The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian realtors have branded the Government’s proposal to increase the ‘fast track’ residency threshold to $1 million as “a great plan if we want to stop people and investment coming here”.

Peter Dupuch, ERA Dupuch Real Estate’s president, told Tribune Business that the planned doubling of the real estate investment benchmark for accelerated permanent residency consideration was “surely not a way” to attract business and economic activity.

A Government spokesman (see other article HERE) has revealed that it plans to implement the increase from $500,000 to $1 million on March 1, 2017, despite warnings from realtors and developers that the policy change could cost the Bahamas an entire segment of its real estate market that is especially vibrant.

“If they want to stop people coming here, that’s a great plan,” Mr Dupuch told Tribune Business. “It’s surely not a way to attract people.

“It didn’t happen to us, but I heard a story of someone buying to get that [permanent residency], spending $600,000 to $700,000, and they’ve backed out now.

“They were doing it for residency, and now they’re putting it [the threshold] to $1 million, they can’t afford that. That’s already tens of thousands of dollars lost to the Treasury.”

Mr Dupuch said many Bahamians, especially those in the private sector, were “sick” of the ever-increasing tax and bureaucratic burden being imposed by the Government.

He added that it seemed as if the Government was trying to “stifle” business at every turn, with constant policy and regulatory changes.

“I just don’t understand what they’re trying to do,” Mr Dupuch said of the Government. “It seems as if they’re trying to stifle everything but, as much as they do, people are still buying.

“It just feel that every way they turn, everything they do, is to put in another screw. People are sick of it.”

Mr Dupuch added that his concerns extended beyond the Bahamian real estate market to issues such as the Government narrowing the ‘window’ for Value-Added Tax (VAT) filings and payments by one week to 21 days.

“Put it this way,” he added. “If S&P have their concerns, and the downgrade is to ‘junk’, I have my concerns. Sometimes I think I’m watching TV, but it’s real; it’s true.

“Things like them changing VAT to the 21st now; what does that do for them? A week? It really impacts businesses at year-end. Because it’s a holiday, you basically have 12-13 days to do your year-end and VAT.

“It’s OK for me, as I’m not a Kelly’s, but for businesses with a lot of inventory, but it doesn’t make sense to make them pay a week earlier. Still, my dad said you can’t fight City Hall.”

Many observers believe the Government has narrowed the VAT remittance window so it can improve a strained cash flow position, getting its hands on its revenues a week earlier to enable it to meet a civil service and public sector wage bill near $60 million per month.

Mr Dupuch, who had been off-island when the Bahamas’ creditworthiness was downgraded to ‘junk’ status, added: “I was looking at it from outside, and it’s like: ‘Jesus, we’ve imploded’.”

Meanwhile, Ryan Knowles, an HG Christie realtor, told Tribune Business that he understood the Government’s rationale for seeking to increase the permanent residency ‘fast track’ threshold to $1 million.

But, while this may assist in attracting the “cream of the crop” among the global investor community, Mr Knowles echoed concerns voiced by other realtors and developers.

He warned that the policy change would “eliminate a large part” of the residency market that bought between the $500,000 and $1 million price points, and called for existing developments targeted at this segment to be ‘grandfathered in’ and given a ‘grace period’ to adjust.

“I understand the rationale behind it, wanting to bring in the cream of the crop; the ultra high net worth individuals,” Mr Knowles told Tribune Business of the threshold’s ‘doubling’ from $500,000 to $1 million.

“That’s a good thing. The challenge is that there are developers who have invested millions of dollars in developing properties and condominiums, targeting clients in the $500,000 to $1 million price range.

“The question is: If they have product that is finished or ready to sell, how is this going to affect them? It’s going to impact them negatively.”

Mr Knowles added: “It’s a pretty large part of the market that will eliminate, and we need to look at that and grandfather in projects already finished or have a grace period.

“They need to be flexible, and look at how they implement, but on the whole I don’t think it’s a bad thing.”

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.