The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A two-time Bahamas Real Estate Association (BREA) president has recovered 50 per cent of the business volumes he lost at the recession’s peak, but is warning that Baha Mar will not be a “saving grace”.

Revealing that his firm’s sales levels declined by up to 75 per cent during the economic slump, Pat Strachan told Tribune Business that tightened bank lending criteria meant the Bahamian real estate market was likely to enjoy only a gradual recovery over the next five years.

And, despite the several billion dollars being invested in Baha Mar’s Cable Beach redevelopment, Mr Strachan said the project was having minimal impact on the Bahamian economy due to the dominance of Chinese companies and workers.

“I don’t think Baha Mar is going to be the saving grace many of us think it’s going to be” the Pat Strachan Realty head told Tribune Business. “Let’s look at it. The developers are talking about $3.5 billion going into the project, but how much of that is trickling down into the economy?”

As a condition of the $1.9 billion debt financing provided by the China Export-Import Bank, Baha Mar has taken on China State Construction as both main contractor and equity partner. The majority of construction workers are several thousand Chinese, although only several hundred are said to be on-island at any one time.

The former Ingraham administration negotiated an arrangement where $400 million worth of contracts were to go to Bahamian contractors, with a minimum 4,000 Bahamian jobs created during the Baha Mar construction phase

Still, Mr Strachan told Tribune Business the New Providence real estate market - especially the Cable Beach area - would have received more of a boost had the Chinese workers rented accommodation there, instead of living on-site in their purpose-built ‘Man Camp’.

“There’s 6,000 Chinese workers down there. If 2,000 Bahamians had been employed that would have an impact on the local economy,” Mr Strachan said.

“If 3,000 Chinese had rented apartments and homes in the surrounding area that would have had a positive impact on the rental market. Are the salaries of the Chinese workers being passed through the local banks, or are they staying in China? How’s that help us? I’m not impressed with it.”

Meanwhile, assessing the current state of the market, Mr Strachan added: “The economy with regard to real estate has hit rock bottom. We have kind of levelled off.

“But I don’t see a surge immediately. I see it improving over the next three-five years, but not a great improvement. Part of the problem is that the banks have tightened up on lending restrictions. It’s very difficult for prospects to qualify compared to five-six years ago.

“Until the money gets into the system and trickles down to the prospects, I think we’re in for a rough ride.”

Mr Strachan told Tribune Business that his company saw “anywhere from a 50-75 per cent” sales slump, compared to pre-recession levels, at the recession’s height. It was “probably back up 50 per cent” now, meaning sales were only down 25-38 per cent from pre-2008.

While some Bahamian realtors, especially those positioned at the high-end, international buyer niche, are reporting improved sales, they are benefiting from a client base more likely to include all-cash purchasers.

Mr Strachan is more focused on the Bahamian market, and he said the difficulties potential buyers are having in accessing bank funds were driving developers to increasingly set-up their own in-house financing schemes.

Projects such as The Balmoral and Lyford Hills have done just that, and Mr Strachan said: “The prospects interested in their developments are finding it difficult to get financing, and that is going to be a major challenge over the next two-three years.

“My business is heading north, but it is not heading north fast. My market is the hotel workers, the teachers, the man collecting garbage in the street.

“To make matters worse, persons are sceptical. They’re waiting to see what happens to the economy. Confidence in the economy needs to grow, and until that happens we’re going to have this wait and see attitude.”