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This is my first post for 2017.  I was terrible at writing in 2016, I was just too busy to keep up with it.  It was great to have so much real estate activity I couldn’t find time to write a post.

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One of the most interesting things I noticed when compiling the data for this blog post was how many properties take a really long time to close.  For instance, as of the date of writing this, there are 13 properties still in pending status on the Bahamas MLS from 2013.  3 years have passed and the property is still not a completed sale.  I am sure several of these are just agent error in not updating their listing status, but I bet several of the properties are still in limbo waiting some legal document or other challenge to be overcome.  The take away here is make sure you hire a good attorney who can get the job done in a timely fashion.

What’s New in Bahamas Real Estate?

The government of the Bahamas recently announced plans to raise the investment threshold for residency application from US$500,000 to US$1,000,000.  This will obviously affect many potential investors in this country who would like to take up Permanent Residence here.  I believe that the investor mindset changed somewhat after the Great Recession, leading to more risk adverse thinking.  And investing a large sum of money off shore in another country is definitely a risk.  I would counter this argument to say that the Bahamas, while not insulated from the recession, is historically a stable jurisdiction.  While some people got hit pretty hard if they bought at the high and had to sell during the low, those others who made savvy choices and invested in active markets still made out relatively well.  Take away here is stay close to active busy markets, with good amenity levels and strong service sectors.  For example, Hope Town is a very safe bet while Rum Cay or Acklins is not necessarily.  It is possible to see the vast differences in values on the Island of Abaco, where central Marsh Harbour maintains strong growth and values, while the southern part of the island has seen little to no growth or improvement (save Schooner Bay, but that is an entirely different topic).

Going back to the new investment threshold, the legislation has not taken effect as yet, and there has been some push back from the real estate sector.  With a reconsideration or concession being considered.  You can read more on the Tribune website here:

http://www.tribune242.com/news/2017/jan/20/govt-reconsiders-1m-residency-bar-following-push-b/

and here:

http://www.tribune242.com/news/2017/jan/23/bahamas-warned-real-estate-market-not-wrapped/?news

Bahamas Real Estate Market Update

I have prepared some research in the real estate market using data from the Bahamas MLS over the past 8 years.  You will see in the table below results.  The most important parameter to consider in my opinion is the orange line which shows the total number of real estate transactions recorded.  This line has a strong trend of growth for the sector.  2016 saw a total of 500 transactions recorded on the MLS, extrapolating the growth rate out, roughly an extra 50 sales a year, by 2020 we should see 700 transactions or 10% growth per year.

As the sales volume increases we can expect to see the market shift in favour of sellers and corresponding shift away from the strong “buyer’s market” which has existed for the past 10 year period since 2008.

On the chart are average and median sales price.  The MLS now has enough data to pull a meaningful median out.  The 2016 Median was $225,000, the 2016 gross average was $451,702.  You will note the sharp drop in 2014 in the average and median, this was due to the commercial banks beginning to dump distressed properties into the market through the use of licensed brokers.  The low value, high volume significantly skewed the market figures.  The positive side is that the distressed property inventory is now almost normalized and the negative pull on the market averages will soon end.

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I have added my estimates for future years, using the trend lines and my background knowledge of the market to suggest that the coming years of 2017, 2018 and 2019 will very good for the real estate sector.  However I believe the change in investor value threshold will have a significant effect.  It will mean that the local Bahamian market remain unchanged with Bahamian residents trading in the $200,000 to $300,000 range.  The higher range between $500,000 and $1,000,000, which is historically strong with our foreign investor market, is expected to dry up almost completely.  I expect do expect a bump in the market over the $1M mark as a result of the change in legislation, however I do not see the increase to be sufficient to balance the fallout in the lower segment which is effectively being eliminated.

Last years “Brexit” together with the change to Britain’s non-domicile rules has lead to a nice boost to ultra luxury home sales.  Reports are that the luxury communities of Ocean Club, Lyford Cay and Old Fort Bay have seen the strongest sales activity in years as a result of this change in Britain.  The lower end of the foreign investor market from the UK has correspondingly seemed to have seen a heavy fallout with less serious buyers for this segment.

