The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Top realtors yesterday warned the Government it would be “foolish” to double the permanent residency investment threshold to $1 million, estimating it could undermine up to 60 per cent of active real estate developments.

George Damianos, Damianos Sotheby’s International Realty’s president, told Tribune Business that the Bahamas would likely lose an entire segment of its real estate market if the Christie administration followed through with the proposed changes.

Emphasising that “it would be a mistake” for the Government to take such action, Mr Damianos said the permanent resident market between the $500,000 and $1 million price points was “key to the economy”, helping to “drive” growth.

His concerns were echoed by Larry Roberts, NAI Bahamas Realty’s chief executive, who warned that the Government’s plan threatened “to kill the only developments that we have”.

Warning that foreign buyers had numerous alternatives to the Bahamas, Mr Roberts said the real estate market and its participants “just don’t need anything more to adversely affect our industry”.

It is unclear whether their warnings will be heeded by the Government, but the Bahamas’ downgrade to ‘junk’ creditworthiness by Standard & Poor’s (S&P) means that this nation can ill-afford anything else which might undermine its economy.

Khaalis Rolle, minister of state for investments, declined to comment on the matter when contacted by Tribune Business, but this newspaper understands that the proposed change did not receive unanimous Cabinet support or approval.

Tribune Business sources suggested that the initiative to increase the investment threshold, from $500,000 to $1 million, for accelerated permanent residency consideration is bring driven by the Ministry of Financial Services rather than Investments.

The former’s minister, Hope Strachan, announced the amendment last month at a seminar held by the Higgs & Johnson law firm, with her Ministry understood to be focused on “changing the Immigration product as it relates to the financial services industry”.

However, both Mr Damianos and Mr Roberts warned that the change - which was approved by the Christie Cabinet but has yet to be implemented - would negatively impact not only the real estate market, but the construction industry and service providers who catered to the expatriate residency market.

“Even though our average sales price this year has been $1.5 million, I don’t think it’s well thought-out and a good move for the Government to increase that to $1 million,” Mr Damianos told Tribune Business of the permanent residency investment threshold.

“I think there’s a market of properties that change hands in the $500,000 to $1 million price level that will definitely suffer from that; a considerable segment of the market.”

He added that foreign condo purchasers, who spent several months per year in the Bahamas and wanted to gain permanent residency status, were “key to the economy here”.

“We need to encourage this, and get more of them,” Mr Damianos said. “They spend their money while here, put money into the economy, and there’s drive and buoyancy from them.

“There’s definitely high-end rollers who spend more than that; spend well over $1 million, but I think the Government would be foolish to lose that $700,000, $800,000, $900,000 purchaser.

“I think it would be a mistake to go that route for the Government. For the time being, we need to do everything possible to keep that segment of the market alive and here,” he added.

“By keeping it alive, and attracting these people to apply for permanent residency, it does nothing but help the Bahamas.”

Mr Damianos said that in doing so, “nobody loses a job”, allaying misconceptions that the grant of permanent residency to foreign real estate purchasers automatically displaces Bahamian workers.

These purchasers require further, different approvals if they seek to work or own a business in the Bahamas, and Mr Damianos emphasised that permanent residents injected money into the economy and helped to create employment by purchasing vehicles, furniture and appliances.

“We will be getting a little ahead of ourselves to think we only need to attract these multi-millionaires,” he told Tribune Business.

Mr Roberts was just as forthright, expressing hope that there were “some clear thinking people” in the Government who could ensure it rethinks the proposed increase.

“I think it’s most unfortunate that they are killing the only few developments that we have; condo developments,” he told Tribune Business.

“There’s very little going on, and those projects that are, are below the threshold of $1 million. They’re virtually killing that market if people are buying for permanent residency. For those who are, it kills that market; they go elsewhere.

“I’m very concerned. You don’t have to look around very far to see the state of our economy. We need as much development to go on as we can get. It’s pretty dead. There’s very little new development.”

Pointing out that the Government’s tinkering with the permanent residency threshold “doesn’t help”, Mr Roberts added: “We just don’t need anything more to adversely affect our industry.”

Pointing out that the potential ramifications would be felt beyond the real estate industry, he said: “Call around the contractors and ask what they’re doing.

“The only contractors that I know are busy are working in the islands. Baker’s Bay is going great guns, and there is work in Old Fort Bay, Albany and Lyford Cay, but other than that.....”

Mr Damianos, meanwhile, said many foreign buyers between the $500,000 and $1 million price points were “trying to get their feet wet” and see if they liked it in the Bahamas.

Many often traded up for larger, more expensive properties, and he warned of the consequences: “We’ll miss out on that whole market, and send them to other Caribbean countries.

“It’s very important. There’s no question about it, You have developments on Paradise Island, Cable Beach. If you go to that $1 million mark, you’ll probably exclude 60 per cent of those developments.

“You’ll hurt realtors as well as new developments that have buildings coming out of the ground at that price level.”

Mr Damianos expressed surprise that the Government appeared not to have consulted with the real estate industry on the proposed changes, adding: “We’d be sorry to see them do that.”

Mike Lightbourn, Coldwell Banker Lightbourn Realty’s president, backed his colleagues, telling Tribune Business that he would “prefer they leave it where it is” in terms of the current $500,000 permanent residency threshold.

“I also feel that in the more remote and less economically active islands they should reduce it to $250,000, just to get something going there,” he added, reiterating that such permanent residents did not take jobs from Bahamians.

Developers and realtors are especially concerned with both the potential change and how it is implemented, given the importance of the second home market to their industries and the wider Bahamian economy.

With the Bahamian segment relatively flat, the second home sector has been one that realtors have been able to rely on to generate sales momentum over the past few years.

With 80 per cent of real estate sales inventory priced below $1 million, they fear that any change - especially one that might be perceived negatively by foreign buyers - could drive a significant chunk of the market to other jurisdictions.

And a ‘drying up’ of such buyers would produce wider ‘ripple effects’ in the Bahamian economy, reducing work for the construction industry and a variety of other trades whose business is tied to the real estate and second home markets.