Housing Incentives Needed | Bahamas Real Estate

Housing Incentives Needed

With financial experts searching for ways to recover from last week’s further downgrading of The Bahamas’ credit rating, one answer is right in front of our faces and up and down every block.

Incentives to encourage a flurry of activity in the housing market, both new construction and sales of existing homes, will spur economic growth in a way that no other quick fix with long-term benefits can.

The housing market in western societies is a leading predictor of economic health. Strong sales mean a strong and healthy economy, and when sales fall off, it’s just a matter of time until you see a slide in all aspects of an economy. More than just an economic barometer, housing sales translate into jobs.

Every home that is sold generates three full-time jobs, according to research commissioned by the National Association of  Realtors in the U.S. Here that number would be ever greater. In both places, the spinoffs from home ownership are enormous and create sustainable business activity. It is not just the fees generated by the move itself, but the ongoing expenses the homeowner assumes – lawn and gardening services, painting, perhaps pool or roofing or plumbing, electrical, air-conditioning, furniture, decor, appliance. There are also the benefits to government from stamp tax. On a luxury property sale of $10 million, for example, the government immediately collects $1 million in stamp tax. Incentives move people at every income level. If the stamp tax is reduced to six percent for a specified time, the buyer considering a purchase may be prompted to complete and save a substantial sum when the split the tax with the seller.

When the government offered stamp tax exemptions for first-time homebuyers, we saw a tremendous response. The when the first $250,00 of a purchase was exempted from real property tax and stamp tax, it was another incentive. And when the interest on outstanding balances of real property tax forgiveness was announced, that drove hundreds to bring their past-due bills up to date.

Incentives work, and there has never been a better or more important time to introduce them to spur the housing market, which in turn will show diversification of the economy leading to a strengthening of our credit rating.

Real estate should be recognized as the third pillar of the Bahamian economy, tying activity in the market to the new construction, remodels, expansion and more.

If anyone doubts how critical home ownership is to a healthy economy, look at what happens when sales slump. When the housing market collapsed in 2008, it took the rest of the economy down with it, and we are still feeling the repercussions, though I believe the economy is beginning its slow climb back up for the middle to upper-middle class family, who was so hard hit by the economic freefall.

I encourage the government to appoint an ad hoc advisory committee comprised of real estate professionals, developers, financial institutions, the Bahamas Chamber of Commerce and a few successful businesspersons to report back in a relatively short period of time with recommendations for jumpstarting housing sales across the board. I want to see the day when every Bahamian youngster coming out of school believes that here or she will own a home and that can be their reality. Home ownership is the single fastest route to economic prosperity and it is one step we can take without damaging the environment or causing long-term negative impacts. It’s time to explore the options.