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Edging toward the end of 2009, a year after the global collapse of financial markets that took everyone’s breath and cash flow away, how is St. Barths faring?

It is possible that this is the first time since the 1980’s and the beginning of the island’s contemporary tourism-driven prosperity that St. Barth protective economy-proof bubble has been pierced so directly. There was the Gulf War in 1990, Hurricane Luis in September 1995 and eight years ago, 9/11. All of these global events impacted St. Barths and weakened economic performance, but, generally speaking, their impact was less intense and shorter-lived than the market crash of 2008. To put things in perspective, it seems only fair to mention that before the financial crisis, at the beginning of the 2008/2009 tourist season, the island was coming off two exceptionally lucrative years. Tourism dollars poured in, the economy was on full throttle, the population was increasing, new businesses were created, and the real estate market was all about the seller as king.  Property prices were on an upward spiral, pirouetting their way through the roof.

The economic and financial crisis put an abrupt stop to the élan of recent years, like someone hitting the stop button in the middle of a wild trance dance. Like everywhere else, St. Barths 2008/09 season was marked by a marked drop in activity. In the absence of any broad spectrum statistics or publication that posts earnings or other financial indexes for the island, it’s difficult to get any kind of accurate handle on the extent or the full scale of the market phenomenon. There are, however, three indexes that give a fairly reliable idea of economic activity. For the first 9 months of 2009, revenue from the 5% duty tax, applied on all imported merchandise, fell by 35% for the same period in 2008. Airport traffic dropped by 16% from the high season period spanning November 2008-April 2009 when compared to the same period the year before. Lastly, gas receipts from the fuel tax (applied on each liter of gas purchased) fell by 20%, when compared against the same 6 month period for the previous year. When combined, these numbers provide an economic window into the extent of the crisis. Without pinpointing a specific number, that window gives us an understanding of the continuum of measurable loss, ranging from 15% to 35%. No surprise here, as the keystone of St. Barths tourism comes from the USA, notably the Northeast, an area hit particularly hard by the financial crisis. Local government leaders recently created the judicial and fiscal tools they will need to control a development that seems to have a mind of its own. It’s ironic that the market beat them to the punch.

In an island economy such as St. Barths, where the majority of businesses are directly or indirectly reliant on tourist dollars, the financial crisis has lowered performance in all business sectors. From boutiques, to restaurants, hotels, construction to real estate, every sector has taken a hit. In general, there have been no major changes in any one industry. Certain establishments have changed hands but this is in keeping with the business shuffle that occurs every year before Thanksgiving, the unofficial start of high season. As businesses prepare to greet the new season, uncertainty and hope can be felt in equal measure. In a show of strength, the local government has thrown the gauntlet and  is stepping up to pull the economy forward. It recently invested 90 million euros in new projects (rebuilding roads, creating a retirement home, etc.), which will keep the construction business afloat.

To speak more specifically about real estate, the 2008 financial crisis has infused its dourness into 2009. Aside from the exceptional-even history-making-sale of a Gouverneur property earlier this year to Russian billionaire, Roman Abramovich, the rest of the season was relatively calm, with only a few real estate sales transacted mostly at the lower end of the price scale. As a consequence, villas are on the market longer and a market correction has stabilized prices that were on the vertiginous upswing for years. Generally, even if local real estate prices have not come down, there are deals to be had. Some St. Barths sellers are beginning to come around to the fact that market conditions have changed and that, if they want to sell, the buyer is now in the lead.

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