The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Real Estate Association’s (BREA) president yesterday said he was “over the moon” due to the Government’s decision to extend the first-time buyer Stamp Duty exemption for another five years, telling Tribune Business: “It’s Christmas.”

Speaking after Prime Minister Perry Christie confirmed that the exemption would be extended until end-June 2018, with the $500,000 limit also remaining, Franon Wilson said the Government had “really stepped up to the place” in addressing market concerns.

BREA and its members have been pressing the Government to both extend the first-time buyer Stamp Duty exemption, and clarify uncertainties surrounding how it is applied and processed.

The Prime Minister attempted to address some of these concerns in his 2013-2014 Budget communication, saying “flexibility” would be granted to how the $500,000 exemption was allocated between the conveyancing price and any mortgage financing.

Tribune Business had previously revealed the confusion being caused by the Treasury’s practice of adding the mortgage value to the conveyancing value - a tactic that often pushes a first-time buyer transaction beyond the $500,000 qualifying cut-off.

This resulted in the stalling, or abandonment, of some first-time buyer purchases, but the Prime Minister’s comments appear to effectively back the Treasury’s practice.

However, he indicated that the Government will allow the parties to determine where the exemption will be allocated - and in what proportion - between the mortgage and conveyance.

Addressing the House of Assembly, Mr Christie said: “The Stamp Tax exemption granted to first-time homeowners will be extended for an additional five years to June 2018.

“And, within the $500,000 cap, flexibility will be permitted as to the proportions allocated to the conveyance and the mortgage.”

This, Mr Christie added, would “remove the contradiction that existed” where first-time buyers were “getting the exemption on the conveyance, and not on the mortgage”.

In response, Mr Wilson told Tribune Business: “It’s Christmas, it’s Christmas. I think that’s everything we could ask for.

“I’m over the moon right now. The Government has really stepped up to the plate and provided an enormous stimulus, and the certainty that provides to BREA members and buyers/sellers, will help people own their own home, own their piece of real estate.”

Describing as “significant” the reduction in the top Stamp Duty rate from 12 per cent to 10 per cent, which was ushered in with last year’s Budget, Mr Wilson said the Christie administration was again demonstrating its backing for the real estate sector.

“The Government once again is showing its commitment to real estate development through the first-time buyer Stamp Duty exemption,” the BREA president said.

“Simply put, it’s Christmas. Also, the certainty government is going to provide is welcome news. That is significant as well.

“Up to late last year, although the exemption was in place for a number of years, we had a number of attorneys and members of BREA raising questions about interpreting the Act differently,” Mr Wilson added.

“The certainty was needed by industry, and we can all move forward once everybody’s on the same page. Some transactions would have been held up, as one attorney interpreted it one way, but the other side’s attorney interpreted differently. This certainly will help everybody move forward.”

The Prime Minister, though, appeared to stop short of the position that many realtors and first-time buyers will have wanted - that of stating that the Treasury will no longer add mortgage and conveyancing values together.

Realtors had previously expressed concern that this policy discriminated against first-time buyers who required mortgage financing, and favoured those who could complete all-cash transactions.

Still, with the exemption’s extension, the way is now clear for BREA and the Bahamas Bar Association’s real estate committee to submit recommendations on how the process and qualification can be improved.

Among the current difficulties is the uncertainty over whether applicants will be approved for the exemption, resulting in commercial banks and other lenders stipulating that buyers place a sum equivalent to the potential Stamp Duty payment into escrow.

This not only slows the mortgage approval/real estate transaction down, but potentially places the property beyond the buyer’s reach if they have to raise the Stamp Duty payment, too.

The BREA/Bar Association recommendations will also look to quicken the stamping of conveyance documents, so banks and lenders gain immediate collateral security for their funds.

And, on the other side, the Ministry of Finance and Treasury have also seen buyers swear false affidavits stating a transaction was their first home when it was not.

The first-time buyer Stamp Duty exemption was introduced under the first Christie administration, initially for properties valued at $250,000 or less, before the Ingraham government increased the threshold to $500,000.

It has been regarded as a relative success, enabling middle and lower income Bahamians - who might not otherwise be able to afford it - to realise their dream of home ownership.

The exemption has also acted as a ‘stimulus’ for that sector of the Bahamian real estate market, benefiting attorneys and realtors, while also generating construction sector activity.

What the Government has given up at the ‘front end’ in terms of Stamp Duty, it has regained at the ‘back end’ in terms of job creation and import spending on materials, fixtures and furnishings. That has also boosted retail stores focused on the home