Make the leap. Bahamas realtors say it's a good time to buy Bahamas real estate.
WHAT-TO-DO - NASSAU, CABLE BEACH & PARADISE ISLAND - JAN 2003 EDITION
Is this a good time to buy a home or invest in property in The Bahamas? Not surprisingly, top real estate agents respond with an immediate and unequivocal "yes."
"Yes," says John Christie, vice-president of H G Christie Ltd, "because you can pick up some pretty good deals. There are some very motivated sellers!"
"Yes," says George Damianos, president of Damianos Realty, because "this is an island - there's never going to be any more land than there is right now and that helps to put a solid foundation under our market."
"Yes," says Mario Carey, a director, appraiser and top-producing agent at Bahamas Realty, because "over time, prices will always rise here. It's a beautiful place to live and real estate investments yield a handsome return."
And "yes," says Gregory Graham of Graham Real Estate, because recent events "have created a great buying opportunity" in The Bahamas for both home buyers and investors.
Drop in prices
Graham says real estate prices dipped about 25 per cent in a four-month period (September 2001 to January 2002) due to world affairs, principally terrorist attacks in the United States on September 11, 2001. Contributing factors included sluggish economies in the United States, Germany and Japan, and a tightening up of the rules of investment in The Bahamas. On top of that, there was a slowdown in tourism.
Bahamian real estate behaved much like the US stock market, says Graham: "prices became inflated and have now settled down to a more realistic level."
Christie agrees: "The US slowdown has definitely affected us, as it has the world. People realize that money has to be earned and they are more sensible with it than before."
As a result of that drop in stock prices, Christie says, "there are now some properties in the luxury areas where the owners might have been financially hurt in world markets and are now strapped for cash. The opportunities are there."
If the recent past was bad for real estate values, the future was uncertain at press time, according to Damianos. "We won't know how real estate prices will fare until the US economic picture becomes clearer," he says.
There is usually a lag before a US recession shows up in The Bahamas, and also before its effects begin to ebb away."
Despite the negatives, Damianos concurs that there are attractive deals in The Bahamas, not only at the very top end, but also in homes in gated communities. Many of these properties offer an upscale lifestyle featuring marinas, pools, clubhouses and tennis courts.
Carey agrees that the residential market has softened considerably but that prices are not falling precipitously and that exceptional deals can be found.
"An investor can still make up to 20 per cent a year on certain properties here," he says.
Why The Bahamas?
Why are Americans, Asians and Europeans buying homes in The Bahamas today? Some of the reasons are obvious.
First, it's simply a beautiful part of the world in which to live, boasting a sunny tropical climate with mean daily temperatures that range from a low of 70.8 degrees in January to a comfortable 83.2 degrees in July.
Then there are the taxes, or rather the lack of them. There are no taxes on capital gains, wealth, income, sales, or inheritance in The Bahamas.
There's also an investment-friendly government, a stable political structure, and a mature legal and judiciary system based on democratic principles and constitutional rule. Add to that well-established public services, good schools, and medical facilities.
Gregory Graham believes that The Bahamas is the "ideal" place for a second home.
"We've got great infrastructure, especially with a fibre optic network, sensational beaches, golf courses not only in Nassau but Freeport, Eleuthera, Abaco, and perhaps soon in Exuma... one of the clearest ocean environments in the world, a variety of fishing - deep sea, reef and bonefishing - and all this is only 21?2 hours from New York, an hour from Miami, and an eight-hour direct flight from London."
Another not-so-obvious reason: some buyers feel that The Bahamas offers a greater measure of personal safety compared to warm-weather retirement areas in the United States.
Andrea Brownrigg, an agent with Paradise Sales and Rentals, says a couple from Germany recently turned down a deal in Florida to buy in The Bahamas.
"After September 11, they decided they did not want to be in Florida. It seemed to them that so many of the hijackers had been doing their training in Florida? well, they just didn't feel comfortable being in the States any more."
Brownrigg says another couple, Americans this time, chose to sell their property in Florida and buy a multi-million-dollar home on Paradise Island.
A home for every purse
You don't have to be wealthy to buy a home in The Bahamas. For a modest amount you can buy a timeshare or even a condo. A town house or villa in a gated community might cost a bit more. Of course there are lots of oceanfront mansions available to those who are truly wealthy.
If you fall into any of these categories, say the agents, you're in luck because - for the time being anyway, and for the first time in many years - it's a buyer's market in The Bahamas.
Deluxe investment properties range from a second home in Lyford Cay, one of the world's most exclusive enclaves, to a beachfront home on Harbour Island or even your own private island in The Bahamas.
"Generally, these properties appreciate approximately 10 per cent per year," says Graham, "far better than most investments." He adds that they have always been considered "a stable and conservative play."