Now, Trump is the new POTUS – What does this mean for Bahamas real estate?  It is still early days, too early to tell, but it would appear that there has been a significant increase in serious buyers from the US.  The new trend appears to have begun just before the US elections and looks like it is continuing.  I suspect it will continue through this year.  The reasons for this are not really known yet.  It could be the confidence the new president is inspiring in High Net Worths, or Ultra High Net worth investors.  It could be that the markets all over the world are doing very well, which means cash is available to invest.  It could be that the policies of the last president are starting to reap benefits?  Whatever the case may be, the indicators are good that 2017 may be a banner year.  There are certainly many changes happening in the world’s economies which so far are benefitting Bahamas real estate.

Value Added Tax was implemented 2 years ago.  It looks like it is here to stay and the economy of the Bahamas has mostly accommodated to it.  It is definitely lowering the purchasing power of the average resident, and definitely increasing revenues for the government.  Whether this is beneficial for the whole Bahamas in the long run, we shall see.

In other interesting news, the WEB.com golf tour has just completed at the Abaco Club on Winding Bay.  Early reports is that it was a great success and everyone is looking forward to next years event.  Similarly, there was another WEB.com tournament at Emerald Bay in Exuma.  It was wonderful to see these 2 spectacular courses in the Bahamas highlighted in the Golf Channel.  The Pure Silk LPGA tournament starts on Saturday at the Ocean Club, Paradise Island.  The Silk tournament on PI has been growing and gaining prestige over the past years.

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Upcoming events in Abaco:

Abaco has many other events coming up, late winter and early spring are a wonderful time on the island with all sorts of things happening.  – the BNT Art for the Parks is Saturday 28th Jan,  Friends of the Environment’s Reef Balls are in February, one in Hope Town, one in Marsh Harbour.  Mangoes Restaurant is set to re-open with wonderful new management, I am hoping it may live up its history when Bo Albury ran it and it was the best place in Abaco.  The fishing tournaments will start up again in about a month.  The Royal Marsh Harbour Yacht Club flotilla is back in town.  Junior Junkanoo is February 24th/25th, always a fun night.  MOW Fea Market, always a fun day trip on February 18th.

So, lets bring on 2017 and see where this year takes us.  Looks like it will be a good one so far.

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“Top Real Estate Trends Impacting You & Your Business”

My name is Dwayne Wallas, 12 years working in the real estate business with HG Christie Real Estate.  I moved to Abaco in 2007.

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I’ve been asked to come here today and present some insight in the real estate market in Abaco.  As you all know Abaco is a unique part of the Bahamas and a unique part of the world.  In my view it is the people that make it unique.

But also and perhaps more importantly it is the geography – it is the only island in the Bahamas which has a relatively large land mass of 650 square miles similar to Grand Bahama or Andros while also having the 120 mile long chain of barrier cays.

This combination is not found anywhere else in the Bahamas or the Caribbean for the most part.  The ‘mainland’ of Abaco offers the ability for farming, logging, and more light industry or the option to have an estate or many acres with waterfront.  The tourism potential of Great Abaco Island is also very much untapped.

The barrier cays offer unique boating experiences together with wonderful communities.  Put the two together and the potential is tremendous.

I believe Elbow Cay is a perfect example of a thriving development model for the Bahamas.  It offers several small scale hotels together with restaurants and most importantly ATMOSPHERE.

The data I will be showing is derived from the Bahamas MLS.  Therefore it only takes into account sales transactions that have had a broker involved.

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What is selling in Abaco?

Hope Town is booming.  The rest of the Abacos have had a banner year but it all trails way behind Hope Town.  The community has managed to strike a balance between authenticity and capacity.  This year you could not rent a golf cart on the cay unless you booked it well in advance.  The real estate market on the cay is similarly very strong.

Treasure Cay is the close second for driving the economy of the Abacos.  The area sees a strong tourism market as well as posting a strong year for the real estate market.  The condominium market in Treasure Cay was in terrible shape, but the past 2 years have finally seen the inventory reduced and the market is beginning to normalize.

