Archives for posts with tag: Bahamas Economy

“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.

**Side note, I recently arranged an aerial photo shoot of a new listing with a company that uses an RC drone to get the images.  They obtained some fantastic shots of a new listing here in Marsh Harbour – check it out,  European Luxury and Tropical Caribbean Flair. http://www.hgchristie.com/details/abaco/marsh-harbour/house-as12275.

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Nice Job and shout out to Sky High Media.

How similar is the Bahamas Real Estate Market to the US Real Estate Market?  Well for starters, 2 years back I had read from the National Association of Realtors, that the most common house colour of homes that sold was yellow so I decided to find out if that held true in the Bahamas.  And guess what, it is the number one colour of homes sold in the Bahamas, by a very large margin.  Go figure.  The number 2 house colour was blue, which is my personal favourite choice for a home.

Then more recently, I had read that the biggest time to sell a home was Spring and Summer.  According to Realtor.com, “Selling in the spring and moving in the summer is a perfect arrangement for families. Families like to move during the summer to prepare for the new school year. The weather is warm and accommodating for moving and relocating. Springtime, with its blooming flowers and pleasant temperatures, is an ideal time to present your home to the real estate market. Real estate agents boast that over 50 percent of homes are sold during the summer.”

So, does this trend extend to our little real estate market as well?

Thanks to having a proper Multiple Listing Service here in the Bahamas, I am able to tease out some real data on our market place.  Prior to 2008, there was no data sharing, no listing sharing among real estate brokers in the Bahamas.  Trying to figure out the dynamics of the real estate market in the Bahamas either came from straight up guess work, or from decades of experience in the business.  Most decisions and value assumptions were performed inside a small bubble based upon the experience and results of one’s small sphere of business.  Now, the Bahamas Real Estate Association has full embraced the 21st century and on the cutting edge of real estate.  Most recently gaining a datafeed portal to the Realtor.com website.  Now prospective buyers can go to the number one real estate portal in the US and search for real estate in the Bahamas.  This was a massive step forward for the industry in our ‘backward little country’ (I say that having intimate knowledge of my home, and how we function, and some chagrin at how some things get handled here in my beloved Bahamas).  The Bahamas MLS is the number one tool for selling real estate in the western world, and has already become the main tool for buyers and sellers of land and homes in the Bahamas in just under 5 years of existence.

Now to the point, I analyzed the number of real estate sales that were placed under contract during each month as recorded on the Bahamas MLS over the past 5 years to date, and what I found, interestingly supports the trends in the USA.  Perhaps our love affair with our great neighbor to the north has an influence, or maybe it is just fundamentally a byproduct of our school year, fiscal year and indeed April is one of the most beautiful months of the year in the Bahamas.  The seas warm up, the air temperature is not stifling hot yet, the Poinciana trees start to bloom in May.  We have a few showers to bring out the green in the landscape.  The busiest real estate months in the Bahamas are April & May, closely followed by March and September.

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More generally speaking, the Bahamas real estate market is doing ok.  Nassau is definitely seeing a return to a strong and stable market and economy, which I believe is largely a result of geography, being a densely populated metropolis with a large number of visiting tourist and most especially being propped up by the large scale development projects of Bahamar and Albany.  And to a lesser extent the Balmoral project is turning a long at a good clip.  On the flip side, the other islands of the Bahamas have had a struggling year.  Abaco’s struggling market I know about first hand, while my colleagues in Eleuthera and Exuma and Grand Bahama are seeing a similarly flat market.  It is a shame because the lesser developed parts of the Bahamas rely on the real estate component of their economy very substantially, and when real estate drops off it hurts every other sector of the micro economy.  Real estate on our family islands drives the incomes of at least half of the economies of the small settlements scattered around outside of the big city Nassau.  We don’t have large resorts to bring in mass tourism.  When real estate sales activity dries up in Abaco, air travel drops, the restaurants suffer, hardware stores and grocery stores struggle with turnover, it impacts taxi drivers, ferry drivers, boat and car rentals, folks who caretake homes and handle vacation rentals.  Even the lady that cuts my hair says she sees her bottom line affected when the real estate market in Abaco drops off.

I would propose that the pending implementation of VAT (purported to be 15% of all sales in the Bahamas) is having a strong negative effect on the real estate market in the Bahamas and all other parts of the economy.  No one likes to see taxes raised, and when there is an uncertainty, any element of the unknown in the future financial realm it directly affects people’s confidence.  When the confidence is impacted, then prospective buyers or investors, hold off on making large decisions, ie buying or selling real estate.

For instance, I don’t know how this VAT will affect the economy, my life, my financial bottom line.  I don’t know what the fall out will be and how long it will take to smooth the hiccups.  As a result, I’m not going to take any unnecessary risks.  Similarly the level of tax burden has gone up significantly in the Bahamas over the past year, and everyday Bahamians see it and feel it.  So when taxes go up, spending and borrowing drop almost immediately.  So when someone asks me about ‘How’s the real estate market these days?’ – I tell them it is pretty rough, everyone is in a holding pattern to see what the present government will be doing.  It is difficult to try to plan a new project of business venture when you don’t know what your cost of goods is going to be in 3 months, 6 months, a year from now.

So, I hope that things will settle down, I hope we will see a steadier, more predictable business environment to work within soon.  I for one would like to see less rocking of the boat.

For those interested here are the recent remarks by the Deputy Prime Minister at the recent Abaco Business Outlook seminar, where he paints a positive picture, but apart from Baker’s Bay and some agriculture he is hard pressed to make any positive remarks about the economy of Abaco directly:

http://www.thebahamasweekly.com/publish/Abaco-Island-bahamas/Hon_Philip_Brave_Davis_at_Abaco_Business_Outlook_Conference_201330725.shtml

 

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