The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government “must make sure it’s done a comprehensive analysis” of all potential repercussions from doubling the ‘fast track’ permanent residency threshold to $1 million, the Chamber of Commerce’s chairman has urged.

Gowon Bowe told Tribune Business that the private sector needed to know, and understand, how the Christie administration had “come to the conclusion” that it needed to double the existing $500,000 real estate investment threshold.

Pointing out that numerous factors, not just tax earnings on the initial property purchase, needed to be considered, Mr Bowe acknowledged the potentially negative ramifications for realtors, developers, contractors and the wider economy from the Government’s proposed policy change.

“The aspect we’re principally concerned with is what analysis has been done to get to that conclusion,” Mr Bowe said of the Government’s plans to increase the investment threshold to $1 million.

“How have we reached that point? There are a couple of things we have to focus on. The Bahamas Real Estate Association (BREA) have expressed concern that there are a significant number of properties in the $500,000 to $1 million range, which are a major part of the inventory they sell.

“This could be a major concern for these elements if it’s upped to $1 million, [particularly those projects and developments that are in the pipeline.”

Tribune Business reported last week that the Government wants to increase the minimum investment threshold for the accelerated consideration of permanent residency from $500,000 to $1 million on March 1, 2017.

Both realtors and developers, especially those with ongoing projects pitched at that market in the $500,000-$1 million price range, are arguing that this deadline gives all parties too little time to adjust.

They have also warned, via this newspaper, that the Government’s policy change may eliminate a sizeable chunk of the ‘permanent residency’ market, which currently accounts for about 50 per cent of the Bahamas’ real estate business.

The development and real estate industries fear it may slow their sectors, and professions such as construction, just at the time when the Bahamas needs every investment dollar it can get following Standard & Poor’s (S&P) move to downgrade this nation’s creditworthiness to ‘junk’ status.

Mr Bowe said the “key factors” that the private sector wanted to understand was the evidence justifying the Government’s decision to increase the ‘fast track’ investment threshold to $1 million.

“Is it looking at the contribution to the economy, the contribution to employment and spending, the initial purchase and ongoing tax contribution of these properties?” he asked.

“If we are going to look at revisiting the permanent residency threshold, then we need to make sure we have done a comprehensive analysis of what the basis is.”

Mr Bowe said second home residents typically spent money in the Bahamian economy, hired gardeners and housekeepers, paid taxes and generated numerous “auxiliary benefits” that were felt by locals.

“While the purchase of the property is one factor, what are all the other elements,” he asked. “Let us make sure we’re doing a comprehensive analysis as opposed to moving the dollar threshold up.

“It may sound great in the early stages, paying a higher price for land purchases, but will it be a deterrent [to investment]?”

Mr Bowe said the Government needed to adopt a similar analytical approach to the one taken in addressing the weaknesses with its tax/revenue system, identifying where the leakages and low collection ratios were occurring.

He also warned the Government not to “put the cart before the horse”, and instead ensure the permanent residency threshold change was part of the more comprehensive land reforms envisaged by the National Development Plan (NDP).

“If this is a cog in the wheel, that’s fine, but it cannot be separate and apart from the National Development Plan,” Mr Bowe added.

With the Bahamian segment relatively flat, the second home sector has been one that realtors have been able to rely on to generate sales momentum over the past few years.

With 80 per cent of real estate sales inventory priced below $1 million, they fear that any change - especially one that might be perceived negatively by foreign buyers - could drive a significant chunk of the market to other jurisdictions.

And a ‘drying up’ of such buyers would produce wider ‘ripple effects’ in the Bahamian economy, reducing work for the construction industry and a variety of other trades whose business is tied to the real estate and second home markets.

Markets and investors are always undermined by uncertainty, and the Government’s constant tinkering with the tax code and real estate market – as in this case – frequently impact economic activity responsible for generating its tax revenues.