The Tribune

By NEIL HARTNELL Tribune Business Editor A LEADING Bahamian property developer yesterday told Tribune Business that homebuilding activity is down to "one-third of where it used to be" pre-recession, with the company now having to compete against an over-supply caused by the rapid increase in foreclosed properties. Franklyn Wilson, chairman of the Sunshine Group of Companies and Arawak Homes, told this newspaper that conditions in the domestic housing market and related construction industry were "just terrible", with a broad-based economic recovery not "automatic". Describing the International Monetary Fund's (IMF) Article IV report on the Bahamian economy as "very, very troubling", Mr Wilson said it indicated that "current public policy is not adequate" to address this nation's economic and fiscal challenges. Warning that the average Bahamian standard of living had deteriorated, and was unlikely to recover in the short-term, Mr Wilson also reiterated that the increasing tendency of some commercial banks to feed this nation's ravenous consumer debt appetite was creating "a new class of working poor". "This economy is troubled; this is the tank," the Arawak Homes chairman told Tribune Business. "The housing sector, the construction sector, our main competition now is all those thousands of foreclosed houses. That's a major problem." Pointing to newspaper advertisements, some up to eight pages long, from the likes of Finance Corporation of the Bahamas (FINCO) that feature distressed properties lenders are looking to off-load, Mr Wilson questioned how many new homes were being built. With commercial banks sometimes willing to accept below-market prices just to get foreclosed properties off their books, and few potential qualified buyers in the first place, Mr Wilson said the situation was creating an over-supply of housing inventory. This, he indicated, would only depress real estate prices - and demand for new home construction - further. "We are definitely feeling the pinch," the Arawak Homes chairman said. "The fact of the matter is that the economy is not as robust as it has been. The good news for Arawak Homes is that the management continues to scratch, crawl and really do some stuff so that we can keep our heads above water, but this is not an easy climate. "We're at about one-third of where we used to be in 2007. It's just terrible; it's very, very difficult." Mr Wilson said the two-thirds decline from pre-recession levels applied to Arawak Homes' property development and construction activities. Noting the implications of the IMF's advice for the Bahamas, he added of the Article IV report: "I think it's very, very troubling. What they're saying is that if we don't change course, the country will have a debt-to-GDP ratio in excess of 69 per cent by 2015-2016. "What more can they tell you than say you're definitely going down the wrong path? That's as clear as they can make it." And he added: "What's even more troubling is that it's happening at a time when the economic impact [from the Government's infrastructure investments] is marginal at best. The Government said they borrowed all this money to stimulate the economy, and given the magnitude of the stimulus one would have thought more people would be working, the mood of the country will be far more positive, and there would be evidence of robustness in the economy. That's not happening." Mr Wilson questioned what would happen when initiatives such as the New Providence Road Improvement Project, as it was unclear whether those employed to work on it would find jobs elsewhere. "I honestly, honestly believe the IMF said current public policy is not adequate," Mr Wilson told Tribune Business. "That's the IMF saying it. "What that says is that we cannot get out of this with current public policy. People keep asking when are we going to get out of this? It's not automatic, and we have to do something. "My position to everyone is to accept that standards of living in the Bahamas have declined, and I don't see what's going to change in the short run unless there's a change in public policy. That's what the IMF is saying, and there's a mountain evidence to show it's true." Mr Wilson, meanwhile, said the group's Sunshine Finance arm was the unit that could "grow exponentially" if it was so minded, but they were "resisting" the temptation to put more resources into it and follow the lead established by Commonwealth Bank and Fidelity Bank (Bahamas) in chasing higher-yielding consumer loans. Suggesting there was "no intrinsic value" to the wider economy, Mr Wilson said heavy consumer lending had left many Bahamians either at, or above, their borrowing limits and unable to qualify for mortgages and other productive activities. "The way it's practiced in the Bahamas, it's just creating a new class of working poor. No doubt about it," Mr Wilson told Tribune Business of consumer lending.