The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Real Estate Association’s (BREA) president yesterday met with a key Cabinet Minister to propose a ‘pre-approval’ process for first-time buyers seeking the Stamp Duty exemption, something he described as a potential “game changer” for the industry.

Confirming that he was set to meet with Michael Halkitis, minister of state for finance, as Tribune Business went to press yesterday, Franon Wilson said continuing uncertainty over whether first-time buyer applicants would receive the exemption had brought real estate transactions to “a grinding halt”.

Explaining that he was meeting Mr Halkitis in his Arawak Homes capacity, together with other officials from the real estate developer, Mr Wilson revealed that he was proposing a solution where first-time buyers would be ‘pre-approved’ to receive the exemption before the entered into their transactions.

“There’s a great opportunity that, in effect, pre-approves people for the Stamp Duty exemption,” the BREA chief told Tribune Business.

“That should put people in a position to not have to come up with so much money up front.”

Due to the uncertainty over whether first-time buyers would be approved to receive the Stamp Duty exemption, something that could ultimately be worth $50,000, commercial banks and other lenders are requiring such clients to place enough money ‘into escrow’ to cover the tax should they ultimately be rejected.

First-time buyers were frequently having to finance this, in addition to downpayments and closing costs (realtors and attorneys’ fees), Mr Wilson acknowledged, creating a financial burden that drove persons from the market and broke potential transactions.

“If they get pre-approved beforehand, the buyers will not need to put this money into escrow, as they will know they are straight for a particular home,” Mr Wilson told Tribune Business.

“This could have a huge impact for the real estate industry. It may take some processes and documents to get going, but it could be a game changer. This is one of those situations where we have an opportunity to keep the real estate market moving forward.”

Arawak Homes sells a significant proportion of its homes to first-time buyers, and he revealed to this newspaper that Stamp Duty exemption uncertainty had “brought some attractions to a grinding halt”.

“The attorneys can’t say for certain what a person’s share of the Stamp Duty will be,” Mr Wilson told Tribune Business. “It’s a problem.

“I have someone right now. They’ve bought two homes and want to move. Arawak Homes has told them to hold on, let’s see if we can get this straight. If we don’t, I’m not sure they can move, because that’s [the Stamp Duty] a massive amount. It’s serious.”

The first-time buyer Stamp Duty exemption was introduced by the first Christie administration in 2003, and was intended to stimulate the real estate/housing market by making it less expensive for young, middle and low income Bahamians, to acquire their homes.

Apart from enabling more Bahamians to purchase their ‘piece of the rock’, it was also designed to boost the wider economy and associated industries, such as construction.

The initial exemption threshold was set at properties valued at $250,000 and under, but this was increased to $500,000 when the former Ingraham administration reintroduced it in its second guise in 2008.

The exemption was reinstated in the 2013-2014 Budget, albeit with further tweaks, such as the exclusion of vacant land/lot purchases.

However, all three versions have been plagued by problems, largely relating to policy - how the Stamp Duty exemption is being interpreted and applied, and what applicants have to do to qualify.

Concerns peaked when the Treasury began adding mortgage and conveyancing values together, as the combined sum frequently exceeded $500,000 and prevented buyers from qualifying.

Michael Lightbourne, head of Coldwell Banker Lightbourne Realty, told Tribune Business that while that particular issue had not arisen, first-time buyers were still “not getting approved”.

“In one instance they’re not giving any approvals at all, and in another they’ve said they only have to pay half of it,” he added. “This thing has been going on for seven-eight months with this particular family.

“The biggest issue is who is exempt, and what are the requirements for the exemption. If you’re a first-time buyer, what’s your exemption - is it all of it, half of it? It’s like VAT; it’s up in the air.

“These lower end sakes, it’s vital. It makes a hell of a difference. These people have to find an extra 10 per cent of the purchase price in some instances to complete a sale. It’s killing sales.”

Adrian White, head of the Bahamas Bar Association’s real estate committee, said that while it was aware of the numerous issues with the first-time buyer Stamp Duty exemption, nothing new had surfaced since it was renewed in the 2013-2014 Budget.

“It’s something we regularly speak about and endeavour to keep an eye on,” Mr White told Tribune Business. “The issues people are still dealing with are still the issues pre-July 1 falling under the 2008 amendment.”

He agreed, though, that the exemption needed to be applied consistently and with clarity.

“It is something from practitioner experience that we are aware of, and something we would want to be kept clean or as clean as possible,” Mr White said.

“We’re still interested in consistency, but it’s not become an issue as far as the real estate committee is concerned.”