The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian tourism and food industry workers earn on average just 38 percent of the salary needed to service a “median” New Providence mortgage and meet bank debt demands, it has been revealed, with this nation’s house price-to-earnings ratio branded “remarkably high”.

The Inter-American Development Bank (IDB), in a just-released March 2026 study on home affordability in The Bahamas, reaffirms that “formal housing solutions are increasingly out of reach of low and middle income households” with New Providence’s house price to income index - which measures affordability by comparing real estate costs to earnings - shown as being among the highest in the world at 141:1.

The report revealed that this ratio, in 2024, was higher than all major developed countries such as the US, Canada, UK, and every major Organisation for Economic Co-Operation and Development (OECD) as it warned that home ownership prospects for many middle and lower class Bahamians are becoming increasingly bleak without fundamental policy reforms that address declining new home builds and the ever-increasing number of existing properties that are falling into disrepair or becoming vacant.

And, further highlighting the growing gap between housing affordability and costs that has been previously exposed by the International Monetary Fund (IMF) and others, the IDB study estimated that aspiring home buyers need to come up with $66,700 in cash upfront to cover bank and legal costs - not even including the VAT due on any sale - to qualify for a mortgage to purchase a New Providence property priced at the “median” $460,000 based on sales data.

And, utilising this price as a benchmark, the IDB researchers found there was a near-$3,400 gap between the average monthly salaries earned by tourism and food industry workers and what would be required to service the mortgage on a $460,000 New Providence property while also meeting bank lender demands that they maintain the 45 percent debt-service ratio set by the Central Bank.

The report, by researchers Robin Rajack, Jose Luis Saboin, Charlene Small, Timyka Davis and Angelo Mazzocca, found that the average $2,176 monthly wage earned by hospitality and food industry staff would be insufficient to cover the $2,550 mortgage payment demanded on a $460,000 home even with a “conservative interest rate” of 4.5 percent with payments amortised, or spread out, over 25 years.

The IDB study said The Bahamas’ affordable housing woes have developed even though the increase in New Providence real estate prices over the past decade has not exceeded international norms, while financing costs have actually dropped due to declining mortgage rates.

“Despite real estate price appreciation in New Providence not being out of line with international benchmarks and a decline in mortgage interest rates during the last decade, housing affordability remains limited for low and middle income households, evidenced by a remarkably high House Price to Income Index,” the IDB study said.

Taking $460,000 as the “median” sales price for New Providence in 2024, and comparing this to nominal disposable income per capita at $39,455 or $3,288 per month, the report added: “Based on these data, the index for New Providence and Paradise Island in 2024 was 141:1. This is remarkably high by international standards. By comparison, the index was 116 for the OECD, 105 for the European Union (EU), and 131 for the US.” The closest to The Bahamas was shown to be Canada at 137.1,.

The IDB then translated this into the implications for Bahamian middle and lower income home buyers aspiring to own their ‘piece of the rock’. Ignoring the VAT payment on completed real estate transactions, it said mortgage borrowers are typically required by the banks to come up with a down payment equal to between 10-20 percent of the purchase price; legal fees of around 1.5-2 percent; a 2 percent bank commitment fee and Stamp Tax at 1 percent.

Realtor commissions, as well as the VAT, was excluded from the report’s calculations, but the study said: “The cash reserve requirements for a person to be pre-qualified for a home in New Providence… the cash on hand that would be required for mortgage applicants would be $66,700 for the median price in New Providence. These cash on hand requirements represent a significant hurdle for borrowers.

“The average deposit held in local accounts is less than $10,000. Bahamian dollar balances of $10,000 or less comprised the bulk of accounts at 87.1 percent, although only 5.3 percent of the total value…. A financial plan with a goal to save $50,000 would be required for the average person seeking pre-qualification for a residential mortgage in New Providence.

“Lenders often play a role in coaching prospective applicants to develop aggressive savings plans to secure the equity requirements. Several lenders noted that the time for readying a prospective client to apply may span five to six years.” The mortgage affordability problem, which is typically compounded by a lack of borrower savings, is often further worsened by high consumer debt levels and the Central Bank standard that debt service ratios do not exceed 45 percent.

This means that a Bahamian household’s total debt - mortgage, credit cards, consumer and car loans, and other repayment obligations - do not exceed 45-50 percent of their monthly gross earnings or incomes. “Assuming a 25-year mortgage, at a conservative interest rate of 4.5 percent for a B-class applicant, and assuming no consumer debt, a monthly mortgage commitment of $2,550 would be needed to service the loan” on a $460,000 Nassau residential home,” the IDB study found.

“A monthly income of $5,667 would be required to maintain a debt service ratio of 45 percent to purchase a home at the median sales price of $460,000 for New Providence and Paradise Island in 2024. The average weekly wage of a worker in the accommodation and food service industry in New Providence is $544, representing a monthly wage of approximately $2,176.

”The gap is anticipated to be much larger as lenders consistently note elevated levels of consumer debt, which counts against the total debt to income ceiling of 45 percent. For such persons, their affordability is typically more in line with the requirements for the purchase of vacant land rather than a house and land.”

Detailing The Bahamas’ affordable housing and home ownership challenges, the IDB study asserted: “The analysis finds that formal housing solutions are increasingly out of reach of low and middle income households in The Bahamas….

“First, while real estate price growth in the last decade in New Providence has been in line with international experience, it was higher in the Family Islands. Second, land use intensity in the Greater Nassau area has declined, likely driving house prices upwards….

“Also contributing to the affordability problem, housing needs are growing not just because of population growth and disaster-related displacement, but also due to diminishing production, stock attrition associated with the ageing and condition of existing units, and stubborn vacancy.”

The IDB report added that, amid the challenges created by “low formal supply growth” in the Bahamian housing stock and “affordability challenges”, Bahamians are increasingly turning to multi-family solutions that may not comply with housing and zoning regulations.

“Owner-driven construction, without full permitting and completion certificates, appears to be playing a significant role. Finally, such owner-driven construction seems to be associated with an increase in multi-family households, possibly as the main coping mechanism for the affordability problem,” it added. “The findings… have significant adverse implications for low or middle income households looking to access housing.

“These include less stock to choose from because production is declining, existing stock is subject to attrition, and vacant units are not meaningfully making their way back into the active stock. Longer commutes are now a feature because development is becoming more dispersed in New Providence. And access to mortgage financing is becoming harder because of fewer mortgages, higher deposits and greater selectivity by banks.

“These findings suggest that policy and public programming changes are needed to augment housing production, stem stock attrition and improve affordability. Reforming the legal framework to better facilitate mixed-use development, multi-family housing and urban regeneration could encourage well-planned densification of existing built-up areas through in-fill development, harnessing the capacity of existing infrastructure and the concentration of economic activity in Nassau,” the IDB continued.

“This approach would also work with the grain of the initiative already being shown by some homeowners and businesses, and government authorities like the Ministry of Housing and Urban Renewal, which has started acquiring and repurposing individual vacant and derelict inner-city properties…

“The Urban Renewal Authority could feasibly get involved in acquiring multiple properties in the same residential blocks, including some from the commercial bank delinquent stock, creating a scale that is attractive to private developer partners. Together, over time these measures could help to reverse the trend of decreasing land use intensity in Greater Nassau.”