
Combining a low-friction foreign investment environment, coupled with annual increases in rental revenue and rapidly increasing property values, creates a significant opportunity for investors. The low inventory of available turnkey properties has created a price gap in the “build vs. buy” scenario. Custom-built villas increase in value during the typical 12-16 month construction process.
While construction costs per square foot are approximately $550 per square foot (after property acquisition), turnkey properties are commonly asking for over $1,000 per square foot - a dramatic gap benefiting investors who, instead of wanting "instant gratification", are comfortable with a 12-16 month construction cycle. Talk to us today.
SKAPE Design+Build, formerly RA Shaw Fine Architecture, is the pre-eminent builder of iconic villas in the Turks & Caicos Islands. We will be continuing our series of articles on the logistics, challenges, and opportunities surrounding investing in the Turks & Caicos Islands via new construction villas. Visit us at www.skapetci.com
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