The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government has “reined in” the ability of first-time home buyers to obtain the full 10 per cent Stamp Duty exemption, a well-known attorney saying the threshold was now below that employed when the tax break was first introduced in 2002.

Adrian White, head of the Bahamas Bar Association’s real estate committee, effectively told Tribune Business that the Stamp Duty exemption policy steps unveiled yesterday by the Government were a ‘double edged sword’, as they also brought “clarity and opportunity” for market participants.

Expressing disappointment that the Government had seemingly cut the threshold at which first-time buyers could obtain the full duty exemption from properties valued at $250,000 to now $200,000, Mr White suggested this might dampen activity at a time when the real estate market was still trying to revive.

“I think it’s clear that the total amount has been reined in,” he told Tribune Business. “In 2002, when the exemption was first introduced under the Stamp Act, you could recover the full exemption on purchases not exceeding $250,000.

“Now, the full exemption has been pulled back to $200,000. While defined, it’s less than it was historically It has lowered the total value upon which a purchaser could receive the full exemption from an initial $250,000 to $200,000.”

Mr White added: “It’s just unfortunate to see the bar lowered by $50,000 from a historical perspective.

“While we are in the stage of reviving the real estate market right now, we have seen more activity and energy in the first-time buyer segment if that cut-off amount would have come in at at least $250,000.”

Still, Mr White praised the Ministry of Finance for unveiling a clear first-time buyer Stamp Duty exemption policy, adding that it had removed the need for banks to demand more upfront money from clients in case they failed to qualify.

“This actually addressed two points and leaves a little room for explanation,” Mr White said of the three policy points unveiled yesterday.

While praising the Government for following the Bar committee’s suggestion that it issue a policy paper on the Stamp (Amendment) Act 2013, the Delaney Partners attorney added: “It appears to solely address the interest that banks have in seeing some kind of pre-approval granted to their loan applicants.”

Apart from the pre-approval, where lenders can confirm with the Treasury’s Stamp Exemption Unit whether borrowers will qualify for the exemption, yesterday’s policy statement says first-time buyers who agree to pay the full Stamp Duty in their sales agreements can only gain the full break if the property is valued at $200,000 or less.

This, Mr White said, would require first-time buyers and sellers, and their advisers, to carefully consider how they structured their sales agreements.

“If the appraised value is greater than $200,000, it may not be worth agreeing to pay the net amount. Consider the structure of your offer,” Mr White told Tribune Business.

“The seller, in turn, will have to examine the offer to see if it comes close enough to their asking price to make the sale happen.”

He added: “The parameters have been defined as to where the full exemption can be obtained, and also set for where half the exemption can be awarded or granted.

“It is clear the Ministry of Finance has acted to address what have been outstanding concerns for a lot of lending institutions: Whether the client qualifies for the exemption. What that process is remains to be seen, but it’s beneficial that the banks’ concerns have been addressed.”

For properties valued at between $200,000 and $250,000, the Government has agreed to grant the full 10 per cent Stamp Duty exemption on the first $200,000, and exempt “one half” - 5 per cent - on the difference between the two figures.

The third and final policy, meanwhile, confirms the Stamp Duty exemption will only be granted for the purchaser’s portion - normally 5 per cent - on properties with an appraisal value greater than $200,000.

Mr White suggested that this figure was probably intended to be $250,000, given the $200,000 threshold set for ‘net purchases’.