The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Just 20 percent of Bahamians are able to service and qualify for an "average" mortgage, the Bahamas Development Bank's (BDB) strategic transformation report estimates.

Canada-based International Financial Consulting (IFC), in a document tabled in the House of Assembly on Wednesday night, said the number of Bahamians who were being priced out of home ownership pre-COVID-19 presented a significant lending opportunity for the state-owned institution once the pandemic is over.

Suggesting that the BDB has "large" potential to assist the "affordable housing market" in The Bahamas, its 2020-2024 strategic plan said: "Lending for home ownership is very low in The Bahamas, and there is an opportunity to impact the affordable housing stock by addressing supply-side constraints.

"Over the last ten years the number of net new mortgages grew by approximately 4,500 (450 per year). By accessing and developing government lands for affordable housing purposes, an estimated $1bn in serviced lots and $5bn in housing assets can be mobilised."

The BDB report said home ownership was "limited in The Bahamas" with more than 40 percent of homes and dwellings rented. "Over the last decade the number of new mortgages has been declining sharply and the number of mortgages for duplexes is low," it added.

"Mortgage loans account for almost 50 percent of the total aggregated loan portfolio for the Bahamian banking industry. This is presumably the result of a combination of the high cost of housing and the increasing debt service charges. The standard debt service as a proportion of income is 30 percent to 32 percent.

"Given this analysis, 20 percent of the local [Bahamian] population would be able to service an 'average' mortgage payment from local financial institutions. Due to the average sales price, only approximately 20 percent of the local population would even be able to qualify for an average mortgage loan, which is a very low number by all standards."

The BDB report said land alone represented 30-40 percent of a home's finished cost, adding that the government's contribution of low-priced crown land to "affordable housing" efforts "would contribute significantly to efforts of building a permanent, secure, affordable stock of housing".

It continued: "Current data points show that there are approximately 35,600 rented dwellings in New Providence and Grand Bahama. There are an estimated 30,000 applications requesting the use of Crown Land.

"When doubling the average surface of a plot of land, 20,000 loan applications would consume approximately 2 percent of the island of New Providence. Reduced costs imply an additional 20,000 buyers. The market potential is therefore estimated to be approximately $1bn in serviced lots and $5bn in housing assets.

"The current market is $2.5bn of outstanding mortgage loans granted by the banking industry at the end of 2018. This is a very low number by almost any standard of measure. Based on the reduced acquisition cost, 40 percent of the population would become eligible for an average mortgage loan, double the current rate of 20 percent, resulting in an additional 20,238 owners."

The BDB report added that the bank's involvement in boosting the roll-out of affordable housing for Bahamians would also tie-in with the Government's land reform, National Development Plan and sustainable development goals, which include land reform that results in greater home construction and ownership.