Other top opportunities for the offshore investor include commercial office buildings, hotel projects or condominium developments. Also selling well, says Damianos, are luxurious digs in prestigious gated communities. Examples include Sandyport and Old Fort in Western New Providence.
Agents say condominium developers average about 20 per cent return on investments such as Caves Point and Bayroc, two new luxury oceanfront condominium communities. (See Property in paradise, pg 176.)
In fact, "any real estate investment in The Bahamas is a good investment as long as it suits the investor," says Christie. "Someone who is retired might like a fixed income property. Someone in their prime earning years might prefer a lot that may appreciate four times before they sell it in 20 years. Others will want a second or third vacation home and not worry about the investment side of it. But if they chose right, they will have a good investment as well as a beautiful place to live."
Uncertain rental outlook
Most rental homes and apartments are furnished in The Bahamas. On average, an efficiency apartment in Nassau rents for $500 to $1000; a one bedroom for $500 and up and a two-bedroom from $1,200 to $5,000 a month.
A two-bedroom home may run from $1,200 to $4,000 a month and a three-bedroom detached house or condo rents for $2,500 to $8,000 a month, depending on location.
Rents in The Bahamas remained relatively stable through 2001, although they may come down in the future if vacancies occur as the result of a Tax Information Exchange Agreement (TIEA), signed between the US and The Bahamas on January 25, 2002, says Damianos.
While it is difficult to judge the ultimate impact of this agreement, it was expected to increase tourism, especially the conventions and incentive travel business at major Bahamian hotels, but also cause a flight of investment capital from The Bahamas, thus cutting into the nation's financial services sector.
In turn, this may lead to a reduction in the number of employees in financial services, many of whom rent apartments, condos and other upscale dwellings in New Providence.
It is unclear whether, when, or even if this will occur. The TIEA commits The Bahamas to exchanging tax information on individuals with respect to criminal matters, beginning in January 2004, and with respect to civil matters beginning in January 2006.
Damianos feels the TIEA is unlikely to affect real estate values or sales, one way or the other, although it might affect the owners of rental properties if there is an exodus of financial services workers.
Building your dream home
If you're interested in building, costs for a three-bedroom house start at about $110 per sq ft, or about $165,000 for a 1,500-sq ft home.
However, costs vary greatly according to location, materials, and the builder. In exclusive Lyford Cay, at the west end of New Providence, building costs could range from $250 to $450 per sq ft.
Paul Royall, developer of Royall Beach Estates, feels one of the most important things to consider is the quality of the building materials.
"As a buyer you should look at the quality of the construction. Look for stainless steel hardware and quality aluminum and plastics that won't rust or corrode in the salt air of The Bahamas."
If you are a home buyer or a real-estate investor (or both), The Bahamian government welcomes you into the country with open arms. The International Persons Landholding Act, 1993, makes it legal and easy for non-Bahamians to purchase property and to enter and stay here, and if your home is worth more than $500,000, you receive accelerated consideration for permanent residence status. Certain land purchases require a permit, such as the purchase of more than five acres of undeveloped land.
Buying is a snap
Under this legislation, buying a home in the Bahamas is a relatively simple procedure if you follow a few basic rules.
First, find an agent certified by the Bahamas Real Estate Association to help you. Working with an amateur who doesn't know all the ropes is a good way to get into trouble.
Second, decide how much you are willing to spend: set the lower and upper limits.
Third, say the agents, look at all the properties within your range, even if they do not have all the amenities you want. You may be sold on one but if you look at them all, you may find one you like even better.
The offers and counter offers will be handled by you and your agent. When you and the seller agree on a price, you put down a deposit and sign a sales contract. An attorney will then approve the title.
It doesn't have to be a drawn out affair. Some buyers have taken possession of a Bahamian home in as few as 30 days. The only paperwork involved for non-Bahamians buying a home in The Bahamas is obtaining Central Bank approval.
Hard to flip
Investors can earn great returns on Bahamian real estate, but it is no place to speculate - to turn properties over for a quick gain, says Damianos.
"You can't 'flip' properties in The Bahamas because of the stamp tax," he advises. Stamp tax is paid on the sale of all real property. It's calculated as a percentage of the selling price. For properties up to $20,000 the tax is two per cent. It then rises by multiples of two until it reaches a maximum of 10 per cent on homes worth more than $250,000. Buyer and seller generally split these taxes.
Then there is the real estate agent's commission (paid by the seller), which is six per cent on improved property, and legal fees, which range between 1 1/2 and 2 1/2 per cent, depending on the value of your purchase.
Once you have purchased your dream home, however, property taxes are negligible.
Disclaimer: The information in this article/release was accurate at
press time; however, we suggest you confirm all details and prices
directly with vendors.
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