By NEIL HARTNELL
Tribune Business Editor
Realtors and developers have warned the Bahamas against thinking it has the foreign home buyer market “wrapped up”, as they hailed the Government’s decision to “reconsider” a $1 million permanent residency threshold.
George Damianos, George Damianos, Damianos Sotheby’s International Realty’s president, told Tribune Business that the Bahamas needed to be “very competitive” and guard against “complacency” when it came to attracting wealthy individuals to its shores.
He emphasised that this nation was competing against Caribbean rivals who offered products the Bahamas does not, such as economic citizenships, implying that the proposed ‘doubling’ of the permanent residency threshold would make this nation less attractive to foreign investors.
And Jason Kinsale, the developer behind projects such as ONE Cable Beach and the Balmoral, emphasised that it was vital for the Government to provide a “lead time” before implementing such a policy change.
Besides giving all market participants time to adjust, Mr Kinsale said such a ‘grace period’ - and the ‘grandfathering’ in of existing projects - could create a short-term boost by giving buyers an “urgency” to purchase.
He added that the proposed jump from $500,000 to a $1 million threshold for accelerated permanent residency consideration was “too much”, suggesting that change should be introduced in gradual “steps”.
Messrs Kinsale and Damianos were responding after Hope Strachan, minister of financial services, admitted on Thursday that “considerable push back” from the developer and real estate community had forced the Government to reconsider its plans.
She indicated that even if the $1 million ‘switch’ was to proceed, the Christie administration would at least provide a “lead time” to enable existing development project, and the market as a whole, to adjust.
“That’s great news. I have to applaud them for actually listening and taking our concerns into consideration, and thinking it through again,” Mr Kinsale told Tribune Business in response. “It’s very encouraging.
“The important thing is they’ve recognised the need for a lead time. One of the things that does is it gives us a nice selling tool; a sense of urgency for people to buy now.
“If they know a change is coming in a year from now, they’ll know they have to spend more money to become a permanent resident,” he continued.
“I can say: Make a decision quickly. I don’t have that selling tool now. Any urgency created is always a good selling tool.”
The Government had initially planned to change the permanent residency threshold as early as March 1 this year, a date Mr Kinsale had previously described as “unacceptable” and “unnecessary”.
The developer, who is currently in the midst of selling both the Thirty|Six condo project on Paradise Island, as well as ONE Cable Beach, said it was vital that these and other existing developments be ‘grandfathered’ in under any change.
Both Mr Kinsale’s projects are targeting foreign buyers in the $500,000 to $1 million price range, the precise market segment that will be impacted by the Government’s proposed policy change.
“We just want to ensure that we have our projects grandfathered in to protect them completely,” Mr Kinsale explained, “and if we have that notice, it allows me to plan for the next project in terms of who we’re selling to.”
He suggested that the Government target an increase to $750,000 if it felt raising the accelerated permanent residency threshold was absolutely necessary, describing this as “a nice step that will not alienate too much of the market”.
“To go to $1 million in one step is too much; there’s no justification for that,” Mr Kinsale told Tribune Business. “Let’s take some baby steps, protect ourselves against taking too much risk with the real estate industry.”
Mr Damianos, meanwhile, backed the developer, warning that numerous real estate projects already under development would be “jeopardised” should there be an instant increase to $1 million.
“I think it’s great that they finally spoke to people who showed them the light; that projects in the works in the $500,000 range would be put in jeopardy if it gets increased to $1 million,” he told Tribune Business.
Mr Damianos joined fellow realtor, Mario Carey, in expressing surprise that neither themselves nor anyone else in the industry, as far as they were aware, had been consulted by the Government prior to the policy change announcement.
He explained that the $500,000 real estate investment ‘threshold’ was often used by foreign purchasers to ‘get their feet wet’, obtaining permanent residency and ‘trialling’ life in the Bahamas, prior to spending more money and buying larger properties in this nation.
Mr Damianos, while not suggesting that the Bahamas offer such products, added that it also had to guard against the competitive threat posed by the ‘economic citizenship’ and residency programmes offered by Caribbean rivals.
“I think we need to be very competitive in the market,” Mr Damianos told Tribune Business. “We shouldn’t become too complacent and think we have it wrapped up, and only do business with extremely wealthy people.”
Urging the Government to “follow through” with its reconsideration, Mr Damianos also called on it to publish data on how many permanent residencies it had granted in relation to purchases in the $500,000 to $1 million range.
Developers and realtors have been especially concerned about the proposed policy change, given the importance of the second home market to their industries and the wider Bahamian economy.
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.
A reduction in foreign direct investment (FDI) flows would also not be desirable in an environment where Standard & Poor’s (S&P) has downgraded the Bahamas’ creditworthiness to ‘junk’ status.