The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A prominent realtor yesterday urged the Government to slash the tax rate on property sales by 50 percent and "cut all the red tape" to stimulate "real money" inflows to The Bahamas.

John Christie, HG Christie's president and managing broker, called on the Government to "get proactive" in stimulating real estate sales on the basis that the industry potentially represents this nation's best source of foreign currency earnings amid the COVID-19 lockdown and its immediate aftermath.

He told Tribune Business that the VAT rate on real estate sales should be temporarily cut in half, a move that would drop it to 5 percent for all property valued above $100,000 and just 1 percent below that benchmark, arguing that Turks & Caicos had already done this and seemed to be enjoying some success.

Noting that tax cuts appeared to have stimulated a $42m private island sale in The Bahamas' south-eastern neighbour, Mr Christie argued that such a move - which would not be a permanent tax cut - could generate much-needed economic activity and Public Treasury revenues at a time when its main tourism source has all but dried up.

The HG Christie chief also called for the "opening up of the Family Islands" to foreign buyers when it came to large Bahamian-owned land tracts greater than two acres. He argued that the Government's previous reluctance to approve such deals often blocked potential exit routes for Bahamian owners, while also discouraging investment that could turn such land into job-creating, productive properties.

And Mr Christie also urged the Government to revamp its predecessor's Homeowner Protection Act as a way to free-up mortgage financing availability for Bahamians. He argued among the Act's unforeseen consequences was that it had further discouraged banks and other institutions from lending due to the increased difficulty of realising collateral security for delinquent loans.

Predicting that Bahamian real estate volumes will decline by 50 percent in 2020 due to the loss of "two quarters of sales" due to COVID-19, Mr Christie said the market's comeback will depend on the timing - and extent to which - the world opens up once the pandemic's health concerns.

"The Government needs to get proactive about encouraging real estate sales as one way of getting real hard money coming in," he told Tribune Business. "I know Turks & Caicos reduced their transfer tax by 50 percent for that reason to encourage sales, and they've put a $42m private island under contract because of that.

"That encouraged people to buy because they save money but you also still get money into the Treasury, so we should start doing the same thing; not indefinitely but while this lasts. Right now everybody has stopped, is not doing anything and is waiting to see what happens. If they cut the VAT sales/transfer tax to 5 percent, more sales happen and you make more money cutting it than by keeping it where it is.

"They're [the Treasury] not making any money anyway, so this will be an incentive to push that along. Turks & Caicos has already implemented it and having success with it. This [tax cut] is not something we're committing long-term; it's just to get money into the Treasury," Mr Christie explained.

"With no tourism, real estate is the main source of money coming in from the outside world."

Urging the Government to streamline the real estate investment approval process, the HG Christie chief said it "is crazy" that the Cabinet - through the Investments Board and National Economic Council (NEC) - have to approve all purchases by non-Bahamians of more than two acres in the Family Islands.

Arguing that this has stifled economic growth and development in many Bahamian islands, Mr Christie added: "We need to get that going, and the Government to open up the Family Islands. If someone wants to buy 100 acres, it's probably owned by a Bahamian desperate for money.

"They get their money, it goes into the economy, and that land that has been sitting there idle starts generating real property tax at 2 percent for the Government. A $1m sale means $20,000 for the Government every year. It grows the pot for everyone.

"We have to change the mindset. If a Bahamian wants to sell land to a non-Bahamian he should be allowed to do it in my opinion. Now's the time to do it," he continued. "I cannot tell you the number of times that retired Bahamians owning 50 acres, 100 acres, have come in saying they need to sell, they need to retire, and there is no market for their land.

"They're shattered. There's no market for their land. Every single government in an independent Bahamas has shut down that market for the most part. The reason why the cruise ships are buying everything is they're the only people who can. We've shut the market down for everyone else. They just need to put in a dock, whereas everyone else has to put in roads."

Mr Christie also urged the Government to prioritise reform of the Homeowners Protection Act, which has also been criticised by the likes of Sir Franklyn Wilson for deterring mortgage lending by banks and other lending institutions by imposing obstacles to realising security in delinquent loans.

"The Homeowners Protection Act makes it very hard for anyone to function," the HG Christie chief added. "If someone's not paying their mortgage the lender needs to realise the collateral. They [the Government] need to rethink everything and get it going. It's unfortunate but that's the economic reality.

"The people the banks lend to often don't need the money in the first place. That Act has done a great disservice to The Bahamas in my opinion. Free the economy up. Get it going. Cut the red tape and be ready to boom as soon as we pop out of this."

Mr Christie said his firm and other realtors were concentrating on closing real estate sales that had been in the pipeline prior to the COVID-19 pandemic's emergence, with a fall-off in activity anticipated once those are completed.

"There'll definitely be a lull, and a big drop-off while no properties can be shown. There's stuff going on but in smaller amounts because it's almost impossible to show right now," he added. "There'll be a huge dip in the second quarter, and in the third and fourth quarter it will come back up.

"It really depends on the world and how it opens up. I think there'll be at least a 50 percent drop. That's my guess. We had two record years in terms of the economic flow. It was probably going to slow a bit anyway."

Mr Christie said had also been receiving "a lot of interest from people looking for safe haven properties" such as private islands and large, remote land parcels. "It was kind of slow before that, but has now picked up," he added. "Whether it comes to reality, who knows, but there are a lot of people sitting at home thinking about it."