By NEIL HARTNELL
Tribune Business Editor
Bahamian realtors have their “fingers crossed” that the Government will renew the first-time buyer Stamp Duty exemption for transactions worth $500,000 or less, with the issue now before the Christie Cabinet.
Describing the incentive as “a game changer” for many Bahamians, Franon Wilson, the Bahamas Real Estate Association’s (BREA) president, said the industry was “hopeful” it would be extended beyond its current June 30 expiry date.
“It really comes down to what Cabinet feels is best to move the country forward,” Mr Wilson said of the Stamp Duty exemption. “At this point, we have no indication either way.
“The time is coming and we’re hopeful. We have indicated to the Government we would hope to see it renewed. It’s significantly important, it really is. The fact of the matter is that, for a lot of people, it’s a game changer.”
Michael Halkitis, minister of state for finance, told Tribune Business that the Stamp Duty exemption clarity sought by realtors and home buyers could be forthcoming as early as this week.
Responding to Tribune Business’s inquiries, Mr Halkitis said via e-mail: “It’s before Cabinet for consideration now. The Prime Minister will address it in the Budget communication on Wednesday.”
Mr Wilson added that BREA and the Bar Association’s real estate committee were set to soon submit recommendations to the Government on how the Stamp Duty exemption approval process could become “faster and more efficient”.
Among the current difficulties is the uncertainty over whether applicants will be approved for the exemption, resulting in commercial banks and other lenders stipulating that buyers place a sum equivalent to the potential Stamp Duty payment into escrow.
This not only slows the mortgage approval/real estate transaction down, but potentially places the property beyond the buyer’s reach if they have to raise the Stamp Duty payment, too.
And, as Tribune Business previously revealed, there is the confusion being caused by the Treasury’s practice of adding the mortgage value to the conveyancing value - a tactic that often pushes a first-time buyer transaction beyond the $500,000 qualifying cut-off.
On the other side, Mr Wilson said the Ministry of Finance and Treasury had also seen buyers swear false affidavits stating a transaction was their first home when it was not.
The BREA/Bar Association recommendations will also look to quicken the stamping of conveyance documents, so banks and lenders gain immediate collateral security for their funds.
“The recommendations the Ministry of Finance is waiting for are to make the process move faster and make it more efficient,” Mr Wilson told Tribune Business.
“The banks are asking people to put Stamp Duty on their account before they purchase the home in the event they don’t get the exemption. And there have been cases where buyers have sworn an affidavit that this is their first home, and it’s not turned out to be true.
“Now the deal’s closed, the Government wants its money. The banks want the Stamp Duty on the account as a precaution. If they get the exemption, great, if they don’t, the Duty will be paid.”
Mr Wilson said some buyers were able to raise the Stamp Duty payment from friends or relatives, or take out short-term bridging loans that would be repaid within several months when the exemption was approved.
“But there are people out there who can’t get that, and they are not able to move forward,” he added.
“As a result, we are making suggestions about ways to help banks not require the money upfront, and ways for the conveyance documents to be stamped faster after the deal closes, so banks have their security.
“It’s helping the system to move faster, and could lead to big growth. We have to send our recommendations in, which should be very shortly, and at that point we’ll just wait. Hopefully it’s extended, and then we will have the discussions.”
The first-time buyer Stamp Duty exemption was introduced under the first Christie administration, initially for properties valued at $250,000 or less, before the Ingraham government increased the threshold to $500,000.
It has been regarded as a relative success, enabling middle and lower income Bahamians - who might not otherwise be able to afford it - to realise their dream of home ownership.
The exemption has also acted as a ‘stimulus’ for that sector of the Bahamian real estate market, benefiting attorneys and realtors, while also generating construction sector activity.
What the Government has given up at the ‘front end’ in terms of Stamp Duty, it has regained at the ‘back end’ in terms of job creation and import spending on materials, fixtures and furnishings. That has also boosted retail stores focused on the home
Mike Lightbourn, president of Coldwell Banker Lightbourn Realty, joined Mr Wilson in calling for the first-time buyer Stamp Duty exemption to be extended.
“Number one, it’s very important,” he said. “But two, we need clarity on the adding of the mortgage value to the purchase price.
“What’s so unfortunate is that a buyer is ready to go, and the bank says you need to pay us the Stamp Duty in case you have to pay it, and they don’t have it.
“People in that price bracket are struggling, in particular, and they’re the ones we want to help get homes. It’s difficult to get a mortgage now. The banks are nervous, scared to lend at the same standard they used to, because things are so uncertain There are so many foreclosures out there - RBC FINCO has almost put out a magazine of foreclosures.”
And Mr Wilson added of the exemption: “Everyone wants to see it work to benefit people. It has helped a lot, and truly been significant.
“You’re talking about tens of thousands of dollars. That can be the reason why someone owns a home or does not own a home, and that can be why people move forward or not.”