Bermuda’s luxury real estate saw significant softening in 2016 after a three-year streak of price hikes, with the average and median prices of luxury homes both dropping 25%, according to a report released Wednesday.
There were only seven luxury homes that changed hands on the island of Bermuda last year, with an average value of BMD$4.4 million (Bermuda dollars is at parity with the U.S. dollar), dropping 25% from the prior year. The median price fell at the same rate to BMD$3.5 million, according to the year-end report published by Rego Sotheby’s International Realty, a leading brokerage on the island.
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Half of the luxury home buyers were Bermudians, and the rest are from mainland Britain, the report found.
The brokerage defines luxury homes as those with an Annual Rental Value (ARV) of BMD$126,000 or more.
Luxury condominiums—apartments with an ARV of BMD$25,800 or more—fared better than single family homes in 2016. The average prices in this segment increased 7% year-over-year to BMD$910,000. About 80% of luxury condo buyers are locals, while most foreign buyers are from the United States, South Africa and Switzerland.
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Currently, there are about 30 luxury homes available for foreign buyers, who are restricted to buy certain size of land at relatively higher price points, with a starting price of BMD$2.75 million for a four-bedroom, four-bathroom home, according to the report. One of the luxury homes on the market is Longford House, reportedly owned by celebrity couple Michael Douglas and Catherine Zeta-Jones, which is asking BMD$10.65 million.
Bermuda used to have one of the world’s highest Gross Domestic Products per capita with its economy flourishing on tourism and the insurance industry. Many wealthy foreigners buy vacation homes on the island for its subtropical weather and beautiful beaches.
But the island’s overall economy was badly hit by the global recession; its luxury real estate sector, in particular, bottomed out in 2012. However, from 2013 to 2015, the market showed signs of recovery. In 2015, 14 luxury homes and 65 luxury condos were sold.
Write to Fang Block at fang.block@dowjones.com