Slow condo sales spark stand-off
Realtors and government remain at loggerheads in a seven-year battle after what industry believed was unintended consequences from 2015 changes that removed the ability for work permit holders to buy condominiums outside of hotel/tourism developments.
But government officials counter that additional legislative changes in the same section of the amendment to the Immigration and Protection Act, leave the door open for more condo purchases by permanent residence certificate holders.
At the centre of the controversy are the sluggish sales of condominiums.
Condos were first built in Bermuda in the last century as an answer to a housing shortage and as an investment opportunity for Bermudians.
Realtors and government both agree that the market has long faced very low sales turnover and realtors have cited steep price drops of as much as 30 to 35 per cent since the 2008 global market crash.
It also seems clear that what industry believes are the unintended consequences in the restrictions on condo purchases are actually exactly what the government was seeking.
The government view is that intentional restriction on non-Bermudian purchase of condo allows more young Bermudians an opportunity to buy their first home.
Today, the only way non-Bermudians can buy a condo is with a PRC or a residential certificate.
The policy has not come without its complications, as outlined by Penny MacIntyre, real estate chair of the Chamber of Commerce.
She said: “In 2015, Government’s change removed the ability for work permit holders to buy condominiums outside of (the more expensive) hotel/tourism developments.
“In 2021, international purchasers could only buy condominiums within hotel/tourism developments, unless the buyer already had a Residential Certificate.
“This reduced the buying audience to only Bermudians for any of the non-tourism, private condominium development owners to sell to, going forward.
“Meanwhile, the Economic Investment Certificate, launched at a time when resort condominiums were already in demand, as local and international buyers sought new units during the pandemic. This led to far less sale inventory options for move-in-ready condominiums at resorts.
“By last quarter of 2021, foreign investors / owner-occupiers only had a total of three condominiums to decide from, island-wide.
“Only new developments with any inventory left are St Regis Bermuda and Azura. Those developments’ next inventory in the pipeline are either pre-sold or not available for up to another 18 to 24 months.”
Realtors have had an opportunity to put their case to the authorities in at least a handful of meetings, but the government is resisting any change.
Their view is that with PRCs allowed to buy, the market for condos will eventually be substantially larger.
When approached by The Royal Gazette, a spokesperson from the Ministry of Economy and Labour advised: "In the 21 years under the previous residential certificate policy, which ended in 2019, condominium purchases outside of hotel and tourism accommodations were restricted.
"As it stands now, that law has not changed, and there is no evidence indicating that significant numbers of residential certificate holders purchased condos. (Government figures show only an average of 14 residential certificates even issued over the last 20 years).
"The possibility of the new policy negatively impacting condo sales is negligible.
"Furthermore, the Government met with the Real Estate Division of the Chamber of Commerce and requested further statistical data on this matter. No information to support a need to un-restrict condominium purchases to non-residents has been received.
"On the contrary, the recent law change (November) to allow Long Term Residents to obtain a PRC will vastly increase the pool of individuals with the ability to purchase a condominium in Bermuda (as of March 1, 2022)."
Realtors say the market would benefit if Government reinstated a condo owner’s option to sell their (non-resort) condominium to work permit holders and international purchasers.
Ms MacIntyre said the benefits would include:
1, Introducing much needed move-in ready and renovation condominium inventory opportunities which current and next two years’ pipeline struggles to provide to buyers;
2, Re-opens to a previously successful broader buying audience who continue to be interested in Bermuda and encourages worker permit holders to further invest in an economy where Government is pursuing foreign investors already as it stands;
3, Stimulates more stamp duty for our cash-strapped economy and Government;
4, Potential to drive more business into our local economy for architects, Planning department, general contractors, electricians/plumbers, designers, furniture companies, movers, local hardware stores, lawyers, real estate agencies, etc.;
5, Improves older / dated condominiums, particularly which sellers are less likely to reinvest in when struggling with value depreciation;
6, Helps Bermudians and non-Bermudian owners finally exit an asset they may have had on market for years without previous reasonable interest;
7, Helps stop the haemorrhaging of older, private development condominium sale values.
Ms MacIntyre said: “The Government’s EIC initiative can continue in tandem with these recommended corrections / reintroductions of selling and buying rights and may find more success for Bermuda by offering broader inventory options that the foreign investors find in competitive markets elsewhere easily.”
With the new policy, international buyers are forced to acquire an EIC, and it would then normally take them five years for the next step to acquire the residential certificate needed for purchase rights to a non-hotel condo. That is the pathway, the mandated process.
But a government source said that together with the November provisions, the changes not only broadened the market for real estate sales, but protected Bermudian interests.
He said the November changes provided an opportunity that allows an additional 400 to 500 non-Bermudians eligible for PRC status, some of whom may be interested in a condo.
He said that the EIC creates a pathway for the well-heeled to bring investment here, jump start the economy and in exchange get a residency certificate.
The purported success of the EIC was recently highlighted in a social media campaign, in which the government said that there were 14 EIC’s issued and together with their dependents covered 32 people, injecting $260.6 million into the economy.
It was comprised of about $46 million in real estate and some $209 million in new business.
It also said total investment in the EIC pipeline is around $110 million, adding that present and future investments into Bermuda speak to the high level of confidence that individuals have in the island.
A Ministry of Economy and Labour spokesperson told The Royal Gazette last month that of the $260.6 million under the EIC included certificates issued from March 1, 2021 through February 28, 2022, approximately $30.4 million of investments were made after January 2021, and approximately $230.2 million in investments were made prior to January 2021, including a previously made large business investment.
Further, the government’s position has long been that previous residency certificates sought to attract the globally retired. But there was no way of tracking what substance they brought to the island.
The new policy provides government with a way of tracking and measuring the overall programme success, through the initial $2.5-million-EIC contribution that leads to the residency certificate.