The 'Emerging Caribbean' -- Owning a Slice of Paradise

When Swiss/Italian developers first asked Donald Trump if he'd like to partner with them to build a golf course and villas on Canouan Island in the Grenadines, he was perplexed. "I didn't know Canouan," Mr. Trump said in an interview with The Wall Street Journal.

Neither do most Americans. But when Mr. Trump celebrated the grand opening of his luxury villas and golf course on Canouan with a New York cocktail party recently, it was just one of a number of new resort developments on Caribbean islands that may not ring a bell -- places like Great Exuma, Roatan and Scrub Island.

None of these places have the chic of Mustique, and some lack amenities that Americans take for granted these days, like golf courses, shopping malls and supermarkets. Violent weather can be a serious hazard. Still, developers are hoping they'll catch on with buyers who are looking for places to vacation or retire that are less pricey than Palm Beach and not as crowded as Barbados.

The Emerging Caribean

A Florida Couple's Bet
On 'Margaritaville' Sours

Executive Puts Down Roots
And Makes a Tiny Island Home

Market Snapshots:

• Anguilla
• Antigua
• Canouan
• Great Exuma
• Scrub Island

"People want a 'don't worry, be happy' kind of island," says Sarasota, Fla., real-estate broker Michael Saunders, adding that her clients are buying second homes in the Caribbean because the islands are "pristine, the way Florida used to be."

With at least 7,000 islands in or bordering the Caribbean Sea, representing 23 sovereign states and various foreign dependencies, there's a lot of room to grow. Scott Berman, a partner specializing in the hospitality industry at PricewaterhouseCoopers in Miami, says that at least 30 resorts with some residential component are planned or under construction throughout the Caribbean, double the number of two years ago. While some are tiny and individually owned, others are big players like The Ritz-Carlton Hotel Company LLC and Four Seasons Hotels and Resorts, who cater to vacation owners who, no matter how secluded the island, don't want to be too far from room service and a massage.

While a bare-bones condominium in a place like the Dominican Republic can sell for as little as $40,000, prices in these packed-with-amenities resorts are much higher. Offering everything from nanny service to massages to private chefs, the higher-end developments can rival the cost of oceanfront resort developments stateside. They range from $325,000 for one-bedroom apartments at NonSuch Bay, an Antiguan resort being built by the Dutch development group La Perla International Living, to $7 million for ultra-contemporary four-bedroom villas at Viceroy Resort and Residences on Anguilla, built by the Los Angeles-based Kor Hotel Group.

Of course, some Caribbean islands are also famous as tax havens, charging permanent residents no or low property, capital gains, inheritance or income taxes (although Americans should always check with their tax advisers to see if and how these breaks apply to them). For some wealthy individuals, that's as much of an incentive to buy as the prospect of a cool drink and a hammock by the sea.

But it's not all margaritas and sugar sand. Hurricanes regularly lash the Caribbean, and some deliver knock-out punches. In 2004, for instance, Ivan hit hard, destroying or de-roofing 90% of the homes on Grenada, on the southeastern edge of the Caribbean, and three-quarters of the homes in Grand Cayman Island, in the west.

According to the U.S. Agency for International Development, the region is also vulnerable to flooding, tsunamis, landslides, earthquakes, droughts and volcanoes. A 1995 volcano in Montserrat, once a luxurious vacation retreat for rockers like Paul McCartney and Eric Clapton, forced two-thirds of the residents to move abroad, and left only 13 square miles of the island inhabitable.

The threat of bad weather makes homeowner's insurance expensive, with high deductibles. There are other drawbacks: Financing can be difficult to obtain, and construction tends to take a long time, given the pace of island culture and that materials often have to be shipped in. Labor costs vary wildly, depending on local laws, custom and availability -- construction costs range from $100 a square foot in Roatan to $600 a square foot on Great Exuma, according to local builders and investors.

And though the cost of living is often low, particularly for local products like fruits, vegetables and seafood, it can be unsettling to live amid people who typically lack cars and other amenities that Americans take for granted, and who may make only $10 a day.

Still, real-estate brokers like Geoffrey Pidduck, who lives in Antigua, have seen home prices as much as quadruple in the past two years as Americans and Europeans snatch up much of the available inventory on the less-discovered islands. "It's been a feeding frenzy," he says. Although developers are moving in to fill the gap, he predicts homes will continue to be in short supply in the near future, particularly in the under-$1 million range. "Everyone today wants to be off the beaten track," he says.

Write to June Fletcher at june.fletcher@wsj.com