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The Marsh Harbour market is a tough nut to crack.  The market for Bahamians is starting to normalize as the banks are starting to ease lending requirements, but the property values are still depressed.  On the other hand the luxury or foreign investor market in Marsh Harbour (MH) is still very much stagnant.  I see lots of growth potential for the centre of Abaco, but it is suffering as a tourism destination.

Marsh Harbour is generally just a transit point and a shipping/business centre.  There is an opportunity to grow the tourism market here and by extension improve the foreign second home owner market.  From what I see MH seems to lack the charm and “islandy feel” visitors expect when they arrive at the airport.

Baker’s Bay is in full steam construction mode and providing tons of employment but not affecting the real estate market of Abaco at all.  It is its own microcosm and has little direct effect on the Abaco economy apart from the jobs.

Similarly the Abaco Club at Winding Bay is in slow growth mode and provides good employment but has little to no effect on the real estate market anywhere else in the Abacos.  The new developer, Southworth, is slowly rebuilding the prestige and demand.

My last point on this topic, as you can see from the chart, the strongest areas of Abaco are Elbow Cay and Treasure Cay.  The remote parts of Abaco have limited demand.

There are some good opportunities in the remote areas, but be aware that you will be in for a long haul.

Similarly the vacation rental market is only really functioning in Treasure Cay or Hope Town.

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So What about Abaco Compared to the Rest of The Bahamas?  

It is often said that Abaco is a more vibrant economy than Grand Bahama and this chart certainly shows that, although it is given that Grand Bahama is more than just real estate sales.  There is industry in Freeport which we lack here in Abaco.  Maybe for the better, maybe not?

Point is, Abaco is a strong real estate investment market, high sales volume and a high average price point.  Prices in Abaco are not too far off Nassau and second in the country.

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It is, I believe, an economic model to be learned from and encouraged to blossom.  The current test case of locally operated property tax collection on Elbow Cay is interesting and I’m keen to see how it works out.

Chart of Sales Growth Abaco

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Over the past 7 years the data shows growth of sales volume of 18% per year.  Despite the growth in the market and strong activity levels, I’m seeing property values are still dropping somewhere around 5% per year.

I anticipate this trend to turn around in the next 12 months.  As inventory is absorbed, we should see prices start to stabilize and begin to push up a little.

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Government Stimulus to Real Estate

Current incentives of 1st time buyers and Family Island Encouragement Act are having positive impacts.  I believe they should continue.

I believe the taxes on the purchase and sale of real estate is too high.

Stimulating the real estate market and providing incentives to buy here will further stimulate the wider economy.  It is said that a new home owner will further spend an additional 10-20% of the purchase price on furniture or remodeling etc.  That adds up to a significant amount of money being circulated around the economy.

I would urge the government of the Bahamas to further incentivize the real estate market and encourage home buyers, both local and foreign.

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The Acreage and Development Market is completely dead…

There has not been a single transaction of a tract of acreage in Abaco in 10 years.  There are many factors at play but the 2 key reasons I believe to be

  1. Restrictions on foreigners purchasing tracts of land via Foreign Investment Board
    • I believe this market should be liberalized.
    • Keeping it restricted does not benefit the Bahamas.
    • The tax revenue on the sale of large tracts of land is a good reason to encourage the market not restrict it.
    • The vast tracts of raw land are not benefiting anyone by sitting dormant.
    • It is all too common to have a large tract of land owned by 10 or 20 people who inherited it and they will never reach a decision on what to do with it.
  1. The cost of developing land in the Bahamas for sales of lots has risen beyond the ability to realize a profit. The cost of utilities, road paving and legal expenses, plus marketing costs are significantly higher than the price one could sell a residential building lot for right now.
    • A Non-waterfront residential lot on the main island of Abaco sells for an average of $30,000
    • Cost to develop a subdivision of lots for sale in Abaco is around $30,000
    • Therefore No incentive to develop.

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The Tribune has recently published 2 articles on land registration reform, one from the president of the Bahamas Bar Assocation, the other form the president of the Bahamas Real Estate Association.  To quote Mr. Elsworth Johnson

“A registered land system would divulge the number of frauds that cause people to be dispossessed of their land. It would also reduce the amount attorneys are able to charge [for real estate transactions]”

Thank you all very much for the opportunity to share some of my thoughts today.

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Have a wonderful day.

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