The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A leading New Providence real estate development yesterday pledged to pay the full 10 per cent Stamp Duty on all purchases from it in a bid to “kickstart” the market, its chief executive telling Tribune Business the initiative was designed to maintain current property values.

Richard Browning, chief executive of the 400-unit Palm Cay project in eastern New Providence, explained that the development was responding to market concerns involving the Bahamas’ relatively high real estate transactions costs by “packaging” its product in a different way.

With its pledge to pay the full Stamp Duty on all real estate purchases taking effect immediately, and running for an indefinite period, Mr Browning said Palm Cay was looking to both reduce buyer costs and give them more certainty about their likely total outlay.

Emphasising that Palm Cay was not discounting its prices, so as to “retain the value of our property”, Mr Browning said the development was aiming to have “a conversation with the market” - both local and international - about what it wanted.

Welcoming the Government’s move to reduce the top Stamp Duty rate from 12 per cent back to 10 per cent, Mr Browning said the top Bahamian realtors were all “saying Stamp Duty is a key to kickstarting the real estate market”.

Mr Browning told Tribune Business: “We like to be practical. We like to respond to what the market is calling for. That’s a sign that’s saying in some cases, the costs of purchasing are something taken very seriously by realtors and the buying public.

“We’re going to respond to that. On our current prices, we’ll be paying the full Stamp Duty for any of the buyers purchasing property from us. The regular property price stays the same. It retains the intrinsic value of the development.”

He added: “It’s not discounting. Everyone’s getting very competitive, we understand that. It’s trying to retain the value of our property, and every property in the Bahamas, but responding to the fact that transaction costs are sometimes prohibitive for people purchasing property.

“The last thing any of us want to do is develop property in the Bahamas by discounting. What we’re trying to do is kickstart the Bahamian real estate market again. That will help us, help the Bahamas and help the Government’s coffers. If there’s no business, 10 per cent of nothing is still nothing.”

With Palm Cay’s points currently ranging from around $500,000 to $1 million, the Stamp Duty savings for purchasers could potentially be significant.

Usually, Stamp Duty payments are split 50/50 between buyer and seller and, with all Palm Cay’s properties attracting the 10 per cent rate, such an arrangement would result in the purchaser paying between $25,000 and $50,000 to the Public Treasury.

Palm Cay’s move will thus save buyers a substantial sum. The developer will have to shoulder payments of between $50,000-$100,000, but the move will ease heavy transaction costs that also, for a buyer, involve legal fees (2.5 per cent of the purchase price normally), insurance and various one-time banking fees associated with mortgage costs.

Sometimes, while banks are prepared to lend enough to cover the purchase price, they will not extend more to cover Stamp Duty payments - something that may cause deals to collapse.

Mr Browning told Tribune Business that, if the initiative did indeed succeed in “kickstarting” the market, Palm Cay hoped “to join with other developers on property packaged in the right way”.

He added: “I think that’s something we all may need to work on - the high cost of property transactions. We may need to work on all-encompassing, all-inclusive pricing so we can tell the market what it really costs them.

“It’s ultimately what the market is looking for, giving a clear message to the market that this is the price of the property, what it costs you, come and buy it. It will be interesting to see in a few months.

“It’s something that’s being discussed, and the developers need to respond. Let’s see if we package it differently, and give the market what it’s looking for.”

Emphasising there was “no need for a time limit” to Palm Cay’s Stamp Duty initiative, and “if that’s the package the market wants we’ll continue with it”, Mr Browning said it would provide much-needed clarity to international buyers especially, as they were likely to be unaware of Bahamian real estate taxes.

High transaction costs also made it difficult for persons looking at Bahamian real estate as investment opportunities to generate the returns they wanted.

“If anyone’s looking for an investment opportunity, property becomes a real long-term investment as opposed to a medium-term investment,” Mr Browning explained. “Prices have to escalate so greatly to make it worthwhile in the medium-term.

“People want to know what it’s going to cost, particularly in the international market. Real property tax is also an issue for the affluent buyer.”