Consistently strong demand for high-end properties coupled with the resurgence of tourism drives activity in the luxury vacation home and short-term rental segments of the Bahamian residential market, while the accessibility of affordable housing for the local population remains a concern.

This extended overview from the Global Property Guide covers key aspects of The Bahamas' housing market and takes a closer look at its most recent developments and long-term trends.

Table of Contents:

• Market-Defining Features and Trends
• Real Estate Hotspots
• Supply Highlights
• Rental Market
• Mortgage Market
• Socio-Economic Context

Market-Defining Features and Trends

The Bahamas has emerged as one of the leading destinations for foreign property investors, preferred for its favorable climate, strong tourism appeal, luxury real estate, tax advantages, political stability, and proximity to the United States. According to the latest regional report from Savills, American buyers dominate the foreign buyer market, representing 35% of international investors, followed by Europeans at 30% (with 10% from the United Kingdom and 20% from other European nations). Canadian buyers make up 10%, while 35% of foreign buyers come from other regions globally.

Offering significant financial incentives, The Bahamas imposes no income, capital gains, or inheritance taxes and provides a straightforward process for foreign property ownership. Investors can also obtain economic permanent residency (EPR) through qualifying real estate investments or Central Bank zero-coupon bonds. Effective January 1, 2025, the minimum investment threshold will increase from BSD 750,000 to BSD 1 million (equivalent to the same amount in USD, as the currencies are fixed at parity BSD 1= USD 1), with assets required to be held for a minimum of 10 years.

The Bahamas ranks third in the 2024 Knight Frank Wealth Report's Prime International Residential Index, which tracks the performance of prime residential property markets in 100 luxury destinations. In 2023, the country achieved a remarkable 15% year-on-year increase in prime residential property prices, significantly outpacing the index's overall average growth of 3.1% and the 4.7% rise observed in other top 'sun' destinations.

Data Source: Knight Frank.

Similar to other Caribbean markets, the Bahamian housing market is clearly divided between the high-end luxury sector, driven by foreign buyers, and the more affordable housing sector focused on local residents. The high-end market is concentrated in areas like Nassau, Paradise Island, and Exuma, with international investors fueling most of the demand. This demand has spurred construction activity in the high-end segment, as seen in the rising value of building permits and completions, though growth in the actual number of units remains modest or stagnant.

In contrast, the local affordable housing market faces significant challenges, with supply struggling to meet demand, leading to rising rents and home prices. Many local buyers, constrained by economic pressures and limited access to financing, face substantial affordability issues. Despite government efforts, such as the Renaissance at Carmichael project, the shortage of affordable housing remains a major problem, leaving low- and middle-income families increasingly unable to secure suitable housing.

Real Estate Hotspots:

Housing Market Dynamics in Key Residential Areas

Despite its relatively small population (estimated at 401,300 as of 2023), The Bahamas offers a diverse range of real estate markets across its islands, each with unique attributes and investment opportunities. Nassau and Paradise Island are considered the country's most active markets. Nassau, the capital, provides a broad spectrum of real estate options, from luxury waterfront estates to more affordable urban residences, attracting both local buyers and international investors. Paradise Island, renowned for its world-class resorts like Atlantis, specializes in high-end, exclusive properties, with upscale condominiums and beachfront estates that appeal to affluent buyers. The strong demand in these areas is driven by their proximity to tourism, business hubs, and easy access to international travel, making them highly desirable for both residential and investment purposes.

In contrast, islands like Abaco and Eleuthera offer tranquil, private environments centered around natural beauty, while Exuma caters to high-net-worth individuals with its exclusive, luxury properties. Grand Bahama, particularly in Freeport, balances residential affordability with commercial potential.

From the luxury estates of Paradise Island to the more affordable opportunities in Grand Bahama, the Bahamian real estate landscape presents diverse opportunities for different types of buyers. A deeper analysis of demand patterns and price trends reveals how global events have influenced these markets, especially during the pandemic, which reshaped buyer behavior and market dynamics across the islands.

Residential Demand and Submarket Trends

During the early stages of the pandemic, The Bahamas witnessed a surge in real estate activity, driven by high-net-worth individuals seeking refuge on the islands. The shift towards remote work allowed many buyers to view The Bahamas as a viable option for a primary residence rather than merely a vacation destination. As was noted by Ryan Knowles, founder and CEO of MAISON Bahamas, in Forbes Global Properties: "The first two years during the Covid pandemic saw the highest real estate sales volume in the history of the country."

