BREA lauds govt’s real property tax turnaroundReal estate association notes decision will ‘stave off a negative impact on the second home market’
The Bahamas Real Estate Association (BREA) yesterday praised government’s decision to reverse its amendment to the definition of “owner-occupied” properties, which would have increased property taxes on properties not occupied for at least six months out of the year.
A letter from the Lyford Cay Property Owners Association warned that this change would cause high-net-worth property owners in the exclusive gated community to sell their properties and leave The Bahamas, leading to a shortfall in the $215 million per year gross domestic product (GDP) impact of Lyford Cay residents.
A statement from BREA said the reconsideration of the definition, which would have affected real property tax prices for many second home owners, will now “stave off a negative impact on the second home market and would reaffirm faith in The Bahamas as a stable investment option”.
Chairman of the Lyford Cay Property Owners Association Henry Cabot Lodge lll, who penned the letter to Minister of Finance Peter Turnquest, said this tax burden on those property owners who fall into the parameters of government’s new definition of “owner-occupied” would “lead to unintentional circumstances that would adversely impact property values and every sector of the economy that services Lyford Cay as well as similar communities”.
Government released a statement Tuesday vowing to amend the legislation that changed the definition of “owner-occupied” when Parliament resumes after its summer break. The statement explained that the increased tax on undeveloped property and the imposed value-added tax (VAT) on vacation home rentals will continue to be enforced.
BREA’s statement explained: “With only a small percentage of second homeowners spending that period of time in the country, the outcry from those whose tax bill could have been doubled, tripled or more, was instant. The reclassification from owner-occupied to ‘other property’ came with a significantly higher tax rate and no cap. A tax rate of three quarters of one percent on the first $500,000 with a two percent rate applied to the value above this threshold was set to be imposed on ‘other property’.
“Ex-pat homeowners, many who had maintained homes in The Bahamas for decades, expressed astonishment at the sudden change. In the case of property valued at $10 million – as many homes in Ocean Club Estates, Lyford Cay, Old Fort Bay and private islands throughout The Bahamas are – real property tax would have gone from $50,000 to nearly $200,000 annually.”
BREA President Christine Wallace-Whitfield said in the statement that the luxury home market is important to the overall economy, as it generates constant income in terms of jobs, maintenance contracts and other related expenses, even when owners are not in the country. Lodge, in his letter to Turnquest, made similar points.
Wallace-Whitfield also noted that high-net-worth individuals have the option to choose second homes in the Caribbean and Florida “where property tax is quite reasonable and foreigners are welcomed with an E-5 Visa that entitles them to residency without intolerable demands”.
“We understand that government did not fully appreciate the backlash that the decision to tie six-month residency to a cap on real estate would have, but in light of the fear of a mass sell-out and departure, they had the courage to reverse their decision,” said Wallace-Whitfield.
“That is never easy for any official to do, elected or otherwise, and so we wanted to express deep appreciation for their willingness to listen to BREA and others. That one move may have just saved hundreds of millions of dollars in real estate value and helped to preserve trust in The Bahamas.”