0

Buyers 'Pull Back' On Moody's Threat

photo

Mario Carey

International buyers are "pulling back" due to uncertainties caused by Moody's threatened downgrading of the Bahamas to 'junk' status, realtors have warned.

Mario Carey, founder of Mario Carey Realty (MCR), told Tribune Business that foreign clients were "holding off" on potential projects until they could assess the fall-out from any Moody's action that impacts the Bahamas' sovereign creditworthiness.

"We've got a challenge with the downgrade by Moody's," Mr Carey said. "We're seeing people pulling back on making decisions.

"They were getting ready to do some stuff, and then told us they were going to hold off because they didn't know what a Moody's downgrade would look like.

"We're starting to see a pattern. The market is retrenching for foreign clients because they don't know what's going to happen."

Mr Carey added that this was impacting all segments of the Bahamas' foreign real estate market - potential purchasers, existing homeowners and tenants.

Any slowdown in activity will be a further blow to the already-struggling Bahamian economy, as the foreign real estate market has been one of the few relatively bright spots in recent years.

Stronger growth levels in the US and other developed world economies, combined with lower interest rates and better access to credit, have helped fuel Bahamian real estate purchases by foreign investors.

The Bahamas, with its favourable tax/investment regime, location and history of stability, remains an attractive destination for foreign capital, especially Canadian and European clients seeking to escape 'high tax' regimes at home.

This demand has generated important foreign direct investment (FDI) and currency flows that now stand to be impacted, along with work for realtors, attorneys, contractors and others who earn a living from the real estate market.

Mr Carey's concerns were echoed by Ryan Knowles, a realtor with HG Christie, who warned that a downgrade by Moody's - especially one that pushed the Bahamas to 'junk' status - would negatively impact investor perceptions of this country.

He added that this nation's "pristine image" with overseas buyers would be threatened, as any downgrade would raise concerns over the safety of their investments and the Government's economic management.

"Perception is reality," Mr Knowles told Tribune Business. "If we are downgraded to 'junk' status, and our bonds are considered 'junk', we're going to lose that pristine image we as a country have in some places.

"We don't want to be associated with Jamaica and those in the Caribbean. We want to maintain our status as an ideal place to invest.

"The Bahamas is probably number one in the region, and certainly our real estate market is; we're the strongest market in the Caribbean for buyers. We could lose that if things like this happen."

Moody's placed the Bahamas on a two-month review, which could lead to the potential credit rating downgrade, on July 1. It warned that any cut could be by "one notch or more", giving it the flexibility to slash this nation to 'junk' status.

Mr Carey, meanwhile, hit out at the Bahamas' 'ease of doing business' woes, which he warned were deterring foreign investors from acquiring real estate and establishing physical businesses here.

"We have all these buyers that want to come in and do developments and to do businesses, and they complain about how difficult it is to do this in this country," he told Tribune Business.

"How many layers of approvals, how many run arounds. There's a lot of frustration that we see. I think it's pretty real to people wanting to come in and do business."

Mr Carey said such investors frequently drew unfavourable comparisons between the Bahamas and the Cayman Islands when it came to 'business ease'.

He recalled a recent conversation with Royal Bank of Canada (RBC) executives, who told him how quick and easy it was to conduct business in the Cayman Islands, plus hire needed expatriate talent.

Mr Carey also said the Bahamian real estate market was also being affected by forces such as the US dollar's strength on the foreign exchange markets, coupled with Great Britain's decision to leave the European Union (EU).

He explained that UK and Canadian owners of Bahamian real estate, in particular, had been influenced to sell by the current weakness of their respective currencies.

"People are trying to sell to take US dollars out and buy at home at good rates," Mr Carey said. "It's good. It creates a real estate market here for people wishing to sell, but they're also exiting the country.

"It's just an interesting trend. These are things that ebb and flow. We've lost a lot of Canadian buyers because of the Canadian dollar's weakness. That's a very big market."

Mr Carey reiterated his belief that a revitalised real estate market, aided by Government tax cuts and business-friendly policies, is a critical factor in helping to fight off the likes of sovereign rating downgrades.

"I feel very strongly that with the right approach to real estate, stimulating the real estate market, creating incentives and creating different products to attract the international buyers out there, we can bring this country out of a big, dark hole," Mr Carey told Tribune Business.

"I feel that we still have so much to offer. There's been zero government incentives, initiatives to stimulate the real estate market; nothing to encourage sales.