While the initial wave of increased demand has eased, the Bahamian real estate market remains fundamentally strong. Morley Realty, citing data from The Bahamas Real Estate Association's (BREA) Multiple Listing System (MLS), reports 249 residential sales contracted in the first half of 2024, reflecting a 67.11% year-on-year increase. Simultaneously, the rise in new listings and a drop in completed sales point to a period of market stabilization.

Residential demand, submarket snapshot:

Price trends closely followed demand patterns. During the pandemic, property prices, particularly for high-end and waterfront homes, surged as demand soared. Although the post-pandemic market has shown signs of moderation, prices have remained robust, supported by sustained interest from international buyers. Morley Realty highlights that average prices across most submarkets rose as of Q2 2024, suggesting an uptick in demand for high-end listings, especially in Eleuthera, Nassau & Paradise Island, and Exuma areas. Median prices in Nassau & Paradise Island and Eleuthera also showed positive momentum, while prices in other islands remained stable within the range of the past two years.

Residential prices, submarket snapshot:

Looking ahead, experts forecast continued strength in the luxury real estate sector for 2024. George Damianos of Damianos Sotheby's International Realty, as quoted in the local news outlet The Tribune, predicts that "2024 will be at least as strong as 2023, if not stronger," with no major economic downturn expected to significantly affect demand. Likewise, Ryan Knowles of MAISON Bahamas anticipates a "substantially stronger" luxury market in 2024 compared to 2023, driven by renewed confidence and urgency among high-end buyers. However, the sharp spikes in activity seen in 2021 and 2022 are unlikely to be repeated.

Supply Highlights:

High-End Developments Driving Value of Residential Construction Market

High-end luxury developments targeting international buyers and affluent second-home owners continue to play a major role in residential construction activity in The Bahamas. According to The Bahamas National Statistical Institute (BNSI), the number of residential building permits issued in 2023 fell by 5.61% year-on-year. However, the value of these permits rose by 31.14%, indicating a shift towards larger, higher-value projects.

This trend of increasing permit values has persisted into 2024. In the first quarter, the value of residential permits surged by 108.14% year-on-year, while the number of permits issued saw only a modest increase of 1.50%. Leonard Sand, President of the Bahamian Contractors Association (BCA), commented to The Tribune: "It's encouraging. There's a fair amount of work going on, and we're seeing more investment dollars flowing in. The economy is stabilizing post-COVID and post-hurricane, and we're just beginning to tap into the full potential of the construction industry."

Data Source: BNSI.

A similar trend can be observed in residential completions. During the first quarter of 2024, the number of completed residential units declined by 5.13% year-on-year, while the value of these units soared by 208.31%, reflecting a shift towards high-end projects driven by luxury market demand and high-net-worth individuals.

Notable ongoing luxury developments include the BSD 250 million (USD 250 million) Six Senses Residences in Grand Bahama, the ultra-exclusive Ocean Club Four Seasons Residences on Paradise Island (set for completion in 2027), and continued expansions at the Albany Resort in New Providence, all catering to affluent buyers.

Data Source: BNSI.

Meanwhile, the affordable housing segment is largely driven by the Bahamian government, however, these efforts are often overshadowed by luxury market activity. Projects like Renaissance at Carmichael, which aims to deliver around 200 affordable homes, demonstrate the government's commitment to addressing housing shortages for middle- and lower-income residents, though these projects remain fewer compared to luxury developments.

Overall, the outlook for the Bahamian construction sector is positive, buoyed by growing investments in both luxury and government-led housing initiatives. As Mr. Sand of the BCA told Eyewitness News: "We're doing well as an industry, and the future looks promising."

Rental Market:

Prevalence of Luxury Vacation Homes and Short-Term Rentals

The rental market in The Bahamas is substantially skewed towards luxury vacation properties and short-term holiday rentals, while the lack of affordable supply remains one of the most relevant issues for the local population, with many households priced out of homeownership (during the 2010 Census, nearly 35% of private dwellings in the country were reported to be occupied by paying tenants, and further 5.9% leased or occupied rent-free).

According to a 2024 guide from the local brokerage MCR Bahamas, long-term rents can start from USD 1,100/month for a one-bedroom apartment, while a three-bedroom apartment in a major city, on average, rents at around USD 2,600 a month, the price tag largely determined by location: from USD 3,000/month in Nassau to USD 1,600/month in Freeport and USD 1,200/month in Eleuthera.

