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Bahamas property market heats up
Bahamas’ property prices saw an average correction of 20% from peak after the financial crisis, with some areas seeing declines of as such as 60%, according to Bahamas Realty. Local agents say house prices dropped by 30% to 40% from 2007 to 2010 (there are no official house price figures).
“Since then, it’s been up and down, but it’s slowly getting better and better,” said John Christie of H.G. Christie Ltd.
Sales volumes surged 40% in 2017, according to George Damianos of Damianos Sotheby’s International Realty. Christie’s put the sales growth at about 90%.
The luxury market has bounced back strongly. In Old Fort Bay, an exclusive waterfront community in New Providence, sales and prices of luxury homes have risen 10% to 15%, according to Richard Sawyer of Damianos Sotheby’s International Realty. Prices of luxury properties in Old Fort Bay start at US$2 million.
Ocean front units in the Royal Ocean Club, situated on Grand Bahama, are now priced at about US$150,000. In the Bahamas Rum Cay, one and two-bedroom beach cottages start at US$125,000.
In the Lyford Cay, a private gated community on the New Providence, a six-bedroom colonial-style home, Cuckoo’s Nest, is priced at US$6.5 million.
In the Elbow Cay, an eight-mile-long cay in the Abaco Islands, houses are priced from US$300,000 at the lower-end of the market, while beachfront properties are valued from US$1 million to US$8 million.
In the other Family Islands, prices range from US$395,000 to US$595,000 for condominium units while house prices range from US$439,000 to US$4.5 million. Oceanfront properties are priced from US$1.8 million.
Most foreign homebuyers come from the United States, Canada, France, Britain, and Italy.
2018 looks even better. “So far it looks to be shaping up to be a very good year,” noted Christie. “Properties sold from last year are going to be closing, and there’s continued strong interest from people in the Bahamas.”
“I am extremely optimistic and encouraged by what is going on, and we’ll definitely have a good year in real estate in 2018,” said Damianos.
The Bahamas enjoyed GDP growth of 3% p.a. from 1997 to 2007. Growth halted in 2008 (-2.3% GDP) and 2009 (-4.2% GDP), due to the global financial crisis. The economy had an annual average growth of just 1.3% from 2010 to 2013 and declines of 0.5% in 2014, 1.7% in 2015, and 0.25% in 2016.
Finally, the economy grew by 1.3% in 2017, supported by the completion of Baha Mar project, new foreign direct investment, and post-hurricane construction activity, according to the International Monetary Fund (IMF).
The economy is expected to grow by 2.5% this year and by another 2.2% in 2019.
There are no restrictions on foreigners buying property, except that a permit from the Government is required before the transaction, if the property is on undeveloped land with an area greater than five acres (20,234 sq. m.).
Foreigners who own properties in the Bahamas are eligible for a homeowner’s residence card (renewable annually) and those who purchase properties valued at least US$500,000 are given priority in permanent residence applications. However, neither permanent nor annual residence gives a foreigner the right to work in the country.
Prices firm in the Bahamas, yields good in Nassau
The Bahamas has traditionally had quite high yields. But as such a high proportion property rentals is seasonal, it is hard to get good figures.
Among the different types of properties that we survey, inland condominiums on Nassau have the highest average yields at around 8%, with yields of around 7% for Nassau condominiums along the water. Yields in Abaco and Grand Bahama waterfront are moderate, ranging from 3.57% to 4.45%. Last year we found a similar yield gap for Nassau houses, so it seems that this real factor, not a statistical blip.
Bahamas impose little tax
Rental Income: There are no income taxes but stamp duties are imposed when leasing Bahamian real property.
Capital Gains: There are no taxes on capital gains in the Bahamas.
Real Property: Property taxes should not be a major concern. The maximum tax rate is 1% for properties worth more than US$100,000.
Inheritance: Inheritance is not taxed in the islands.
Residents: Income of residents is not subject to tax.
Buying costs can be very high in Bahamas
Round-trip transaction costs, i.e., the cost of buying and selling property, range from 9.10% to 25.50%. The huge range is partly due to the progressive nature of Stamp Duty, which ranges from to 2% to 10%.
The high transaction costs are also due to the (very high) agent's commission, usually paid by the seller.
Commission for real estate agents in the Bahamas are set by The Bahamas Real Estate Association. The real estate agent’s fee is 6% for developed properties and 10% for undeveloped properties or vacant land.
Bahamas' law is pro-landlord
Rent: Rents can be freely agreed both for long-term fixed term tenancies, and for holiday lets.
In theory some property falls under the Rent Control Act, but it only applies to buildings with a total value of less than B$25,000, so in practice it is inoperative.
Tenant Eviction: The landlord must give the tenant proper notice of rent due and possible eviction for defaulting on rent. If the tenant fails to pay the rent on time, the landlord can summon the local police and repossess the property.
Even though a court order is not necessary for tenant eviction, most landlords bring defaulting tenants to court and sue for uncollected rent.
Economy improving, but tourism is weakThe economy was estimated to have expanded by 1.3% last year, after declines of 0.25% in 2016, 1.7% in 2015, and 0.5% in 2014, according to the IMF. The growth was mainly driven by the completion of Baha Mar, new foreign direct investment, and post-hurricane construction activity.
Baha Mar resort and residential development has created about 4,000 jobs, helping to reduce the overall unemployment rate to 10.1% in November 2017 from 11.6% a year earlier. Valued at US$3.5 billion, Baha Mar is the largest and priciest resort development in the Caribbean. It includes about 300 condominium units, more than 1,000 hotel rooms, three spas, retail and entertainment facilities, a casino and a Jack Nicklaus-designed golf course.
The economy is expected to grow by 2.5% this year and by another 2.2% in 2019, according to the IMF.
The government’s overall deficit is expected to decline to 2.7% of GDP during the fiscal year 2018, substantially down from last year’s 5.8% deficit.
Due to sustained large fiscal deficits, national debt increased to about 57% of GDP in FY2017, up from 51% of GDP in 2015 and from less than 20% of GDP prior to 2008.
Inflation is now rising. The Bahamas posted an inflation rate of 2.4% in 2017, up from 0.8% in 2016, 1.9% in 2015, 1.2% in 2014, 0.4% in 2013, and 1.9% in 2012. Consumer prices are projected increase by 2.2% this year and by another 2.6% in 2018, according to the IMF.
However, tourism is weak. In 2017, total visitor arrivals in the Bahamas fell by 2.1% y-o-y to 6.14 million, after growing by 2.5% in the previous year, based on figures from the Ministry of Tourism.
- Visitor arrivals by sea fell by 1.5% to 4,800,226 people in 2017 from the previous year
- Arrivals by air fell 4% y-o-y to 1,335,933 people in 2017
Tourism accounts for around 60% of Bahamas’ GDP, and 50% of employment. Bahamas’ second-largest industry is financial services, which accounts for 20% of GDP.