"I've been preaching that for a long time. Every time a transaction happens, it creates employment. The statistics show it."

Comments

banker 7 months, 2 weeks ago

Carey is right about Canadians exiting. I was recently talking with a Canadian expat who is exiting the Bahamas and closing his accounts. He is doing it for two reasons:

(1) They do not feel safe either in New Providence or the Family Islands. The expat cited the elderly Canadian killed in Freeport, the British dive instructor killed on his boat in Stuart's Cove, the death in Exuma of the Toronto couple who were hit by a drunk driver and killed (the potcake rescue couple) and didn't get satisfaction from the police or the country, and the retired doctor from Vancouver who was killed in his home of 30 years by a man who robbed him.

(2) The banks do not offer him the capabilities to effectively and efficiently manage his investments and actively trade his accounts. A cheque takes forever to clear compared to overnight or next business day in the US and Canada.

He was saying that they no longer felt welcome in the Bahamas, and the deteriorating conditions were troublesome. They voted with their feet.

Interestingly enough, when I asked him where and how he would escape the cold Canadian winters, he replied that he bought a riverfront house in rural state of Georgia (USA) for $78,000.

0

asiseeit 7 months, 2 weeks ago

It is not just the expats who are leaving, anyone with a child that has any hope for that child's future is trying to their family or at least the child out of the country. I heard it this weekend, time and time again, This country is for the criminal, the corrupt, the immoral, the dishonest, not for the honest, not for the hard working, not for those that are not tied to some scum politician. Those that have failed at managing this country (the political elite) are happy as clams, as you would be if you where sitting on the country's money, resources, and opportunity, which you dole out to those YOU favor. This country has been destroyed by a political class that is petty, dishonest, immoral, unethical, unable to manage anything, and utterly criminal.

2

observer2 7 months, 2 weeks ago

Just the possibility of the Bahamas being downgraded will give investors pause in terms of investing in a Country. Would you want to invest large amounts of money in a place that may have financial problems?

Besides crime, poor infrastructure (electricity, roads, education), inefficient government functioning and negative GDP growth rates, its really expensive to buy and sell a high end property. It actually cost 22% of the purchase price (both buyer and seller costs) to complete a transaction. So if an investor buys a property and then sells it in 5 years, that property will need to increase in price by 50% just for for the transaction to break even.

See attached schedule.

We are relying on foreign investors who are driven by factors other than profits. However as the livability of the Bahamas declines this must have an impact on their investment decisions.

2

banker 7 months, 2 weeks ago

Most savvy second home buyers have already figured this out. It really is good to see in spreadsheet form with numbers. Buying a second home in the Bahamas is definitely not investment-grade -- just like the bonds that the government issues !! Thanks for the breakdown.

1

Well_mudda_take_sic 7 months, 2 weeks ago

All of those who pushed for rather than against government's introduction of VAT should hang their heads in shame when reading this one paragraph in a recent article written by Richard Coulson and published in The Tribune:

"The rating agencies will not be blind that VAT was originally sold to the Bahamian public as a direct application against debt increase, only to learn that that the proceeds are swallowed into the Consolidated Fund, where, since dollars are fungible, they simply pay for whatever increased expenses the politicians approve. In their talks with the private sector, the analysts will not find many citizens claiming VAT has improved public services, reduced public inefficiencies or lowered import duties to reduce his food bill - quite the contrary, as every lower-income shopper finds the necessities of life have become a struggle to economise, or do without."

The idiots like John Rolle, Gowan Bowe and others who made the government's case for introducing VAT turned a blind eye to the simple fact that giving a spendthrift corrupt incompetent government more money to spend would naturally induce more government spending and enable more government borrowing. It's common sense that just like you don't give an alcoholic more alcohol to drink, you don't give a corrupt irresponsible government that can't control spending more money to spend. Rolle, Bowe and others like them should have been insisting on tangible evidence of reform in the government's wasteful spending habits for at least a year or two before even considering throwing their support behind any system of new taxation. By not insisting on the VAT revenue being appropriately ring-fenced or earmarked only for paying down the level of our national debt, our country's finances are now in an even worse position than they were before the introduction of VAT. Thank you John Rolle, Gowan Bowe and others like you for helping our government royally shaft all honest hardworking Bahamian taxpayers!! And to think John Rolle went on to become Governor of The Central Bank; a definite quid pro quo from a corrupt government for his efforts in securing more tax dollars for our government to wastefully spend or allow to be squandered by egregious instances of outright fraud!!!

0

Sign in to comment