Rents for luxury vacation homes also differ a lot depending on location, size of the property, and amenities offered, as well as the season (peak months typically being December through April):

• High-rise condos: USD 2,000 to USD 5,000 per month;
• Vacation homes: USD 2,500 to USD 6,000 per month;
• Rental homes with a pool: USD 2,500 to USD 8,000 per month;
• Beach houses: USD 3,000 to USD 10,000 per month;
• Beachfront villas: USD 4,000 to USD 40,000 or more per month;
• Luxury villas: USD 6,000 to USD 60,000 or more per month;
• Beachfront villa residences: USD 4,000 to USD 390,000 or more per month.

The Rent Control Act (RCA) introduced in The Bahamas in 1975 (and most recently amended in 2008) stipulates that rents shall not exceed 20% (p.a.) of the assessed value of the property. However, it only applies to properties with a total value of USD 75,000 or below and doesn't cover luxury vacation homes.

Furthermore, the legislation is often seen as outdated and unable to protect the tenants amid continuously growing property costs. "With the explosion in Bahamian property values, most duplexes and triplexes - and even single dwelling homes - are not captured by the provisions for rent control," wrote The Tribune in 2023.

In the short-term rental (STR) segment, recent positive developments were mentioned in the Prime Minister's 2024-2025 budget address: "With respect to the short-term vacation rental industry, data provided by Airbnb confirm the favorable improvement in tourism. At the end of March 2024, total room nights sold increased by 16.7 percent from the previous year, reflecting the rise in average occupancy rates for both entire unit listings and comparable hotel listings."

Earlier, in an effort to ensure high standards of service across holiday accommodations and to ensure STR owners are meeting their tax obligations, the government launched a portal for those who own short-term rentals to register their businesses. The Department of Inland Revenue noted that all owners operating their properties as short-term vacation rentals are now required to register their properties, effective March 1, 2023. "We must strike a balance between regulation and fostering growth. Our immediate objective is to identify up to 10,000-plus short-term vacation rental properties throughout The Bahamas. This can be done through the simple act of registering, which will enable us to move forward with our plans to strengthen and promote the industry," commented the Department's Acting Controller Shunda Strachan.

As of October 2024, the data from AirDNA shows the largest number of active short-term rental listings in the capital city of Nassau on the island of New Providence. Among the more active local submarkets (with 100 or more active listings) the highest average daily rates, exceeding BSD 500 (USD 500), are reported in Hope Town, Exuma, Bimini, and Central Eleuthera districts. Occupancy for short-term rentals is highly seasonal, fluctuating from 70-75% in March to 25-30% in September.

Key short-term rental indicators across selected submarkets as of October 2024:

Mortgage Market:

Lending Market Continues to Shrink, New Disbursements Subdued

After a period of rapid expansion and a brief stabilization that followed in the early 2010s, the residential lending market in The Bahamas has been notably shrinking in the last decade. The total value of outstanding residential mortgages annually declined by 1.4%, on average, between 2014 and 2023 and most recently stood at BSD 2.7 billion (USD 2.7 billion) in Q2 2024. In relation to the country's GDP, the home loan stock dropped from 30.2% of GDP in 2011 to only 19.5% of GDP in 2023.

Bahamas mortgage loan interest rates:

According to the Central Bank of The Bahamas (CBOB) reporting, the vast majority of outstanding mortgages are maintained by domestic banks (88%), with only 12% of the stock held by insurance companies and other financial institutions.

Data Source: CBOB, IMF.

No major shifts in the trend are observable in the near future, as new residential mortgage disbursements remain below the long-time average of about BSD 327 million (USD 327 million) a year. Most recently, the CBOB reported BSD 119.2 (USD 119.2) of new residential mortgages disbursed in the first half of 2024, which is 2.9% below the comparable period last year and 3% below the comparable period two years ago.

The total number and value of mortgage commitments has picked up in the last two years since 2021, however, this movement was primarily driven by existing dwellings, while mortgage commitments for new buildings - a forward looking indicator of domestic activity - remain subdued. In the first half of 2024 the CBOB reported a total of 551 commitments for BSD 121.6 million (USD 121.6 million). New construction represented only 32.2% of that value, compared to 68.5% in 2004.

Data Source: CBOB.

At the same time, the average interest rate on residential loans in the Bahamian banking system gradually climbed down from the 8-9% levels in the 2000s and early 2010s and has stabilized in the last four years between 5.00% and 5.50%, with marginal month-to-month fluctuations. Most recently, it was reported by the central bank at 5.40% in August 2024. The underlying CBOB key rates have remained unchanged since 2017 at 4.00% (bank rate) and 4.25% (prime rate).

