The Tribune

• Transaction closing time rises four to six-fold

• Property tax, subdivisions are latest hurdles

• Permitted mortgage financing time doubles

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

PROMINENT realtors say “there’s no such thing as ease of doing business in The Bahamas” with the time required to close property deals having increased four to six-fold.

Mike Lightbourn, Coldwell Banker Lightbourn Realty’s principal, told Tribune Business his firm has a two- year old real estate transaction that it is still trying to close with “the whole system slowed down” by issues such as the Department of Inland Revenue (DIR) challenging valuations for VAT and real property tax purposes.

“The biggest problem is the ease of doing business. There’s no such thing in The Bahamas,” he blasted, echo- ing a frequent lament of most in the private sector. “It’s almost impossible to close a real estate transaction in a reasonable period.

“You’re supposed to get a number for each conveyance, and every time you take it to Inland Revenue they’re completely backed up. We have a transaction that’s almost two years old.” Mr Lightbourn said Inland Revenue challenges to agreed sales prices, fearing the transaction has been under-valued for VAT avoidance purposes, frequently delay deal closings. 
With the tax authorities using real property tax valuations to detect suspicious transactions, Mr Lightbourn added: “We’ve got a house listed in the Out Islands at $2m, and Inland Revenue has valued it for property tax at $3.1m. The home is for sale at $2m. It’s not worth more than two years ago, and has been for sale at least a year.

“Why do you have to quibble with that? Things like that slow down the whole system. You find that all over the place. There is no such thing as the ease of doing business.” The Bahamian real estate industry has benefited significantly from the post- COVID boom sparked by pent-up demand and the search by wealthy buyers for more secluded, private locations in stable jurisdictions close to territories such as the US.

However, Mr Lightbourn and others signalled that the economic impact for The Bahamas could have been even greater if real estate transactions were able to be processed and completed faster when it comes to the processing of conveyancing documents, tax payments, approvals and other requirements those needing mortgage financing must meet. Delays also hold hit the Government’s revenues and cash flow.

David Morley, Morley Realty’s principal, told Tribune Business that there is now “more time and delay” involved in closing Bahamas-based real estate transactions as buyers and intermediaries have “a couple more hoops to jump through”.

Comparing present deal closing times to when he started in the real estate industry, he added that these had increased from 30 days to “four to six months down the road if you are lucky” due to the sheer number of “boxes that have to be ticked”.

“Doing real estate in this country, whether you are a Bahamian or a foreigner, buying is a challenge,” Mr Morley said. “Look at what you have to do under real property tax. On the conveyance, the Government requires that you put a real property tax assessment number on it.

“You need to get a tax certificate, make sure your property is on the tax and is paid up to-date. I know it is helping them to collect arrears, but this is one of two extra steps on real estate transactions. The other big challenge is bigger one. It goes back to the Planning and Subdivision Act and a Privy Council ruling.

“You have to make sure the property being purchased is part of an approved subdivision or approved for severance. That becomes a nuisance

especially if the buyer is securing financing from a bank because it means the attorney has to write to the Department of Physical Planning seeking confirmation that it’s an approved subdivision,” Mr Morley explained.

“In the circumstances, the turnaround time is not always quick. Buyers requiring mortgages have to tick a lot of boxes, and for some of the banks it is mandatory to determine if the property is in an approved subdivision or has been approved for severance. If the attorney doesn’t provide evidence of that, the bank doesn’t provide the money.”

To ease the burden associated with this, Morley Realty’s principal added: “There should be some- where in government that provides a list of approved subdivisions so attorneys can go online and search and approve it themselves.”

Whereas real estate deals previously proceeded more

rapidly, once attorneys had convinced themselves title was good and marketable and there were no liens on the subject property, Mr Morley said the Know Your Customer (KYC) requirements of the country’s anti-money laundering regime represent a further imposition in addition to the real property tax and subdivision hurdles.

“The client has to be onboarded first before you do the transaction, and with KYC it can take two to three weeks for them to get the stuff. Then you throw in the Planning and Subdivision stuff and, on top of that, you have the real property tax stuff. It’s adding more time and delay for getting real estate transactions completed and closed,” he told Tribune Business.

“I remember when I started out that most attorneys’ closing dates was in 30 days. Now you’re lucky if it’s four to six months down the road. Anyone seeking

financing, the agreement was previously made subject to the buyer getting financing in 21 days. Now the bank is suggesting a minimum of 45 days.

“It’s not as easy conveyancing property in this day and age. It’s a lot more patience, and you have a couple more hoops to jump through, but it keeps moving forward. If they [the Government] can just figure out ways to improve the system. No one’s asking them to do away with the system. We’re asking them to improve it, and with today’s technology there’s got to be something they can do.”

Despite the struggles, the two realtors anticipate another strong year Bahamian real estate. “I think it will be another good year. It won’t be as good as the last two years; there was pent- up demand and it’s slowly decreasing,” Mr Lightbourn said.

“For a Bahamian to buy it’s always a problem

because of the financing. You can hardly blame the lending institution. They want a loan that comes to fruition and so many of them don’t. I still think it will be a good year; just a little down on 2023.”

Mr Morley added: “I believe the real estate market is going to be good. And, when I say good, 2023 or slightly better. I think 2024 is going to be a good year. It’s one in which I think you cannot sit back and wait for things to happen.

“If you look at the US, they’re in the process of hopefully beginning to reduce their interest rates. That frees up people’s cash flow a bit more to invest in second homes in The Bahamas. There’s a lot of indicators that there’s no reason to see downturns in the market. You might see a continuation of 2023, which was a good year for us.”