By NEIL HARTNELL
Tribune Business Editor
A Bahamian developer is urging the Government not to suddenly “destabilise” the real estate market through plans to change the permanent residency threshold, expressing concern for his $60-$70 million in active sales.
Jason Kinsale told Tribune Business that changing this policy now would have “a huge mid-flight impact” on his ongoing developments at ONE Cable Beach and Thirty|Six on Paradise Island, both of which are targeted at the market segment that will be most affected.
Looking beyond his own situation, Mr Kinsale said the Government’s plans to increase the real estate investment threshold for accelerated permanent residency consideration to $1 million would impact other developments already underway, and, potentially, the entire market.
He estimated that the “residency market” currently accounted for 50 per cent of the Bahamas’ real estate sales and, given this nation’s fragile economy, it could not afford to “create any more ripples in the water right now”.
Calling on the Government to leave the threshold at the existing $500,000, Mr Kinsale said that should it decide to press forward with change, a sudden ‘without warning’ implementation needed to be avoided at all costs.
He called for the Government to give a year’s warning before making any change, and for existing developments already underway to be ‘grandfathered in’, so that their multi-million dollar investments were not jeopardised.
“The market between $500,000 and $1 million, for me, is the strongest market,” Mr Kinsale told Tribune Business, explaining that it was a key sales driver for his two ongoing projects plus the Balmoral.
“I’ve invested significant amounts of money to target this market, and to change mid-flight would have a huge impact on our business.”
Hope Strachan, minister of financial services, last month announced that the Government planned to ‘increase’ the permanent residency investment threshold from $500,000 to $1 million.
She told a Higgs & Johnson seminar that Cabinet had given permission to double the threshold from its current $500,000, saying: “This threshold is no longer achieving the intended objective, which is to attract high net worth individuals to our country and to support the real estate market in a tangible way, while maintaining the integrity and profile of the Bahamas as a premier financial centre.”
Developers and realtors, though, are especially concerned with both the potential change and how it is implemented, given the importance of the second home market to their industries and the wider Bahamian economy.
With the Bahamian segment relatively flat, the second home sector has been one that realtors have been able to rely on to generate sales momentum over the past few years.
With 80 per cent of real estate sales inventory priced below $1 million, they fear that any change - especially one that might be perceived negatively by foreign buyers - could drive a significant chunk of the market to other jurisdictions.
And a ‘drying up’ of such buyers would produce wider ‘ripple effects’ in the Bahamian economy, drying up work for the construction industry and a variety of other trades whose business is tied to the real estate and second home markets.
Mr Kinsale said the proposed increase to $1 million “really makes no sense”, and added: “The reality is that we have a lot of competition internationally, and the residency market is a big driver of our business right now.
“Why should we deter one person from buying here?... The other thing is: What do we really have to offer at $1 million. If you have a budget of $1 million, there’s a very limited supply of available product. A lot of people don’t want to spend $3 million for a place they will not use for more than a few weeks a year.”
Mr Kinsale added that foreign investors who were new to the Bahamas may not want to make a $1 million-plus investment initially, but may do so later on when their confidence and familiarity with the jurisdiction increased.
The ‘$1 million threshold’ might deter this market complete, he implied, and said there was not enough demand at the $500,000 price point to justify the Government’s planned change.
“We’re 60 per cent sold on ONE Cable Beach and 40 per cent at Thirty|Six,” Mr Kinsale said of his ongoing projects, both of which have significant inventory priced between $500,000 and $1 million.
“That means I still have $60-$70 million of real estate I have to sell. To drop this on me half-way through this process puts at risk this large investment I’ve made, and other developers depend on this as well.”
Mr Kinsale said something similar had happened to him when developing Balmoral, as he recalled how the Government changed the Stamp Duty exemption for first-time buyers from $250,000 to $500,000.
“We see a lot of the business coming from permanent residents. We need to attract more people to this country and see a measurable demand for real estate, but I don’t believe that’s there. The statistics aren’t saying that. Our restaurants aren’t full, so that tells me we don’t have enough visitors.”
Mr Kinsale told Tribune Business that the real estate market, especially for foreign buyers, relied on predictability, continuity and consistency - not sudden changes in government policy.
“The reality is we cannot afford to destabilise the residency market,” he added. “I would say it’s approximately 50 per cent of our business.
“I was considering other projects, but now I will have to sit down and work out markets I have to sell to if I don’t have the residency market, otherwise it becomes too risky.
“We have to make things easier for people to come here; we can’t make it more difficult,” Mr Kinsale continued.
“We have to stop believing we’re so special and market harder, as we’re being beaten by other jurisdictions.”
He explained that the Bahamas was not just competing with other Caribbean nations, but the likes of Spain, Portugal, the US and Canada, all of which had lifestyle and tax advantages to offer foreign purchasers.
Mr Kinsale added that foreign buyers, such as those who had already purchased in his developments, were sophisticated investors likely to warn their friends about coming to the Bahamas should any negative policy changes occur.
“I think we need everything in our quiver to be successful,” Mr Kinsale told Tribune Business. “We cannot change these policies midway through projects without any advance warning. We cannot afford to make ourselves look unstable. We cannot afford any more ripples in the water right now.”
Calling for the threshold to remain at $500,000, Mr Kinsale said an increase to $750,000 might eventually be achievable, if it was handled in the correct manner.
“There has to be a notice period and grandfathering period,” he added, “lasting at least one year. One thing that might work is to say we’re increasing the residency one year from now, and let everyone know.
“We need some stability. We can’t handle anything else; the economy is too fragile.”