Despite this general decrease in interest rates, average monthly payments on residential mortgages grew by nearly 63% in the last twenty years and reached BSD 1,952 (USD 1,952) in Q2 2024. Coupled with low approval rates of mortgage applications (52.9% at the end of 2023, according to the quarterly bank lending conditions survey published by the CBOB), lacking supply of affordable housing options, and the duality of the property market split between the wealthy foreigners and local population, the cost of borrowing continues to raise concerns about the accessibility of homeownership for the Bahamians.

"The lack of affordable housing has become a major issue for many Bahamians, as the cost of housing continues to rise, making it increasingly difficult for low-income and middle-income families to find a decent place to live," wrote The Tribune.

Data Source: CBOB.

To address the issue, the CBOB announced the relaxing of lending rules for residential mortgages at the end of 2023. Specifically, the mandatory requirement for mortgage indemnity insurance on mortgages secured with down payments of less than 15% was lifted. "While this is not anticipated to have a significant impact on personal lending, it should reduce the cost burden for suitably qualified borrowers and allow some additional individuals to qualify for credit," said the central bank.

In early 2024, the Office of the Prime Minister issued a press statement reiterating the administration's commitment to making homeownership more affordable and accessible for the people of The Bahamas and listing the main government measures to be supported and expanded further, including broader concessions to first-time homeowners and a new rent-to-own program for those who ordinarily would not be able to afford a mortgage or downpayment.

Socio-Economic Context:

Strong Growth in Tourism Fuels Economic Rebound

The Bahamas' economy continues to rebound vigorously on the back of strong tourism inflows. Given the persistent demand for travel in major source markets, the sector serves as the main driver supporting recovery after hurricane Dorian and the pandemic.

In 2023, the CBOB (based on the data from the Ministry of Tourism) reported over 9.6 million tourist arrivals, a 39.9% growth from 2022 and a 32.3% increase from the pre-pandemic peak in 2019. The recovery was more pronounced in the cruise ship visitor segment (44.2% year-on-year) than in the stopover visitor segment (24.1% year-on-year), in part due to focused government efforts to attract new cruise companies (including revitalization and expansion of the Nassau Cruise Port that opened in May 2023). The overall growth momentum, albeit more tempered, continued into 2024, when the first six months of the year brought in nearly 5.5 million visitors (9.2% above the comparable 2023 level), of which about 4.7 million were cruise passengers and about 801 thousand were stopover travelers. Estimated visitor expenditures in 2022 (the latest available data) stood at BSD 4.2 billion (USD 4.2 billion), already exceeding the pre-pandemic level by 2.3%.

Traditionally, the vast majority of stopover visitors (about 82%, on average, according to the Ministry of Tourism figures) arrive in The Bahamas from the US; other leading geographies of origin include Canada (7%) and Europe (6%).

Data Sources: CBOB, Ministry of Tourism.

Supported by gains in the tourism industry, the Bahamian economy followed the sharp 23.5% contraction in real GDP in 2020 with a rebound of 17% and 14.4% expansions in 2021 and 2022, respectively. In 2023, the growth slowed to 4.3% and is expected to moderate further in the next few years. The International Monetary Fund (IMF) projects the country's real GDP growth at 2.3% in 2024 and 1.8% in 2025.

Consumer Price Index (CPI) inflation for The Bahamas has dropped from a 5.6% peak in 2022 to 3.1% in 2023 and continued to decelerate further, even entering the negative territory mid-year. The latest report from the Department of Statistics showed a 0.5% deflation in July 2024, primarily tied to price decreases in such categories as clothing and footwear, furnishing and household equipment, transport, and recreation and culture. The IMF forecast sees stabilization for the indicator at around 2% from 2024 onward.

Data Source: IMF.

With the general recovery of the national economy, the Bahamian labor market saw improvement as well. Nationwide unemployment which had previously skyrocketed to above 26% during the pandemic, decreased to 8.8% in 2023, the lowest level since 2008, according to the IMF data. The latest quarterly economic report from the CBOB shows an uptick in unemployment to 9.9% in Q2 2024 but mentions that due to a different methodology used in the most recent labor force surveys this figure can not be directly comparable to the previous years and the overall trend is positive. Despite being relatively high, current unemployment levels are below the national 30-year average for The Bahamas.

Data Source: IMF.

The overall economic outlook for The Bahamas is favorable, albeit with downside risks, concludes the latest IMF staff report. According to the IMF analysis, tourist arrivals and real average spending should continue to rise in the near term, supporting real GDP and helping to narrow external and fiscal imbalances in the country. However, boosting long-term growth beyond 1.5% will require investments in new hotel capacity and improving the domestic supply of skilled workers to reduce labor shortages in construction and tourism and amplify the economic impact of projects in these sectors.

