Property outlook improving in Fiji

Fiji once claimed to be the happiest place on earth, based on a 2011 global barometer, and it's easy to see why. A glorious climate, pristine beaches and laid-back, smiling locals who seemingly don't have a care in the world - no wonder nine out of 10 people surveyed said they were happy, compared to just 53 per cent of the global sample.

Perhaps Fijians just don't worry, because if they did, like so many who obsess over the ups and downs of stock and property markets, there hasn't been much to smile about as of late.

Despite possessing what the International Monetary Fund (IMF) calls "a richly endowed economy", Fiji has been stuck in the growth doldrums for decades, dogged by political instability, external shocks and slow progress on structural reform. However, indications suggest all that is changing. Much hope is pinned on the democratic elections scheduled for September and this, combined with other favourable fiscal factors, equates to an environment the IMF deems to be a "rare window of opportunity to make a clear break with the slow growth of past decades, and lay the foundation for a transition to a higher growth trajectory".

Philip Toogood, chairman and managing partner at Bayleys Real Estate (Fiji), concedes the market has been "challenging", but says the outlook is brighter for South Pacific's most high-profile island nation.

The "pricing correction", which affected all global property markets post-global financial crisis, was not as significant in Fiji as in some other countries, and values in the worst-affected areas have returned to pre-crisis levels, he says.

"In some instances - vacant building sites on Denarau Island, for example - prices have increased by around 10 to 15 per cent above 2005 peak levels."

He also cites a supply/demand imbalance. There have been few developments in Fiji since the coup d'état of December 2006, pushing prime residential prices in the capital, Suva, up by 30 to 40 per cent over the past two years.

Things are moving now, though: three resorts are planned on Naisoso Island, which is connected to the main island by a bridge, and a new casino development close to Denarau Island is under way. Toogood says: "The overall development situation is changing, and we are currently in discussion with developers for 10 new projects, two of which are set to launch in June, with a further eight due before the end of the year. These include resort-style managed apartments which offer a yield as well as owner use - typically 28 days a year - residential apartments which appeal both to owner-occupiers and investors, and residential subdivisions."

This "very much reflects" the growing confidence in Fiji politically and economically, Toogood says. Most new developments are by local developers. However, Chinese developers and investors are undertaking "an enormous amount of due diligence in Fiji" and show interest in any development properties which come on the market.

"Their questions are searching and thorough," he says. "We are seeing a few investments and have a 24-acre [9.7 hectares] development site on the Coral Coast settling this month to a Chinese buyer who will be developing a resort there. We expect to see more Chinese developers purchase sites over the next three years as they complete their Fiji market due diligence processes."

The tourism sector also appears healthy, with visitor numbers up and prospects looking good for the peak winter season this year and beyond, Toogood says. "Returns to leisure managed resort apartment investors are getting back to pre-2006 levels, and in some cases ahead of those returns. Double-digit returns are looking likely for many investors in 2014."

Foreign investors are returning, with an "an encouraging pick-up" in interest this year, especially from New Zealand and Australia. Toogood also expects an inflow of Chinese buyers. "If their investors are seen to have confidence, then we are likely to see a strong lift in mainland Chinese investing in houses and resort-style managed apartments in Fiji."

Fiji offers great value for money, the realtor says, though he does advise offshore investors to factor the leisure component into their investment equation. "If they have no interest in spending any time here, then they should perhaps review their plans."

The risks are few, according to Toogood, especially with the democratic elections on track and the economy showing growth. "The process of purchasing here is sometimes lengthy, but I have not known an application by a foreigner to purchase freehold land to be declined. Repatriation of investors' funds to their domicile country upon the sale of assets here has been slow in the past but not now, as the country is building its foreign reserves steadily as the economy improves. The real estate industry is now regulated, and so the standard of service and levels of integrity is far higher than foreign investors may have experienced in the past."

Among those with eyes on the upcoming election is realtor Aren Nunnink, managing director of Ki-Maren (Fiji). The expatriate Australian says awareness of the election is reinforcing a trend already in motion. Since the middle of last year, foreign investors have been steadily buying freehold properties, driven by "a desire to hedge against global uncertainties, higher taxation and negative forecasts in America, Europe and China, and to take advantage of current low property prices in Fiji".

Ki-Maren's buyers are predominantly from the United States, then Australia and Europe, including Russia - and now increasingly from the Chinese mainland. Nunnink says: "We have had increasing numbers of inquiries and inspections by new investors coming from China, with sales slowly but steadily picking up."

American buyers, concerned about the direction of US domestic policy and the likely future impact on taxpayers of government debt, want to "land-bank" their US dollars now, he says. "European investors have concerns about economic performance and stability in their home regions, as well as European dependence on imported energy. Our mainland China investors seem to be keen to simply invest their money abroad - and for some, to get away from pollution."

None of these investor groups has expressed concerns about Fiji, "despite the fact that we haven't had an elected government for eight years, nor are we a powerhouse economy by any means", Nunnink says.

"However, they see Fiji as an investor-friendly, reliable nation with a steady future, and without any of the major problems facing their home countries. The upcoming elections are reinforcing this perception for them. The fact that there is an easy approval process for foreign investors to get business permits, and that our maximum tax rate is now only 20 per cent, has added to the attraction."

Nunnink has also sold several large tracts of freehold agricultural land to foreign investors. "Several Chinese companies and private individuals are following this trend, and are 'seeing the light' in regard to this opportunity, ahead of our own local business community."

BUYING GUIDE

What you can buy for US$375,000

A two-bedroom furnished apartment at Travel World Resort, Wailoaloa Beach, Nadi, Fiji. The hotel component is due for completion in December 2015, and the apartment resort in December 2016. The five-star property is located next to the Nadi Golf Course and will be managed by an international brand.

Agent: Bayleys Real Estate

What you can buy for US$2.2 million

The priciest penthouse at the Grand Fijian Suva, soon to be sold off the plan. Views across the city and harbour will be available from Suva's tallest building, with one-, two- and three-bedroom apartments, sub-penthouses and penthouses - some with balcony plunge pools - due for completion in December 2016.

Agent: Bayleys Real Estate