The Bermuda Government intends to lower the threshold for properties that can be purchased by non-Bermudians and non-permanent residents.
However, senator Michael Fahy, the Minister of Home Affairs, said the move would maintain the number of properties available to such individuals rather than increase it, citing falling ARVs across the island.
Until now only homes with an annual rental value of more than $153,000 had been available for purchase by such individuals but Mr Fahy said that limit would be lowered to $126,000. Meanwhile, the minimum ARV threshold for condos will be reduced from $32,400 to $25,800.
He said yesterday that regulations already in place to protect land for Bermudians — such as a limit to the total acreage that can be held by restricted persons and anti-fronting provisions — would remain unchanged.
“The motivating factor behind this decision is the reduction of the value of the property sector in recent years and the corresponding reduction of ARVs across the board in Bermuda,” he said.
“This reduction came about during the preparation of the 2015 draft valuation list, which reflects an analysis of rental information across Bermuda.
“The draft list confirms the widely held opinion of many in the property sector, and in the community, that rental values in the open market generally have fallen between the valuation date of December 31, 2009, for the previous 2009 valuation list and July 1, 2014, which is the valuation date for the valuation units in the current 2015 draft valuation list.
“Now that the Department of Land Valuation has finalised the new valuation list, which takes effect retroactively from January 1, 2016, the new list has lowered ARVs, which will require an adjustment to the ARV threshold for residential property for restricted persons.”
A total of 462 properties and 425 condos are purchasable by restricted persons based on the threshold, but Mr Fahy explained that 198 valuation units and 61 condos would fall below the threshold without the reduction.
Penny MacIntyre, partner at Rego Sotheby’s International Realty, described the reduction as a “reasonable adjustment”.
“The ARV thresholds need to correspond with the lower property values which Bermuda has experienced for almost seven plus years,” she said.
“This adjustment isn’t aimed at putting more properties on market but simply putting back the ones previously available to international buyers over the last few years that fell out of being internationally available when ARVs were reassessed to reflect lower property values.
“Bermudian buyers who were buying internationally available properties here walked away from their deals earlier this year when the property they were buying fell out of being internationally available. No one — Bermudian or non-Bermudian — will buy anything if they see one minute a house is available to the world of prospective buyers then the next it isn’t. Because when it isn’t, the value is far less and takes longer to sell.
“The adjustment shows Bermuda understands the need to be consistent and improve buyer confidence in real estate here.
“Holding values steady and restimulating the real estate market with international buyers is not just great for sellers and buyers but necessary for Bermuda’s future unless someone here has figured a way to make money grow on trees.”
Mr Fahy said the move was intended to help the local real estate market, adding: “Liberalising real estate for PRCs and other non-Bermudians can be a sensitive topic for some Bermudians.
“But let me stress that our motivation in bringing this legislation forward is to stimulate a waning real estate market.
“Many of us know at least one property that remains empty. Some of us may even be in the unfortunate position of being unable to sell such property. It is clear to the ministry that it is Bermudians who are primarily hurt by a real estate market that is not as robust as it can be.”
In addition to directly boosting the real estate market, Mr Fahy said the move was hoped to help the wider economy.
“Based on detailed submissions received by industry stakeholders, I can report that when high-net-worth non-Bermudian purchasers acquire property in Bermuda, they almost always then expend considerable funds in the renovation of the property in order to have it suit their requirements,” he said.
“In certain cases, the renovation costs have almost matched or exceeded the initial purchase price itself.
“This contributes to an economic multiplier effect and feeds back into our economy through increased Government revenue by way of import duties and payroll tax on construction, landscaping and housekeeping workers.
“All of this is in aid of the Government’s efforts to foster job creation. This is, and will continue to be, the singular focus of this Government.”
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