By NEIL HARTNELL
Tribune Business Editor
The Government was yesterday said to be “putting the meat on the bones” of plans to lower the permanent residency investment threshold for economically-depressed Bahamian islands.
Brent Symonette, minister of financial services, trade and industry and Immigration, confirmed to Tribune Business that the Minnis administration had already “agreed” to move away from the ‘one size fits all’ approach to real estate-related permanent residency investments.
While the Government is proceeding with plans to raise the threshold from $500,000 to $750,000 for more vibrant real estate markets, such as Nassau and Abaco, Mr Symonette said it would “more than likely come down” for certain struggling island economies.
“That’s already been given consideration,” Mr Symonette replied, when questioned by Tribune Business. “That’s been agreed. Certain areas will not go up, and will more than likely come down.
“There will be areas that are not as developed and resilient as Nassau, so we’re outlining those areas at the moment.... We’re working out the details of that plan, and will give it to you shortly. $750,000 in Nassau is a lot different from $750,000 in Freeport, where the duty and tax structure is totally different. It’s just a question of putting the meat on the bones.”
The Minister reiterated that the initiative had moved past the “consideration” stage, and added that lower permanent residency investment thresholds could be applied to parts of an island - not just a whole island.
The Government’s policy initiative will likely be warmly welcomed by realtors, attorneys and other Bahamian professionals who benefit from the second home market, some of whom have called for just such an approach in recent weeks.
It also ties into the Commercial Enterprises Bill, which establishes ‘specified commercial enterprise zones’ “for the purposes of rationalising infrastructure investment, efficient land use or the encouragement of clusters of commercial development”. Investment incentives specific to each zone can be developed.
George Damianos, Damianos Sotheby’s International Realty’s president, urged the Government to be “a little more creative” with the permanent residency product in a recent Tribune Business interview, and move away from the ‘blanket’ threshold standard.
The rationale behind Mr Damianos’s proposal was that lower permanent residency thresholds for struggling island economies would entice wealthy foreign buyers to those locations, spreading them throughout the Bahamas and helping to distribute economic activity more evenly, given that the spending generated by their presence will create jobs and boost businesses.
He was backed by Terence Gape, senior partner at Dupuch & Turnquest, who told Tribune Business that the Government needed to use permanent residency as an economic stimulus tool and cut the threshold to $350,000 for Freeport.
Tribune Business understands that $350,000 is the number being considered by the Government for Freeport, and the ‘horses for courses’ threshold approach has received further backing from prominent realtors and Chamber of Commerce executives.
Mario Carey, chairman of Better Homes and Gardens MCR Bahamas Group, told Tribune Business in a recent interview that he “totally agrees one size doesn’t fit all”.
“Every island should have its own threshold based on activity,” he suggested. “Every location, every island, has its own market. That’s very real. How come we’ve been so closed-eye to that, and thinking that, for so long. It makes a lot of sense.
“To buy a property for $500,000 in Long Island, it would be one of the most expensive properties there. You’re not going to spend that; are you ever going to get out? We’re in a very competitive market, and a lot of people are going after these investments. We’re not in a bubble.”
Roderick Simms, head of the Chamber of Commerce’s Family Island division, told Tribune Business that a properly “tailored” permanent residency policy could help the Bahamas “get a return” on its considerable infrastructure investments throughout the archipelago.
He argued that residency certificates for Family Island homeowners mandate that they live on a specific island for at least nine months of the year, otherwise these and other benefits will be taken away.
“We have to attract people to other parts of the country, as the growth of the Bahamas is in the Family Islands, not in Nassau,” Mr Simms said. “Maybe you need to decrease it to $150,000 for Inagua, $250,000 for Mayaguana.
“The investment policy needs to be tailored to each island; the permanent residency threshold needs to be tailored to each island economy. They have reside on a particular island for nine months of the year, and if they violate that the residency permit is null and void.
“It can’t be transferred around the country. You have to stay in that island. We can’t allow people to come through Inagua to Nassau. Your permanent residency is married to the island that you invest in.”
Mr Simms added that the Bahamas needed to “decentralise” its economy, and attracting second home owners and foreign investors to the Family Islands could provide the taxes necessary to sustain their infrastructure.
“We’re too Nassau-centric,” he added, “and we have so much infrastructure on these islands as it is. We have to find ways to get a return on the investment we have in the Family Islands.
“We have millions of dollars in electricity lines, water lines. We have to find ways to get a Return on Investment (ROI) back. We have to look at them individually; we have to look at them as island states.”
Mr Symonette, though, strongly hinted that the Government plans to increase the permanent residency investment threshold from $500,000 to $750,000 for New Providence and stronger island markets.
He emphasised that the threshold only applied to second homeowners/investors seeking speedy approval of their permanent residency applications, and was not meant to be a deterrent or bar.
“If you look at the value of housing in the Bahamas, $750,000 is not out of line,” Mr Symonette told Tribune Business. “I’ve met with people who raised objections, I see their concerns, and we’ll take a look at whether or not we can accommodate them with what we are trying to achieve.
“We’re trying to attract wealthy clients that bring something to the Bahamas by way of permanent residency. When you look at the real estate market and see what $500,000 buys you, and what $750,000 buys you, it’s pretty clear where we want to be.”
The Bahamas Real Estate Association (BREA), and its members, have been opposed to any increase in the real estate investment threshold for expedited permanent residency applications. They were against the former Christie administration’s plans to raise this to $1 million, and have taken a similar stance on its successor’s plan - albeit that the proposed increase is 50 per cent less.
Tribune Business understands that the Government has been asked to consider a smaller increase to $600,000, with real estate and other industries’ concerns centred more on ‘the bigger picture’.
They believe the increase to $750,000 cannot be viewed in isolation, and has to be compared to the thresholds/benchmarks established for permanent residency and citizenship in other Caribbean jurisdictions - especially given the background of ever-increasing competition for foreign direct investment (FDI) and second homeowners.
With the likes of Antigua & Barbuda, St Kitts and Nevis and St Lucia all around $200,000-$250,000, the private sector’s fear is that the Bahamas will become uncompetitive and price itself out of this market.
Mr Symonette, though, said the Government had to ensure the permanent residency system was not abused when it came to real estate investments.
He pointed to cases where foreigners bought Bahamian real estate, only to immediate sell or ‘flip’ it for profit, yet clung on to their permanent residency status.
“We have to make sure there are added benefits to permanent residency, and that it’s not being used as an added tool in their tool-kit,” Mr Symonette told Tribune Business.