The main risks to the positive prospects for The Bahamas are seen in a slowdown of the US growth, amid monetary tightening and global uncertainty, as well as the ever-present threat of natural disasters, characteristic of the entire Caribbean region.

Sources:

1. Central Bank of The Bahamas (CBOB)
   1. Foreign Exchange: https://www.centralbankbahamas.com/
   2. Money & Credit Aggregates: https://www.centralbankbahamas.com/
   3. Quarterly Statistical Digests: https://www.centralbankbahamas.com/
   4. Quarterly Economic Reviews: https://www.centralbankbahamas.com/
   5. Monthly Economic and Financial Development Reports: https://www.centralbankbahamas.com/
   6. Quarterly Bank Lending Conditions Survey December 2023: https://www.centralbankbahamas.com/
   7. Relaxed Lending Rules for Residential Mortgages: https://www.centralbankbahamas.com/
2. Office of the Prime Minister
   1. Press Statement on the Davis Administration Expanding Opportunities for Homeownership for Bahamians: https://opm.gov.bs/
   2. 2024/2025 Budget Communication: https://opm.gov.bs/
3. Office of the Attorney General & Ministry of Legal Affairs
   1. Rent Control Act: https://laws.bahamas.gov.bs/
   2. Supplement Part I. Official Gazette The Bahamas: https://laws.bahamas.gov.bs/
4. The Bahamas Ministry of Finance
   1. Economic Environment: https://www.bahamas.gov.bs/
5. The Bahamas Ministry of Tourism
   1. Frequently Requested Stopover Statistics & Trends: https://www.tourismtoday.com/
6. The Bahamas National Statistical Institute (BNSI)
   1. Consumer Price Index (CPI): https://www.bahamas.gov.bs/
   2. National Accounts Annual Report: https://www.bahamas.gov.bs/
   3. 2010 Census First Release Report: https://stats.gov.bs/
   4. 2022 Census Preliminary Results: https://www.bahamas.gov.bs/
   5. National Accounts Annual Report 2023: https://www.bahamas.gov.bs/
   6. Building Construction Stats Report Q1 2024: https://www.bahamas.gov.bs/
7. The Bahamas Department of Inland Revenue
   1. Government Launches Registration Portal for Short-Term Rentals: https://inlandrevenue.finance.gov.bs/
   2. Vacation Rental: https://inlandrevenue.finance.gov.bs/
8. International Trade Administration
   1. Bahamas - Country Commercial Guide: https://www.trade.gov/
9. International Monetary Fund (IMF)
   1. Country Overview: The Bahamas: https://www.imf.org/
   2. IMF Staff Country Report: https://www.imf.org/
10. Nassau Cruise Port
    1. Nassau Reimagined: New Bahamas Cruise Port Set to Open On May 26, 2023: https://www.nassaucruiseport.com/
11. Savills
    1. Caribbean Islands. Prime Residential Property. 2022/23: https://pdf.savills.com/
12. Knight Frank
    1. The Wealth Report 2024: https://content.knightfrank.com/
13. Morley Realty
    1. Bahamas Market Report: Q2-2024: https://www.morleyrealty.com/
14. MCR Bahamas
    1. Average Rental Price in The Bahamas: 2024 Guide: https://www.bettermcrbahamas.com/
15. AirDNA
    1. Short-Term Rental Markets: The Bahamas: https://app.airdna.co/
16. The Tribune
    1. Urgent Need for Affordable Housing in The Bahamas: https://www.tribune242.com/
    2. Govt to Start Construction on 50 Homes in Grand Bahama: https://www.tribune242.com/
    3. Mortgage Loan Approvals Hit 4-And-a-Half Year Low: https://www.tribune242.com/
    4. Central Bank Ease 'Won't Open Mortgage Avenue': https://www.tribune242.com/
    5. Rent Control Ineffective for the Protection of Tenants: https://www.tribune242.com/
    6. We Didn't Hit $1bn, But We Did Very Well: https://www.tribune242.com/
    7. Construction 'Into the Meat': New Permit Value Near-Triples: https://www.tribune242.com/
17. Forbes Global Properties
    1. The Bahamas' Buyer Demographic Continues To Trend Younger: https://www.forbesglobalproperties.com/
18. The Washington Informer
    1. Bahamas Government Constructing 200 New Affordable Homes: https://www.washingtoninformer.com/
19. Eyewitness News
    1. Contractors Association President Upbeat About Bahamian Construction Sector in 2024 Amidst Antitrust Concerns for Smaller Firms: https://ewnews.com/