Real estate: The forgotten pillar

By MARIO CAREY Mario Carey Realty ACCORDING to the National Association of Realtors (NAR), every house sold in the US equates to three full time jobs. This is as a result of the obvious domino effect. Let us assume this statistic applies to the Bahamas. As noted in 2010, the Government reported that funds collected from conveyance stamp duty had reduced by approximately $41 million. Let us assume that this number has gotten worse given the current worldwide economic crisis. The world's largest economies have made, and continue to make, drastic changes, long-term and short-term, to their policies in response to the current economic crisis. They all see the need to foster growth, provide relief and to alter policies using a range of tools. When the Bahamian Government used its tools and policies, and decided to raise the Stamp Duty and real property tax rates, it was - and still is - a bad decision. There is no one that I have spoken to that will not agree that a reduction in any cost of doing a real estate transaction can lead to increased business, increased jobs and increased monies for a troubled, debt-ridden Government. Our Government needs to move decisively and aggressively through its tools and policies to decrease Stamp Duty, real property tax, interest rates, lending requirements and find a suitable solution for the disposal of foreclosure properties. How can economic growth and job creation be achieved by reducing the stamp tax? Currently, there are approximately 450 licensed BREA Agents in the Bahamas. If the stamp duty was reduced for a two-year period of time to 6 per cent across the board, and 50 per cent of the agents each sold only one home in one year, on an average price of $550,000, one can see the obvious domino effect. 225 Agents, 225 homes = 225 x 3 jobs = 675 jobs $550,000 x 225 Agents x 6 per cent Stamp duty = $7.425 million in income For a period of two years, 1,350 permanent jobs, $14.85 million in stamp duty collections What happens if each agent sells two homes = 2,700 jobs: + $30 million in income Look at what the world powers like China, India, the US and Europe are all doing to stimulate economic activity. They all focus on the real estate sector, as they assess it to be an important pillar of the economy. On January 7, 2012, the federal chairman, Ben Bernanke, noted: "The ongoing weakness in housing has made it more difficult to achieve a vigorous economic recovery." He goes on to say: "With additional housing policy interventions we could achieve a better set of economic outcomes". The real estate sector in the Bahamas gets no respect. Whenever the Government talks about economic forecasts and the pillars of the economy, rarely is the real estate sector mentioned. In most economies around the world the housing market is a primary pillar. The Bahamas can greatly benefit from Stamp Duty policy interventions. At present every sale lost because of the high cost of stamp duty results in zero, zero, zero. Loss of income, loss of jobs and the loss of a possible, better economic outcome. If you are interested in the domino effect that a sale of real estate has on jobs in the Bahamas please visit the following link: http://www.facebook.com/notes/mario-carey-realty/the-domino-effect-from-the-sale-of-real-estate/10150467092501353


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