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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.

Many times I am asked how the process of buying real estate in the Bahamas works.  Often our foreign home buyers (who love the idea of having a tropical home in the islands) are concerned about the process and the security of the investment.  I will discuss the Bahamas Investment Safety and Security at another time.  Below I have outlined the rough steps and a very rough estimate of the time it takes for each one.  I have to qualify all of this by saying the estimates of the length of time it takes vary widely.  How quickly a sale will close in the Bahamas is dependent on many many factors, some of which are beyond the parties control.  For instance I have seen a financing application take 6 months for approval.  I have seen title and requisition process take as long at 6 months due to continuing questions arising from the history of the chain of title.

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Above: Palm Ridge at Bookies Bay, The Most Charming Cottage In The Most Beautiful Place on Earth, currently priced at $750,000.

On the other hand, I have seen instances where the whole process moved like clockwork and the new homeowner had the keys and were enjoying a cocktail on the back porch in less than 7 weeks from the time of first offer.  For things to move this quickly under the bright Bahama sun (which seems to slow everyone and everything down to the speed of warm molasses) is not a common occurrence and it is imperative to have patience when dealing with a real estate transaction in the Bahamas.

There is a major factor which can influence the speed of a real estate transaction here, and that is whether a bank is involved providing financing for the purchase and/or if a bank is releasing and existing mortgage on the property being sold.  This is partly a result of the Bahamas banking environment being dominated by 3 major Canadian institutions.  The final approvals of any major decisions the lending institution has to make is not made here in the Bahamas, it is made offshore somewhere.

That said, the lender won’t commit to financing a purchase until they have a copy of a formal purchase agreement in hand.  We commonly insert a 21 day financing clause in purchase agreements which allows the buyer 3 weeks to formalize their loan and get a commitment letter.  3 weeks may seem like a good length of time, but I would suggest working on getting as much of the paperwork as possible into the loan rep, before making an offer.  They will take 2-3 weeks just make a decision, so if they are waiting on something from you like a reference or utility bill that will hold the hole process up.  I would ask 3 times for the complete list of all the documents they will need from you just to be sure that all the bases are covered.  In my experience they always come back a week later and say they need one more thing, and often that happens more than once.

With the 21 day financing clause inserted into a formal “purchase and sales agreement”, if you don’t get the loan secured you can get your deposit back and everyone can walk their separate ways.  The vendor is often weary of entering into an agreement which is dependent on a bank partly due to the time off the market with no guarantee of a sale and partly due to a bit of expense in hiring a lawyer to prepare a purchase agreement and work with the purchaser’s attorney on the deposit etc.  Title investigations typically don’t start until after the financing commitment letter is in hand.  Once the title is approved, they we move to conveyance drafting and approval and then the mortgage would be drawn down.

 Time to close a cash sale (no mortgage involved) is 60-90 days.  Time to close with a bank mortgage will be 90-150 days.  So keep in mind you won’t be able to take possession of the home for some months while waiting on the lender to do their thing.  Some people will purchase a home in cash and then leverage the cash back out with a mortgage after the purchase as it allows them to take possession of the home sooner.

  •  First step is to get the ball rolling with the bank and get a nod. (about a 1week)
  • Second we put in the offer to purchase, negotiate and hopefully reach agreement in principle (1-2 weeks)
  • Third you retain an attorney top represent you in the transaction, put up a deposit with the seller’s attorney’s ‘Escrow Account’ and the purchase agreement is executed by both parties. (1-3 weeks, this begins the real process of purchase, get appraisal, all paperwork to bank, references, etc.)
  •  Forth, you put in the formal application for financing, provide the bank with a copy of the executed purchase agreement and go through the motions with them. (3-5 weeks) (If Necessary, no bank financing involved, it would skip straight to the title search)
  • If the buyer is getting a permit from the Foreign Investments Board, the application gets put in right away and approval of the permit can take 2 weeks up to 3 months.
  • Then, once the mortgage is approved and you have a commitment letter in hand. Your attorney begins title search. (3-5 weeks)
  • Once title is approved the vendors attorney drafts a conveyance, it gets approved and the vendor executes (2-3 weeks)
  • Then the bank gets a copy of the conveyance and begins to draw down funds. (2-6 weeks)
  • Once the funds are disbursed, the sale closes and you can take possession. (you get the keys).

So, the long and short of it – it could take as little at 6 weeks to close a purchase or it could take as long as 6 months and it all depends on the seller, the buyer, the attorney’s involved, the government for the permits and often most importantly the lender.  So make sure to have the right people involved who are attentive, motivated and on the ball to see the sale happen.

I recently had a sale occur where the buyer’s attorney lost the purchase agreement after the purchaser had signed it and neglected to send it to the seller’s attorney for 3 months.  So while we all thought the sale was proceeding, it hadn’t even started.  Stay in touch with your lawyer and keep them moving things forward.

Lastly, having an experienced and motivated real estate broker or agent on your team can have a very positive effect on ensuring the least amount of frustration and delay.  HG Christie is one company with a strong team of professional sales staff who know the ins and outs of Buying and Selling homes, land and development property around the Bahamas.  Feel free to comment and tell us your story in buying or selling real estate below.  I hope you enjoy this post and find it somewhat useful.

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