By NEIL HARTNELL
Tribune Business Editor
and NATARIO McKENZIE
Tribune Business Reporter
The Bahamas Real Estate Association’s (BREA) president yesterday confirmed realtors had rejected doubling the permanent residency investment threshold to $1 million, amid indications the Government may press ahead with the increase regardless.
Carla Sweeting, BREA’s president, told Tribune Business she was “just sending off” the results from a members’ survey on the issue to Hope Strachan, minister of financial services - a move that coincided with another Cabinet Minister’s backing for the increase.
Fred Mitchell, minister of foreign affairs, described the current $500,000 investment threshold for permanent residency consideration as “absolutely too low”.
Addressing Parliament during the second reading of the Home Owners Protection Bill, he backed the increase to $1 million as “the right thing to do”.
Mr Mitchell said: “The Bahamas government made a decision with regards to adjusting the pricing point for people coming into the Bahamas to become permanent residents, which is the right thing to do.
“We are giving people permanent residency to stay in this country for $500,000. That is absolutely too low. The cost of a work permit is $12,500 for someone who is a managing director of a bank for one year, and then you’re giving permanent residency to someone because he could pay $500,000 for a house. Something is wrong with that.”
It is unclear whether the Government has already taken the decision to move ahead despite the significant concerns, and opposition, expressed by realtors, developers and other private sector executives.
Mrs Sweeting expressed this fear yesterday, but emphasised that she had received no official notification from the Government that a final policy decision on the issue had been taken.
She confirmed that, on BREA’s behalf, she met with Mrs Strachan’s Ministry of Financial Services team early in the New Year after numerous realtors and developers had voiced concerns over the $1 million threshold via Tribune Business.
Several teleconferences between the parties had followed, and Mrs Sweeting told Tribune Business: “We shared our concerns, and they asked that we do a survey of our members.
“I just sent the final conclusions off today. We didn’t have that many responses from our members, but those that did were not in favour of it being increased. I’m just sending it off now.”
The BREA president said Mrs Strachan had informed her that she would discuss the findings, and other feedback, with the rest of the Christie Cabinet before “moving forward”.
“I was quite impressed that she was concerned with the feedback she was getting, and that she reached out and asked for the information,” Mrs Sweeting said of the Minister.
“In a nutshell, nothing has changed. I have not been officially contacted that anything has taken place yet. It’s hard fighting, because it’s like fighting a battle already lost. We’ll known in a couple of days time once they’ve got the information.”
Mr Mitchell’s House of Assembly remarks, though, will raise concerns that a decision in favour of the increase to $1 million has already been taken.
At the very least, it indicates that some Cabinet Ministers are in favour of a policy action opposed by most in the private sector, who fear it could destabilise the real estate market and investment inflows.
Mrs Sweeting said she understood the rationale behind the proposed increase, with the Government seeking to attract more affluent buyers who possess the capital to eventually invest in other sectors of the Bahamian economy, such as physical businesses.
“On the other hand, not everybody buys something for $500,000 simply for residency,” the BREA president explained. “Sometimes, people want to acquire a place to retire, and don’t have funds to spend on other things in the country.
“If they’re upstanding people, why would we not want them to be in the country? There are other positive aspects.
“I think that someone just gets an idea in their head and doesn’t stop and think,” she added, “and ask questions about the implication moving forward.”
Mrs Sweeting said another Government concern was that, by setting the permanent residency threshold at $500,000, Bahamians were being squeezed out of that market segment by an influx of foreign buyers “preventing them from purchasing”.
She, however, said the price points in areas desired by foreign buyers, such as Lyford Cay, Old Fort Bay, Albany, Ocean Club Estates and Cable Beach, were all well above the $500,000 threshold.
“Tell me where you will find something at $500,000 in Cable Beach,” she asked, pointing out that virtually all inventory was priced at $750,000 and over.
Turning to the Government’s concerns on the condo market, Mrs Sweeting took the Cave Heights development as an example, noting that the West Bay Street-based project had still not completely sold-out yet.
“What’s preventing Bahamians from investing in condos is the banking system,” she argued, pointing to requirements such as 30 per cent downpayments and higher interest rates than those available internationally.
Mrs Sweeting added that to rent out a $740,000 condo, lease rates of $6,500 per month were needed to “make financial sense. Bahamians are not able to do that”.
She emphasised “the trickle down” impact from foreign purchases of Bahamian real estate, and the jobs created for gardeners, handymen, plumbers and electricians.
Auto, furniture, appliance and insurance sales were also boosted by the presence of foreign buyers, together with business for attorneys, retail stores and restaurants, which all “help to build the local economy”.
Mrs Sweeting also pointed out that the debate over the ‘dollar value’ of the investment threshold would be rendered irrelevant unless the Bahamas improved the transparency and timeliness of the permanent residency process.
“Until we clean up the policy, and the way this thing takes place, and works on the timeframes and doesn’t frustrate people, nothing’s going to change,” the BREA president told Tribune Business.
Developers and realtors are especially concerned with both the potential change and how it is implemented, 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, drying up work for the construction industry and a variety of other trades whose business is tied to the real estate and second home markets.
Mrs Strachan previously pledged that “all efforts” will be made to maintain business currently “on the table”, suggesting that developments already selling to foreigners in the $500,000 to $1 million price bracket will be ‘grandfathered’ in, giving all market segments - foreign buyers, developers and realtors - time to adjust.