Buying a property on a tropical island may be easier than you think.

While the island nation of Vanuatu is justly famous for its warm tropical climate, white sandy beaches and world-class diving, many people don’t get further than the capital, Port Vila. But Vanuatu’s largest island, Espiritu Santo (or ‘Santo’ as it is more generally known) is well worth a look.

Santo has long been a Mecca for divers, lured by the magnificent sea-life and the wreck of the SS President Coolidge, one of the most highly rated dive sites in the world, but it has a lot to offer non-divers too. It remains a largely rural environment with spectacular inland walks, adventure activities, horse trekking and opportunities to see the local culture. The climate is warm all year round and the picture postcard scenery is tempting more and more people to ‘live the dream’ and buy their own piece of paradise in the sun.

Property is available to buy under a leasehold system, and because Santo is as yet relatively undiscovered, it is still very affordable by comparison to Australian or New Zealand coastal property. A good-sized waterfront section currently averages around AU$100,000, with blocks available for less or more than this depending on the actual size and location.

A lease is typically established for 75 years and can be renewed for a small fee. Leases are owned either by the government (in urban areas) or by local “Custom Owners”, and, once established, can be bought and sold in exactly the same way that freehold property is traded, at market value which is driven by supply and demand.

The leasehold system has the advantage for the indigenous population that land ownership is kept within the local population, avoiding the problems of disenfranchisement and subsequent grievances as have happened in other countries. Under the lease an annual rent is payable to the Custom owner (or in the case of urban properties, the government) which is calculated on the area and value of the land, but does not take into account any buildings or other improvements. For a typical beachfront section this would normally be around AU$400 a year.

The purchase process is pretty straightforward where there is a lease already in existence. You make an offer and if this is accepted pay a 10 percent deposit, with the balance of the agreed amount payable on completion, usually 30 to 60 days later. It makes sense to use a Vanuatu-based lawyer to complete this process and carry out due diligence to check that the title you are buying is unencumbered. In addition to the purchase price stamp duty is payable at 2 percent and government registration at 5 percent. (These amounts may vary for commercial properties). Where a new lease is being created there may be additional costs for survey and registration.

The lifestyle in Santo is relaxed and friendly. Although the main town, Luganville, is still relatively small there are an increasing number of restaurants and shops and most imported goods are now available at one or other of the supermarkets. For fresh fruit and vegetables the local market is unbeatable with a huge variety of local produce that is brought in daily from the local countryside and islands.

The town itself is not big on nightlife, but there is a thriving social scene around Santo, including the Palekula golf club with spectacular sea views from the greens, which welcomes novices and experts alike.

If you like the idea of owning a holiday home in Vanuatu but know you will only be able to use it for a couple of months a year, there is a healthy rental market in Santo which would allow you to get some income out of it for the rest of the year. There are a number of infra-structure development projects planned or underway in Santo which are bringing in overseas professionals and contractors and demand for rented accommodation often exceeds supply. So you could choose to rent out your holiday home while you’re not there to help pay back the capital and any mortgage costs.

At present Santo may be one of the best kept secrets in the South Pacific for property investors but it’s unlikely to stay that way for long. While there are still plenty of waterfront sections available at very affordable prices, increasing demand means prices are likely to rise over the next couple of years. So living the dream by owning your own tropical island home could prove to be a wise investment too…..