By NEIL HARTNELL
Tribune Business Editor
The Government will have to walk “a very fine line” in attempting to balance its twin desires of land affordability for Bahamians and a strong second home market, a leading developer said yesterday.
Franon Wilson, the Bahamas Real Estate Association’s (BREA) president, told Tribune Business that Prime Minister Perry Christie had little margin for error with his recent hints at changes to real estate policies, and “can’t be too far off on either side”.
Mr Christie and Khaalis Rolle, minister of state for investments, together with Bahamas Investment Authority (BIA) officials, met with BREA’s Board and past presidents on July 18 to outline the Government’s thinking on potential reforms.
The subsequent questionnaire sent out by BREA to its members, in a bid to obtain feedback, gives an indication of the concerns articulated by the Prime Minister, and the general theme that Bahamians face being ‘priced out’ of the market.
The key question asked of BREA members is: “What formula or policy could the Government consider or create to ensure that Bahamian ownership of land on each of the communities in the Bahamas is maintained and/or preserved at levels sufficient to protect the interest of the Bahamian people in light of present and future foreign direct investments and or developments?”
Mr Wilson acknowledged the real estate ‘affordability’ issue, given that salaries in the Bahamas had not kept pace with the rate of appreciation in property prices.
And he conceded that the Government had a public policy duty to “look down the road” and ensure Bahamians could afford to realise their ‘home ownership’ dream some 10-20 years into the future.
Noting that vacant property in Nassau “for the most part” cost $80,000 and upwards, Mr Wilson said some upscale communities, such as western New Providence’s Serenity, were offering empty lots for $100,000.
“The bottom line in the short-term, the next five to 10 years, is what your salary’s going have to be to afford that,” the BREA president told Tribune Business.
“All our salaries have not kept pace with the rising cost of real estate. That’s great for investors, but the rate of real estate price appreciation has outpaced salaries.”
Pointing out that “different islands have different situations going on”, and that “not one shoe fits all”, Mr Wilson said the key question was whether the Government needed to consider policy reforms “to ensure there is land for Bahamians on certain islands, and carry it through”.
Noting that the smaller size of some islands meant they had greater challenges than others, Mr Wilson added: “On New Providence, buying property for less than $10,000 is never going to happen.
“The PM is looking at it to see what can be done, if anything, or what should be done, if anything, to ensure that five, 10, 15 years down the road someone wanting to get a home does not need to be earning six figures.
“That has happened in Bermuda, where the cost of property is such that you have to be making a significant amount of money to own real estate.
‘The Government wants to look, not just today but down the road, to see what should be done so that land is not just here in the Bahamas for Bahamians, but so that Bahamians can know owning their own home is possible without having to make six figures.”
However, Mr Wilson acknowledged the need for the Government to strike the correct balance between local Bahamian interests and the avoiding any shocks to the market’s international segment.
The key, he said, was for the Government to preserve Bahamian access to affordable land “while at the same time ensuring there’s no policy in any way, shape or form that damages the real estate industry”.
But getting this right, the BREA president conceded, was “a $1 million question”.
“The main thing is what formula, or balance, is created, if any,” he said. “We [BREA} want to provide property accessibility and affordability for Bahamians, and at the same time ensure government does everything it can to strengthen the real estate industry and second home industry in the Bahamas.
“What’s the formula for doing that, if there is one? The Government wishes to see Family Islands resorts and development continue to expand, get better and stronger, so finding that balance is key to ensuring Bahamians have property that is affordable for them to buy, and at the same time allows these future developments to be successful.”
BREA’s questionnaire, which has been obtained by Tribune Business, shows that a general theme of concern is that foreign buyers are acquiring real estate tracts priced within the reach of Bahamians, thereby squeezing them out of the market.
“Of specific concern to the Prime Minister are low value transactions on some of the islands, such as Grand Bahama and Exuma, and the smaller island communities, such as Harbour Island and North Bimini,” the BREA questionnaire said.
Mr Christie’s concerns on the former two islands are understood to relate to foreign buyers increasingly snapping up low-priced real estate that is normally within the reach of Bahamians,.
And the latter two locations are grappling with overdevelopment and land supply shortages that threaten to send prices skyrocketing.
The BREA questionnaire indicates the Government is also reviewing the minimum $500,000 investment threshold that a foreign real estate buyer must hit to obtain permanent residency.
Asking how much foreign buyers should be required to invest to obtain this status, the questionnaire also suggests the Government is assessing whether to impose strict time limits for foreign buyers to develop undeveloped land purchases.
BREA members are asked policy the Government should adopt on non-Bahamian land purchases “without any conditions for construction”.
This has emerged as a particular problem in Freeport, where many observers believe the absence of real property tax has encouraged buyers to ‘sit’ on land and not develop it because they are not exposed to ‘carrying costs’.
The same applies to undeveloped land in New Providence, and Bahamian-owned properties in the Family Islands.
The BREA questionnaire also asks realtors what the Government’s policy should be on land sales to foreigners without permanent status in the Bahamas, and if this should be led by the purchase price and whether it matched the residency permit threshold.
Industry feedback is also being sought on “BREA’s interaction and access to developments occurring throughout the Bahamas”, a sign the Government wants to ensure Bahamian realtors have an opportunity to sell real estate options offered by major FDI projects.
The danger with all this is that, if mishandled, the Government’s proposed real estate policy reforms could be negatively perceived by potential international buyers and the wider industry.
This, in turn, could undermine FDI and the Bahamian second home market, and in turn damage the real estate and construction sectors plus other service providers to this high-end market, affecting job creation.
Mr Wilson, though, said it would be “premature” for international buyers or the Bahamian real estate market to panic over the direction of the Government’s initial thinking.
“The Prime Minister asked us to provide feedback, and right now we’re gathering information and offering documents to the Government,” the BREA president told Tribune Business.
“Any foreign buyers or someone selling property to foreign buyers today, it would be premature to get nervous or scared or anything like that.”
Mr Wilson said BREA had hired Public Domain to survey its membership and compile their responses ahead of the organisation’s next meeting with the Prime Minister on July 29.