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Commercial property sales highest since 2007 - An excerpt from The Royal Gazette

Published on 28th February 2016

Published January 29, 2016

Commercial properties sold at their fastest rate in eight years in 2015, according to industry experts.

And the sale of luxury residential properties also had “a significant resurgence” over the previous year, with 12 properties sold, double the number recorded for 2014.

A total of 19 commercial properties sold — a number that would have taken three years to achieve post-2008.

The average price paid at the top end of the residential real estate market went up nine per cent to $6.2 million compared to $5.7 million the year before.

Bermudian buyers have accounted for about half of the total number of luxury homes sold over the past eight years.

The news came in the review of the year compiled by Rego Sotheby’s International Realty.

Penny MacIntyre, partner in Rego Sotheby’s, said that the boost in the commercial sector came from a mix of business owners opting to buy rather than rent, new firms setting up and retailers gearing up for an expected America’s Cup sales boom.

Ms MacIntyre said: “We’ve seen people who are partners in a business or working for a certain practice, a doctors’ office or dentists’ office, where the principal owner is retiring and selling their practices or renting and taking the opportunity to own.”

She added: “Overall, commercial inventory in the central business district of Hamilton has reduced with more start-up businesses from law firms, both locally and internationally establishing presence in Bermuda, to retailers seeking to capitalise on consumer confidence with America’s Cup 2017 drawing more first-time visitors.”

But there was a “significant drop” in the average sold price for commercial properties from 2014’s $2.4 million to $1.14 million last year.

Ms MacIntyre said, however, the fall was “not a statistic that defines values and trends since a single high or low sold price in the generally low volume of commercial sales in Bermuda will easily cause the average price to fluctuate”.

And the Rego Sotheby’s report added that nearly all the commercial properties sold required upgrading and modernisation — likely to fuel an increase in business for the construction industry.

The firm said that both dollar volume and transaction volume had increased for the third year in a row after the 2008 recession hit sales on the island hard, with the market bottoming out four years ago.

Ms MacIntyre said: “Since then, we expect the real estate industry Island-wide to achieve a 30 per cent increase in dollar volume and approximately 25 per cent increase in transaction volume once all sales are officially recorded for 2015.”

Rego Sotheby’s said, however, that condominium sales continued to struggle, especially those with an annual rental value (ARV) of less than $32,000, although those rated above that figure had “shown some resilience” with 84 per cent of sales being to Bermudians, up from 62 per cent in 2014.

The average price for condominiums sold was $850,000, a 13 per cent decline over the figures for the previous year.

Overall, the number of houses sold is expected to be the same as 2014, with an average pricetag of $1.2 million, also in line with 2014.

Around 70 per cent of the homes sold across the industry went for less than $1.5 million.

Ms MacIntyre said that, although the figures remained much the same over the two years, it was a signal that the market was recovering.

She explained: “We look at it as a positive indication that we’re retaining value — we’re not seeing fluctuations in figures that are causing us concern.”

She added: “We’re pleased with how the luxury sector has shown more signs of life. We have people coming to Bermuda, looking around and evaluating the benefits.”

The Rego Sotheby’s review added that a recovery in the hotel market was also evident, with new developments slated or ready to begin construction.

The report said: “We continue to garner development and redevelopment interest from local and international prospective developers and hotel operators.

“This year will have added momentum as we prepare to launch Bermuda’s newest condominium hotel and villa residences at the former Pink Beach Club property.”

Buddy Rego, president of Rego Sotheby’s, said: “No one has a crystal ball, but for the first time in a long time, three years consecutively, we have seen more activity and stronger pricing.

“What 2016 will hold remains to be seen, but people are probably cautiously optimistic.

“With the America’s Cup and if interest rates stay low and consumer confidence stays high, or at least on the same plane it is now, we hope again for modest increases.”

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