The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A 25 per cent contraction in mortgage disbursements during the 2012 second quarter has further highlighted the weak construction and local real estate market, although the Central Bank of the Bahamas said there were signs of a modest uptick.

Unveiling its quarterly review for the three months to end-June 2012, the Central Bank said new issuances of construction mortgages by the banks, insurance companies and Mortgage Corporation declined by 24.9 per cent to $28 million year-over-year.

This contrasted with a 7.6 per cent improvement during the 2011 second quarter, with the Central Bank describing a “sharp” 25.2 per cent decline this year in residential mortgages to $25.8 million.

This compared to a 9.8 per cent increase in residential mortgages during the 2011 second quarter. Meanwhile, commercial mortgages issued during the 2012 second quarter fell by 21.8 per cent or $0.6 million to $2.2 million, “extending 2011’s 14.1 per cent drop”.

The Central Bank added: “Construction sector developments during the second quarter continued to be dominated by ongoing foreign investment projects in the tourism sector, along with public sector infrastructure works.

“However, domestic private sector activity remained relatively weak, due to persistently high levels of non-performing mortgages, banks’ conservative lending practices, and the moderate growth momentum.”

Yet, on a brighter note and possibly indicating slightly better days might lie ahead, the Central Bank said: “In a modest offset, mortgage commitments - a forward looking indicator - rose in number by 34 to 160, with a corresponding $12.4 million rise in value to $31.5 million.

“The dominant residential segment improved by 35 in number to 159, and by $11.8 million in value to $30.8 million, while commercial loan approvals were halved to one, but increased in value to $0.8 million from $0.2 million.

“Lending conditions tightened for commercial mort-gages, as the average rate firmed, year-on-year, by 60 basis points to 8.8 per cent. However, the average residential loan rate steadied at 8.2 per cent.”

On the foreign direct investment front, net investment inflows to the Bahamas during the 2012 second quarter fell by 68 per cent from $229.7 million to $74.4 million, although the former figure was inflated by the BTC privatisation deal in 2011.

Real estate purchases, though, slumped, falling by $13.7 million year-over-year to “a mere $1.3 million” in the 2012 second quarter.

“Net equity inflows plunged by almost two-thirds to $73.1 million from $214.7 million in 2011, when Government sold a majority stake in BTC,” the Central Bank added.