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Land fees delayed to spur property sales

The Island is seeing growth in property sales to non-Bermudians, but realtors have warned the Bermuda Government to defer a hike in property fees, citing $124.5 million in land transactions that are “in train” at present.

The growth in purchases from international buyers and Permanent Resident's Certificate (PRC) holders was confirmed by Rego Sotheby's International Realty.

Executive vice president Penny MacIntyre told The Royal Gazette that agents were “absolutely experiencing an uptick in business this year”.

“International buyers largely recognise there are current buying opportunities that make Bermuda real estate valuable in the long term,” she added.

The figure of $124.5 million was given in the House of Assembly on Monday by Bob Richards, the Minister of Finance, as he tabled the Bermuda Immigration and Protection (Land-Holding Charges) Regulations Amendment 2015.

That legislation is set to go to the Senate for approval next Monday, brought by Senator Michael Fahy, the Minister of Home Affairs.

The amendments follow the Bermuda Immigration and Protection Amendment Act 2015, which was tabled in the Senate in March by Sen Fahy. The Act, which aimed to boost stagnant property sales by relaxing some of the rules for sales to PRCs and non-Bermudians, proved controversial, prompting a march on Cabinet in which protesters came into the Senate Chamber. Marchers viewed the legislation as catering to foreigners while not enough was done to help struggling Bermudian families — but Sen Fahy insisted the measures were strictly aimed at improving the Island's economy.

Those sentiments were echoed this week, as Mr Richards said the moves had been designed to “stop the bleeding of property values, spur growth in the property market and help create jobs for Bermudians”.

However, Mr Richards said, industry representatives had subsequently approached the Government, urging for a scheduled increase in land fees to be delayed as it had the potential to “derail activity”.

As a result, the latest amendments seek to delay a proposed increase in land holding charges by a further 18 months, so that they come into effect on March 31, 2017, instead of on September 30, 2015.

Responding in the House for the Opposition, David Burt, Shadow Minister of Finance, said the first round of legislation appeared to have been ineffectual thus far. The new amendments, which were brought before MPs at 2.15am near the close of business, were not strongly opposed by the Progressive Labour Party.

The legislation targets property fees, which are set to increase automatically to between 6 per cent and 12.5 per cent of the value of the land.

These cover charges must be paid by applicants before the minister will issue a land licence for a non-Bermudian to own property.

The increases are as follows:

• For permanent residents: 4 per cent of the value of the land, to rise to 6%.

• For other non-Bermudians: purchasing a residential unit, 8 per cent of the value of the land, to rise to 12.5 per cent; purchasing a condo, 6 per cent of the value of the land, to rise to 8 per cent.

Commenting yesterday, Sen Fahy said that there would continue to be no landholding charge payable for land purchased by the spouse, child or parent of a Bermudian.

“In addition, the landholding charges for tourist accommodations and hotel residences will remain unchanged by these regulations,” Sen Fahy added.

“It should be noted that since the passage of the Landholding Amendments in March 25, 2014, there have been strong signals of activity in the real estate market. This demonstrates that the Government of Bermuda is on the right track.”

However, Ms MacIntyre said the changes in fees ran the risk of sending the wrong message to prospective buyers.

“All this talk of whether to raise the licence fees or not this year should not be the conversation taking place,” she said.

“These potential fluctuations make an international buyer see Bermuda as inconsistent and irrational. Who wants to buy somewhere they feel rushed to make a decision because of a potential looming licence fee hike?”

She added: “Then there is the exit risk for any seller who can't sell their property in a world-class market against other islands that do not have these random licence fee changes.

“We strongly recommend Bermuda focus on simply setting the licence fee, then monitoring the effectiveness of the fee rate and adjust with a year advance notice, if market conditions warrant the change.

“After all, that is the intention of the licence fee reset in the first place: to stimulate our economy in a competitive global market, and balance the interests of protecting land for Bermudians if international buyers flood our country. This would be a welcomed problem to solve.”

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Published August 20, 2015 at 11:12 am (Updated August 21, 2015 at 2:44 am)

Land fees delayed to spur property sales

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