By NEIL HARTNELL
Tribune Business Editor
The Bahamian real estate market “shrinks drastically” beyond the $450,000 price point because too many purchasers are being priced out, a local developer has warned.
Jason Kinsale, president of Aristo Development, told Tribune Business in a recent interview that The Bahamas currently has a “two-speed” market where the foreign segment is strong but the local element “still struggling”.
The developer, who has spearheaded the development of projects such as the Balmoral Club, ONE Cable Beach and THIRTY-SIX on Paradise Island, said Bahamians were increasingly unable to afford middle to upper middle class price points due to a combination of insufficient income and bank reluctance to advance mortgages.
Suggesting that single parent homes were “probably 50 percent of the demographic”, and with construction costs continuing to increase, Mr Kinsale said Bahamians households needed to be earning around $100,000 per year - some $7,000-$8,000 per month - to comfortably service the $3,000 and higher monthly mortgage payments at such price points.
“I think to be quite honest with you the Bahamian market is still struggling,” he told this newspaper. “Any time you see prices over $450,000 you’re seeing resistance. The foreign market is strong, but I don’t see the Bahamian market really recovering.
“I think Bahamians are nervous, and we’re still seeing some downsizing continue in the banking industry. You’re trying to find the persons that can afford real estate. The single person with a child can’t afford it, and that’s probably 50 percent of the demographic unfortunately.”
Mr Kinsale added that he did not “really have the answer”, but with construction costs continuing to rise suggested that the Government may have to explore more tax breaks and concessions to incentivise Bahamians and make the burden of real estate ownership a little easier.
“It’s just not there right now,” he added. “They just need to do something. It’s the ability to qualify and afford a home over $450,000. The market shrinks drastically over $450,000. Who can afford something over that price? The mortgage is $3,000 a month, so you need to be earning $7,000-$8,000 a month and $100,000 a year. It starts getting tight for sure.
“I also think you’re going to see prices increase in The Bahamas. Construction has gotten expensive in The Bahamas. A lot of new developments in The Bahamas are at the $900 per square foot price point and up. The market in the US is quite buoyant, so construction materials in North America have increased. That seems to be the trend right now.”
While “bad” commercial bank loans dropped to under $800m at end-January 2019, falling to their “lowest levels for ten years”, the industry remains skittish about mortgage lending given how badly it has been stung in the decade since the 2008-2009 recession. Only the most qualified borrowers, able to put down 20-30 percent equity upfront, are being considered.
Many salaries and incomes also have yet to fully recover despite recent signs of a Bahamian economic rebound, with existing personal and household debt levels often cited as a key factor for why Bahamian commercial banks are rejecting up to 50 percent of mortgage applicants.
Mr Kinsale said his latest project, the 16-unit Baron Place located just south of Super Value’s Cable Beach store, is priced at $389,000 per property in a deliberate bid to “get it to a Bahamian market” by keeping costs below $450,000. He added that 10 of the units had been sold within two months of going to market.
The Aristo chief, meanwhile, said few units were left at his ONE Cable Beach and THIRTY-SIX projects, both of which have been targeted at an international buyer clientele as opposed to the domestic market.
“At ONE Cable Beach we’re 98 percent sold out,” he told Tribune Business. “We’re in great shape there. We only have two units left out of 73. At THIRTY-SIX people are moving in now. We have nine units out of 36 remaining there.
“Overall we’re doing quite well. We’re seeing buyers from Canada, Europe, America. There’s still a lot of demand for residency. That seems to be high on everybody’s priority list. The reality is you can’t get it for under $750,000, but that hasn’t created any issues for us.”
Mr Kinsale said duplex lots priced at $250,00 are still available at his original development, Balmoral. “We’re almost done there,” he added. “It’s nice to get out of those projects. In real estate you have to start, finish and get out. If it takes too long you never benefit. That’s the nature of the beast.
“We have a product we can be proud of. We were lucky we were able to get higher prices; between $900 to $1,300 a square foot at ONE Cable Beach, and I think we’re about $850 a square foot at THIRTY-SIX. We’re not on the beach there.”
Moving forward, Mr Kinsale said: “My biggest concern is we’re getting into a shortage of buildable, available land. I think that’s one of the concerns we have. When you look closely there are not a lot of properties you can build on that are viable - not in ideal locations. That’s my concern: How do you build the GDP of the country if you do not have land to build on?”