Buy Buy, Baby: Your Own Fantasy Island

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Fleeing the mainland hasn't helped private-island owners escape economic reality.

Island investors' dreams of sandy beaches and secluded homes have burst with the real estate bubble, as sellers watch a rising tide of frugality wash away their profit margins. With island owners stranded on unsellable properties, their paradise lost is now available for a relative pittance.

New Jersey's Middle Sedge Island, listed for $6.5 million, is a 20-minute helicopter ride away from Manhattan.

For every new castaway like Johnny Depp, who espoused the virtues of his $3.5 million, 45-acre island in the Bahamas to the British press last month, there's someone like Nick Hexum from Nebraska reggae rock band 311. Hexum put his 5.5-acre island in the Florida Keys on the market for $10 million in 2006, but has since dropped it to a sea-level $3.85 million.

"We've seen an unusual amount of price reductions in the last few months," says Alexis Pappas, director of operations for Toronto-based island real estate firm Private Islands. "In the past three months, we've had islands drop to almost half their price."

Island owners in almost every part of the globe have taken a bath amid recent economic turmoil. The 4.4-acre Monarch Caye, an island and estate off the coast of Belize, was originally listed at $5 million, but sold for $1 million. The sprawling 1,235-acre Nafiska Island in Greece's Ionian Sea was originally offered by the Onassis family for more than $21 million before its price was cut in half. It's still unsold.

Even formerly unsinkable markets in Fiji and the Bahamas have seen prices plunge as the 30-year private-island boom that spawned firms like Pappas' and the multinational Vladi Private Islands goes bust.