By NATARIO McKENZIE
Tribune Business Reporter
THE high-end second home market is in "a state of shock" and "panic" over fears of "exorbitant" real property tax hikes following the recent budget changes, realtors are warning.
John Christie, director and vice-president of HG Christie, told Tribune Business that the government's decision to amend the definition of "owner occupied-property", leading to the removal of the $50,000 real property tax cap and a higher two percent rate, was effectively a "double whammy" for this market segment.
"People are in a state of shock in the luxury high-end market. There is a lot of talk in New York and other places like that. People are afraid they can't sell their homes. In some cases you're talking about going from $50,000 a year in property tax to $200,000 a year in property tax," Mr Christie said.
"There are a lot people upset up about this. There are a lot of people who want to buy and move forward, but are now saying let me wait and see what happens here."
The definition of the term "owner-occupied property" has been changes in the Real Property Tax Act to remove the phrase "or seasonal basis", inserting a requirement that an owner must reside in their property for at least six months annually.
Beginning January 1, 2019, an owner that resides in their property for less than six months in any given year will be required to pay real property taxes annually at the rate of 0.75 percent on that part of the market value which does not exceed $500,000, and two percent on that part of the market value which exceeds $500,000. The maximum annual tax of $50,000, which applies to owner-occupied property, will not apply in such instances.
Christine Wallace-Whitfield, the Bahamas Real Estate Association's (BREA) president, said the organisation was still hoping to have a "sit-down" with government "to hash-out" some of its concerns.
"There are still a lot of concerns that we want to sit down with the Government and hash out," she said. "We are still asking for the sales before July 1 to be honoured at the previous VAT rate. We never got anything in writing on that. I wrote a letter to the Government and never got a reply.
"I had a phone call but we want a discussion. We would like to sit down and speak about our concerns. I think we are very much an important industry in the Bahamas, and we should be able to sit down and have an audience with the Ministry of Finance."
Mrs Wallace Whitfield continued: "Under the new regulations as it appears now, anyone who does not spend six months or more here, the property will be deemed other than residential. If it is deemed other than residential the property tax rate will go to 2 percent and the cap is null and void.
"There is panic in some places with people saying they couldn't have thought this through. Most of these people don't spend six months in one place. With these homes they hire staff to maintain the property in sort of an under-the-radar economy."
Monica Knowles, Bahamas Realty's 2016 'top producer', told Tribune Business there is concern over the possibility of a flood of luxury homes coming on to the market if second home owners decide the cost is too high.
"The fees could be exorbitant for a $5-$10 million home, and the even higher brackets will feel it more. People will decide whether it is something they want to absorb or not. There's a lot of concern in that market," she said.