The Tribune

By NEIL HARTNELL

Tribune Business Editor

LEADING real estate developers have warned it is "critical" for the Government to extend the Stamp Tax exemption for first-time buyers beyond its June 2013 expiration date, one telling Tribune Business that such purchasers accounted for 30-40 per cent of his total sales.

Jason Kinsale, principal at the Sanford Drive-based The Balmoral development, said the exemption - applied only on properties worth up to $500,000 - was vital not only to middle class buyers but also in stimulating a Bahamian real estate market that was "not out of the woods yet".

"I think it's critical that it's extended," Mr Kinsale said of the first-time buyer exemption. "That represents approximately 30-40 per cent of our buyers, and if someone has to come up with the entire 6 per cent on a $300,000 unit, that's another $18,000 they have to find, and that really impacts someone's decision-making."

Properties valued at more than $250,000 now attract a 12 per cent Stamp Duty rate following the Government's 2010-2011 Budget tax increases. Depending on whether the seller and purchaser decide to split the due Stamp Tax evenly or not, a purchaser could find themselves paying 6 per cent ($18,000) or the full 12 per cent ($36,000).

The sums involved show just how valuable the exemption potentially is for first-time Bahamian buyers, and Mr Kinsale added: "We're talking about some real money here, not just a couple of dollars.

"I have to applaud the Government for raising the ceiling to $500,000, and it does make a difference, as a lot of first-time buyers do not have $18,000 sitting in the bank for taxes....... It weighs pretty heavily on their decision-making."

The Balmoral principal, though, said many Bahamian first-time real estate purchasers seemed unaware that they qualified for the exemption, suggesting it had not been marketed effectively.

"Unfortunately, I don't think enough people are aware of it," he added. "The first time buyers, there's 30 per cent of the people that come through my doors that do not know about the Stamp Tax exemption, and it's not being promoted as heavily as it could be. When I educate them on the Act, they're really unaware of it."

The impact from stimulating increased real estate market activity rippled throughout the Bahamian economy, Mr Kinsale said, producing spin-offs in sectors such as furniture, construction, building materials and landscaping.

"It gets people working and has a big impact," he told Tribune Business of a thriving real estate market. "It's [the Stamp Tax exemption] valuable, and we need all the help we can get in this economy.

"Take away that exemption, and come June next year it will have an impact, no doubt. We need this to stay in place; we all need it. The real estate market still needs help, and we're not out of the woods by any means."

Franon Wilson, the Bahamas Real Estate Association's (BREA) president, pledged that once today's general election was behind the Bahamas, the organisation would make its concerns over the first-time buyer Stamp Tax exemption's continuation known to the new government "right off the top".

"That is huge," Mr Wilson told Tribune Business of both the exemption and its continuation. "We hope that the Government will seek to, at a minimum, extend that time period in an effort to continue to help real estate activity move forward."

Mr Wilson, who is also president of Arawak Homes, said the Stamp Tax exemption could be made even more effective if the Government was to inform potential lenders that first-time buyers had been 'pre-qualified' and approved to receive the incentive.

"There are ways we could help even more," Mr Wilson said. "Right now, there are some banks requiring people to put money on their account [to cover potential Stamp Duty payments].

"When the exemption comes through, the banks release that money. There are ways the Government could assist even more by creating a 'pre-exemption', so persons could go to the bank and say there is no need for them to put money on account. Small things like that would help the exemption to go further than it is today."

While some banks were accepting letters from the buyer's attorney as assurances the Stamp Tax exemption would be granted, Mr Wilson added of its benefits: "Saving a few thousand dollars could be the reason why a person owns the home."

Describing downpayments and closing costs as "the biggest hurdle" for many Bahamians when it came to home ownership, Mr Wilson said the Government "gets back" what it gives up in Stamp Tax through the home ownership spin-offs.

Noting that many people invested post-purchase to "turn a house into a home", via construction, landscaping and fixtures and furnishings purchases, the BREA president said such activity also boosted Customs duty take.

"It's huge," Mr Wilson said of the need to extend/renew the first-time buyer Stamp Tax exemption. "There's absolutely no question about it, and it's our sincere hope it will be extended. We'll definitely be speaking to the Government about that.

"By later this week, we'll see which way we're faced, and when we know that we'll definitely be approaching the Government about that and make sure the concerns are heard right off the top."

In a newsletter sent out to potential purchasers, The Balmoral developers said: "As many of you are no doubt aware, the Bahamas Government has been granting an exemption for first time buyers on their Stamp Tax when they make a real estate purchase up to $500,000 which, in real terms, means a saving of $30,000 on a $500,000 purchase.

"This has proven to be a huge boon to young purchasers who are buying on their own, as well as to those who are fortunate enough to have parents willing to assist their children with getting their foot in the door.

"However, this is all about to change - as of June 2013 this exemption will be expiring, and subject to either renewal or cancellation, which means that anyone who has not previously owned a home will have to take possession of their property by June 2013 or be faced with the possibility of additional tax, which in many cases can be the difference between being able to go ahead or not."