Nick Damianos, Estate Agent
After making slight gains in price levels along with sound and steady gains in volume over the past few years, I think we can say with reasonable confidence, that the worst days of the real estate market in The Bahamas are behind us. The data suggest that the low point in our market was experienced in late 2009/early 2010. Since then we have been on a very slow but steady upswing. The Euro Zone crisis and the re-structuring of various tax regimes have lead many wealthy Europeans to the relatively stable, tax-neutral environment of The Bahamas. These buyers are primarily seeking out single-family homes in gated-communities on New Providence (Nassau). It is important to note however, that these wealthy European buyers are not sweeping in to The Bahamas in a wave of “irrational exuberance” but are trickling in slowly and cautiously, with a keen eye on value pricing. Most home sales are still occurring below replacement costs (land value + construction costs).
The vacation condo market is still extremely fragile, as North Americans are only just now becoming comfortable enough with the world economy to start exploring leisure and retirement properties. Almost all of our sales are cash purchases, subsequently making the buyer pool rather small.
Despite the tepid recovery, real estate in The Bahamas still remains an attractive prospect. In comparison to many competing jurisdictions, The Bahamas offers great value, an enviable lifestyle, a stable and progressive business environment and easy access to the world’s major cities.
Nick Damianos is a savvy and energetic real estate professional who specializes in working with international buyers. A 3rd generation real estate professional, recently earned the 2012 BAHAMAS TOP PRODUCER designation by Damianos Sotheby's International Realty. To date, he has helped countless international buyers and their families relocate to our sunny shores.
Nick Damianos, Estate Agent
Real Estate prices have hit bottom, so what kind of rebound can we expect? The answer: slow and modest. The days of “irrational exuberance” are over, but nonetheless, savvy investors are realizing that now is the time to buy.
The US Market
“The Crash is over,” declares Mark Zandi, Chief economist for Moody’s Analytics Inc, “Home sales and housing starts are now off the bottom.” This is a sentiment echoed by various market experts and evidenced by recent studies and data.
According to The Economist magazine, “On fundamentals, America’s housing market looks increasingly healthy. Inventory levels and vacancy rates are way down and rents are up … home sales and construction rose substantially in early 2012 from the prior year.” Bolstering this claim is a study performed by RE/Max LLC of 53 metropolitan areas in the US, which showed 9 straight months of sales volume increases.
The steady increases in volume can be explained by the fact that the US market experienced an extreme over-correction in prices. Even as values have climbed in many areas since 2008, “Homes in many cities are (still) substantially undervalued as measured by affordability,” says David Stiff, chief economist at Fiserv Case-Shiller. (“Affordability” is measured by the ratio of median home price to median family income.) Mr. Stiff adds that this “can lead to double digit bounces in prices – say a jump of 10 – 15% in the year following the trough.” However, while such a bounce-back often occurs after a typical slump, this Great Recession is anything but typical. Although many analysts agree that prices have hit bottom, they also agree that home prices will not experience a significant jump any time soon. Rather, prices will climb slowly at very modest increments.
The Bahamian Market
Historically, the Bahamian economy and real estate market have lagged behind the US by about 6 to 12 months. However, as it relates to the housing rebound, we have been ahead of our neighbors to the north. While prices still have not rebounded to pre-recession levels, we have seen an increase in volume over the past year.
Much of our volume increase has been due to the economic turmoil and uncertainty in the Eurozone. Many wealthy Europeans have sought shelter in the stability of the Bahamas and our tax-neutral laws. In 2012 we have seen an increase in the number of French coming to the Bahamas buying real estate and placing their money in our locally-based private banks. However, it’s not just the French, Europeans of all stripes have been choosing the Bahamas and buying high-end properties to establish residency here. By establishing residency in the Bahamas, Europeans are insulating themselves from the inevitable tax hikes needed to fund bailouts and prop up banks in the Eurozone.
Canadian buyers have also been a significant part of the ongoing recovery in the Bahamian real estate market. Like Europeans, Canadians enjoy tax benefits by establishing residency in the Bahamas, but more importantly they have remained bullish on real estate as the Canadian property market has continued to boom while the rest of the world has been suffering. This positive attitude towards real estate, combined with increasing wealth in Canada, the strengthening of the Canadian dollar and the tax benefits of property ownership in the Bahamas, have made the Canadians one of our largest buyer segments.
Finally, it is interesting to note, that the Americans are returning to our market in greater numbers. Wealthy and middle-income Americans are again looking at the Bahamas for investment and vacation property. Now that the US economy has settled a bit, savvy investors see our real estate market as being far more stable than that of the US and view Bahamian real estate as an excellent hedge against the rising inflation in North America.
The Bottom Line
While we feel that prices have finally bottomed out, we do not expect massive price increases in the near future. However, given the current affordability of real estate it is a great time to make a long-term investment. The Economist magazine agrees, stating “On our gauge, prices nationally (in the US) are still 19% below fair value,” causing investors with cash to snap up properties quickly, as they know prices are not likely to get any better.
The key for sellers, is to remember that buyers have a lot of choices and the markets are still a long way off from returning to pre-recession levels, therefore only the accurately and realistically priced properties are going to sell.