House sales to foreigners forecast to drop
Figures that showed fees from the sale of property to non-Bermudians were likely to be at least $4.5 million less than predicted has sparked questions from the Opposition leader.
Craig Cannonier said that Walton Brown, the former home affairs minister now responsible for the Cabinet Office, “took his hand off the steering wheel” when he was in charge of the immigration department.
Revised revenues from land acquisition fees for 2018-19 were $2.414 million, according to the Government's Budget book, but the original estimate for the fiscal year was $7 million.
The goal set for 2019-20 was $5.5 million, said to be a reasonable target by Wayne Caines, the Minister of National Security, who took over the area after a Cabinet reshuffle in November.
Mr Cannonier claimed: “Anyone residing over this kind of crash in the private sector, having forecast $7 million and only brought in $2.4 million, is fired. Not transferred, fired.
“That's $4.5 million gone, where is it? Something's wrong.”
He asked about the figures during a Budget debate in the House of Assembly last week, when Mr Caines said the revenue target for the upcoming fiscal year was adjusted in line with the “softness” of the market.
Mr Caines said the estimate for 2019-20 was $5.5 million, “which is within the range of a reasonable estimate”.
He told MPs the revenue was made up of an initial $1,625 application fee and landholding charges that varied depending on the purchaser and property type, which was paid after the licence was approved.
Mr Caines said these could be split across fiscal periods due to processing times and suggested it could take about 60 days to complete the procedure, but that he was looking at ways to cut that.
Mr Caines admitted: “Sometimes it's simply a backlog.”
Mr Cannonier told The Royal Gazette: “That goes back to the former minister who took his hand off the steering wheel.”
He added: “How does that happen, that we only gleaned a third of what we expected to bring in?
“Revenue is one of those things that you can pretty much forecast, it's a constant.”
Mr Cannonier said: “That's not a soft market, that's a market that has crashed.”
The original estimates for the category ranged from $6 million to $11.3 million over the fiscal years 2012-13 to 2017-18 according to earlier Budget books and actual revenues have been between about $4.9 million and $6.9 million.
Sharon Cranfield, cochairwoman of the Bermuda Chamber of Commerce real estate division, explained yesterday that land acquisition, or alien land licence, fees for non-Bermudians were 8 per cent of the purchase price of a house and 6 per cent for a condominium and the fee for Permanent Resident's Certificate holders was 4 per cent.
The condominium fee is 6.5 per cent if the property is in a designated tourist resort.
Ms Cranfield added: “The current alien licences fees were extended by two further years to March 31, 2020 in the recent Budget to encourage investment by overseas purchasers.”
She explained that several factors could contribute to changes in non-Bermudian sales, such as a greater population of Bermudian-born residents who have found prices now within their reach.
Ms Cranfield said: “We have seen a fair number of people who were PRCs get Bermuda status and purchase. This is welcomed by both Bermudian sellers and the market in general.
“We, the real estate division of the Bermuda Chamber of Commerce, believe that revenue could be improved and sales of condos would increase if the Bermuda Government opened up the sale of condominiums on island to non-Bermudians with work permits.”
Karin Sinclair, of Sinclair Realty, an affiliate of Christie's International Real Estate, said eight non-Bermudian house sales were completed in 2018, which was “the upper end of average”.
She said a further three purchases were still going through the immigration process by the end of the year but had closed or would close in 2019.
Ms Sinclair explained: “But 2018 was very unusual in that the highest non-Bermudian sale was only $8 million.
“An unknowledgeable observer might jump to the conclusion that values are dropping, but actually that's a totally false impression.
“The truth is that 2018 was a year of caution for higher-end non-Bermudian buyers, reflecting not only what was happening in New York City and London, Bermuda's two main feeder markets for international purchasers of luxury homes — but also the very real global challenges faced by most countries.”
The Government's communications department was contacted for comment.