The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

An ex-Bahamas Real Estate Association (BREA) president is anticipating a $45-$50m economic boost when the Government releases 300 more plots into its low-cost serviced lots initiative.

Pat Strachan, pictured, told Tribune Business he had been informed by the prime minister that the administration was "getting ready" to put more lots on the market in the Dignity Gardens area as efforts to enable more Bahamians to "own a piece of the rock" gather pace.

He branded the initiative as vital "to getting the economy moving north" by increasing construction industry activity, as well as increasing affordable home ownership among the Bahamian middle and lower middle class.

"They're getting ready to put 300 lots on the market in the Dignity Gardens area," Mr Strachan said of the Government. "I think that's encouraging signs for the construction market. When you look at each lot as $150,000 in land and construction costs, you're looking at anywhere from $45-$50m being pumped into the economy.

"I believe this will boost the middle and lower middle class sector of the economy, and create employment for masons, carpenters, plumbers and general contractors. If the lot owner deals directly with the private sector there will be more benefit for the economy. We need to get the middle and lower middle class going as soon as possible. ASAP."

The Minnis administration has targeted revival of the stagnant domestic housing market as a policy priority, with its low-cost serviced lot initiative the key mechanism for achieving this. The Prime Minister has said the lots, priced between $15,000-$30,000 and with all necessary utility connections, are being sold at 70 percent below market value in some cases.

"I met with the Prime Minister," Mr Strachan told Tribune Business, "and he's committed to ensuring the middle class market gets moving in housing. He's committed to get the economy moving north, and he wants every Bahamian to own a piece of the rock and have a roof over their heads.

"By putting these lots on the market he's making that happen. The fact prospects are able to buy lots at $30,000 is a steal. I've advised prospects to get hold of the ministry and get them as soon as possible."

However, the Government's twin objectives of making home ownership more affordable and accessible for Bahamians, and kickstarting the housing market, still face major obstacles - some of which are largely outside its control.

Commercial banks, in particular, remain reluctant to extend mortgage financing other than to the most qualified borrowers. And, given the general lack of savings in Bahamian society, many homeowner candidates are unable to come up with down payments as high as 20 percent of the total purchase price.

Mr Strachan urged the Government to engage the banks directly to resolve this, saying: "The banks need to reduce the down payments and extend repayment plans at reduced interest rates. I encourage the Government to meet with the banks and instill in them how important it is to relax lending policies. The Government needs to make it a priority and get it going.

"We need to increase employment. Every day I come into contact with masons, plumbers and electricians; they need regular work and don't have it. If we get these lots on the market and the financing to build that will be a positive injection; no question about it."

The former two-time BREA president added that the middle class Bahamian housing market had been "lingering" for between eight to 10 years as a result of the 2008-2009 global recession, and said it was beyond time for a turnaround to occur.

But Leonard Sands, the Bahamian Contractors Association's (BCA) president, yesterday estimated to Tribune Business that the construction industry would only likely start feeling any positive effects from the Government's initiative in the 2018 fourth quarter.

He added that any real "pick-up" in activity it may cause would come in the 2019 second and third quarters, given the natural construction industry time-lags caused by homeowners having to obtain financing for vertical building, getting permits and then negotiating contracts with contractors, architects and the like.

"We don't think we're going to see traction on that at least until the next [fourth] quarter," Mr Sands told this newspaper. "Even though you may get the lot, you have to go through the process of engaging your architect, contractor and getting your financing.

"We never expected to see significant turnaround from the perspective of construction. Give it a couple of months to organise. We could see some activity, but the earliest you will see some kind of pick-up is in the fourth quarter this year. We believe that between the second and third quarter of 2019, activity should be pretty strong in relation to that initiative."

The Government launched its low-cost lot initiative earlier this summer with plots in Sunset Close and Fox Hill, and Mr Sands said the cut-price land could help offset the impact the VAT increase to 12 percent will have on construction costs and the inability of developers to recover what they pay on their inputs.

"Even though the cost of land is lower, with the increase in VAT all the associated costs of building rise," the BCA chief warned. "That may be a heavy burden to overcome, but it's not insurmountable. The lower cost of land does give the homeowner an advantage.

"What we will see from persons planning, making preparations to buy land that is almost 50 percent cheaper, is that that's going to translate into how quickly they get architects, how quickly they can build. That absolutely quickens the time to finance and build a home. It significantly increases the volume of work and all contractors will benefit."

Both Mr Sands and Mr Strachan backed the Government's decision to exit direct involvement in the construction of low cost homes, and its management. With lot owners now assuming this responsibility, the Government can focus on regulation and no longer be exposed to the cost overruns and shoddy workmanship that ultimately became liabilities for Bahamian taxpayers.

"I think personally that's the best position for the Government to be in," Mr Sands told Tribune Business. "The Government is a policy machine. They're not set up to be in the building market. It takes the burden off the public purse, and takes this strain off the Government and policymakers so they don't have to manage this housing programme.

"There are more important things for them to focus on rather than be burdened with finding funding to finish and repair homes. Take that element off the table. It gives the Government the ability to focus on what they need to be doing."

The BCA president said the Government's housing programme had "never been the biggest driver" of activity in the domestic sector. Instead, it had largely been middle class Bahamians with the wherewithal to obtain private financing and purchase/build their own properties.