What Is Next For Resort Real Estate – 2009 and Beyond?

On the surface, the question is rather simple to answer. In the past, real estate has followed cycles that go something like this –  in the short term, prices drop, the number of second homes purchased decline, many communities/properties go into bankruptcy, real estate supply and demand falls back in line and, in the longer term, the market return back to the normal excesses.

However, the cycle is most likely going to change.   A different cycle may start, but something will change.  Why?  Banks will be more hesitant to loan up to 90% LTV, or provide no documentation loans, or allow a developer to build a condominium building with only 60% sold.  Builders will rarely build spec homes, thus existing homes become more valuable – to the extent they have deflated in price already.  And, lastly, new trends RESORTTOPIA feels will take hold is that resort real estate purchasers will once again look for value properties, and properties with a unique benefit – be it the architecture or that they are environmentally conscious.  Yes, I said VALUE, ARCHITECTURE and ENVIRONMENTALLY CONSCIOUS in the same sentence.

In other words, they may still spend $1 million for a oceanfront property, but it will be for a 3-4 bedroom property, not a studio suite, and have a design that is unique and strives for higher green standards.  And that studio suite will be $250,000 – $400,000 and have realistic rental income opportunities.  These value properties will be found in all sorts of markets.  They may be renovation properties, foreclosures, or fire sales.  The properties may be new, but if so they will be in emerging markets such as the Grenadines, St. Kitts, Dominican Republic, Costa Rica and Panama.

And, what would seem to go opposite to the logic, these properties will not be part of large resort properties, but rather small resort properties with non-branded or boutique branded hotels, clubs and spas.  Why, well it is once again simple.  Larger properties have all amenities imaginable, but they are nearly impossible to finance and their financials depend too much on a large volume of cash flow (ie sales).  Smaller properties will still have great amenities, usually better locations, and they will be much easier to finance and thus will not drag on cash flow and be easier to sell.

Seems simple, right?