By NEIL HARTNELL
Tribune Business Editor
Less than 50 per cent of mortgage applications were approved during the 2017 first quarter, highlighting the Bahamas' ongoing housing crisis and borrower difficulties in qualifying for credit.
The Central Bank's research department, in a presentation accompanying its June economic report, revealed that bank approvals for home loans are significantly below those for consumer and commercial credit.
All three loan categories enjoyed a plus-80 per cent approval ratio in the 2015 third quarter but, since then, those for mortgages tailed off steadily to hit 50 per cent in the 2016 second quarter. While mortgage approvals temporarily recovered to near-70 per cent in last year's third quarter, they again plummeted during the first three months of 2017 to below 50 per cent.
In contrast, commercial bank approval rates for commercial and consumer loans were 90 per cent and 80 per cent, respectively, for the 2017 first quarter.
The Central Bank data suggests that Bahamian banks remain extremely jittery over mortgage lending, given how badly they were burnt in the wake of the 2008-2009 recession, with huge portfolios of distressed and delinquent properties still clogging their balance sheets to this very day.
The figures also illustrate the ongoing difficulty Bahamian home buyers are having in qualifying for loans, with the banks having considerably tightened their lending criteria to demand higher downpayments and more collateral.
Combined, these factors mean the continuation of a depressed local housing market, together with negative social consequences and reduced work for contractors, realtors, attorneys and other professions reliant on this sector.
This likely resulted in the sluggish 2017 first quarter housing market, with the Central Bank revealing: "The total number of construction starts in the Bahamas decreased for private residences by 36.2 per cent in the first quarter of 2017, vis-à-vis the comparable period of last year.
"The value of construction starts fell for private residences by 17 per cent (mainly in Grand Bahama). Total completions rose by 11 in number and by $6.5 million in value."
Drawing on Department of Statistics data, it added: "Nevertheless, during the three-month period, private residential completions rose by 4 per cent in number and by 15.3 per cent in value.
"Similarly, the number of permits issued for private residential construction - a forward looking indicator - firmed by 1.4 per cent in number, but contracted by 31.1 per cent in value."
The Central Bank data also revealed that Hurricane Matthew recovery needs drove a "notable spike" in 2016 fourth quarter loan applications, which increased from around 11,000 in the same period in 2015 to 18,000 - a rise of around 63.6 per cent. It also represented a 38.5 per cent quarter-over-quarter increase.
The regulator added that post-Matthew there was "strong growth in debt consolidation applications, and a notable increase in furniture and appliances loans", which enjoyed "approval rates of 92 per cent and 87 per cent, respectively".
This indicates that many storm-hit Bahamians were forced to borrow to repair homes, and replace damaged property, while others were left unable to meet their financial obligations and had to restructure existing debt facilities.
Other monetary sector data showed that private sector credit demand continues to be weak, with lending to businesses and households contracting by $16.8 million in the 2017 first half following a $55.2 million fall the prior year.
The decline was driven by reduced mortgage and consumer lending, which fell by $26.7 million and $13.3 million, respectively, although commercial (business) credit grew by $23.2 million.
However, increased lending to the Government drove a $165.1 million increase in domestic (Bahamian dollar) credit during the 2017 first half.
"Net claims on the Government advanced by $185.2 million, compared to the $3.5 million marginal rise in 2016," the Central Bank said. "Credit to public corporations weakened by $3.3million, after a $30.9 million increase in the prior period."
Highlighting the task in finding qualified borrowers, excess liquid assets in the Bahamian commercial banking grew by $165.9 million during the 2017 first half to hit $1.6 billion.
Meanwhile, the Bahamas' external reserves jumped by $58.9 million over the same six-month period to hit $961 million, which the Central Bank described as "a substantial slowdown" from the prior year's $245 million expansion that was aided by the Government's $100 million foreign currency bond.
"At end-June, reserves were equivalent to an estimated 3.8 months of current period merchandise imports, compared to 4.5 months a year earlier," the Central Bank said.