Greek island of Scorpios
Lenta.ru investigated why this is happening and whether owning a piece of land in the ocean is truly an unattainable dream for an "ordinary mortal."
Island expansion
Recently, investors, especially from China, have been actively investing in the acquisition of islands. Thus, last week, the Chinese investment company China Capital Investment Group bought South Molle Island near the Great Barrier Reef in Australia, paying 25 million Australian dollars (about 19 million US dollars). The investor's attention was drawn by the economic potential of developing 12 hectares of pristine nature with a beautiful 600-meter beach. Businessmen from China plan to build several luxury resorts here. A year earlier, the same company bought Daydream Island with the Daydream Island Resort&Spa complex.
According to Marina Kuzmina, director of international real estate at the Russian office of the international consulting company Knight Frank (KF), previously an island was an exclusively status purchase, a luxury item, but in 2016, businessmen and specialized companies from Russia began to consider island territories from the perspective of investments and sites for development projects. "For example, we have inquiries about buying an island in Greece near the mainland to build a hotel with a spa center or a complex consisting of several bungalows. There are offers at a distance of no more than 200 meters, which allows saving on connecting utilities," she said in an interview with Lenta.ru.
According to KF data, in the last two decades, the development of the internet, the global financial crisis, and the influence of environmental factors have forced wealthy people to shift their focus from earnings in financial markets and more actively invest in real estate. The KF review notes that for the development of island resort real estate, the most promising are the islands of Central America (Panama, Costa Rica, Belize) and the Asia-Pacific region (Philippines, Tonga). Bali, Phuket, and Fiji, according to KF estimates, are the most mature island real estate markets.
At the same time, the company notes that not only large entrepreneurs are interested in acquiring private islands, but also non-governmental organizations, environmental protection funds – for the purpose of preserving unique ecological systems, as well as government agencies – for developing resorts. The number of purchases made by these categories of investors has more than tripled over the past decade.
Interest in islands is growing against the backdrop of falling prices, explained Tatyana Burlakovskaya, CEO of Golden Brown Real Estate: "The most affordable offers that are popular on the market are located in Croatia, South America, and Canada. More expensive exclusive options – for example, with their own airfield – are Brazil and the Bahamas."
According to Burlakovskaya's estimates, on average about 250 island sale offers appear on the world market annually. On the website of Vladi Private Islands, the largest island sales broker, one can find hundreds of lots in different parts of the world – from Central America to Africa.
Toys for the stars
Islands are bought not only to create luxurious resorts, but also just for the soul. True, such exotic purchases are only affordable for very wealthy people. Only successful businessmen or movie and show business stars can afford to seclude themselves in a paradise corner.
Owners of private islands include David Copperfield, Leonardo DiCaprio, Celine Dion, Claudia Schiffer, Eddie Murphy, Johnny Depp, Mel Gibson, Brigitte Bardot, and other celebrities. Ilonda Barnes, director of global research at Savills, believes that unlike the previous decade, which was a time of investment in elite urban real estate, the next will be the heyday of investment in island properties.
An island for the price of a studio apartment
The price range for islands is very wide. Tiny islets in sparsely populated parts of Canada sell for 30 thousand dollars, which is cheaper than a one-room apartment in the capital region; in the Bahamas and the Philippines, property in the middle of the ocean will cost 60-70 million dollars, in Mexico – 100 million. For example, Gatun Island in Panama with an area of three thousand square meters costs 28 thousand dollars. And one of the most significant deals for the acquisition of island territory was the purchase of most of Hawaii's Lanai: in 2012, Oracle founder Larry Ellison bought this land for 500 million dollars together with several small towns inhabited by three thousand people.
However, only five percent of all private islands in the world are considered quality real estate – with good transport accessibility, electricity and sewage, in countries with a stable political regime. Burlakovskaya notes that to acquire a liquid asset, one must be prepared to pay at least one million euros for an island, and equipping it with everything necessary may cost more than the acquisition of the asset itself.
Some countries are ready to lease an island to a developer for a symbolic amount – provided that the investor builds the necessary infrastructure on it, including for tourism. This approach is practiced, for example, by the Philippine authorities.
For other countries, selling islands is a way to replenish the state treasury. Greece, in the midst of the financial crisis, offered investment companies and private tycoons dozens of such properties in the Mediterranean Sea. Some of them cost less than a house in London. However, as analysts noted, such an unconventional method did not help the descendants of Hellas significantly patch up the budget.
Sign a lease and live in peace
Legally, the procedure for acquiring an island differs little from buying real estate, but it has its own peculiarities in different countries. Director of the retail sales department at PSN Group Ekaterina Tein notes that in the Maldives you cannot purchase an island outright, but you can enter into a long-term lease agreement with further renewal.
The practice of long-term leasing for a term typically 30-50 years is especially common in Asia. In England, there are no fully private islands at all. In Greece, there are serious restrictions on the construction of real estate and infrastructure on islands due to the abundance of ancient and architectural monuments, and in Croatia, island development is completely prohibited.
In Russia, you can also buy an island if you wish, but the legal nuances of the transaction depend on the land category to which it belongs, says partner at Goltsblat BLP Vitaly Mozharovsky. Forest fund lands cannot be bought – only leased, and agricultural land cannot be sold to foreigners. Certain restrictions also apply to the acquisition of islands in the border zone. In addition, according to the lawyer, there are restrictions on development in the coastal zone.