Lending institutions released close to $25 million into the economy for new home construction and repairs during the second quarter of the year, the Central Bank revealed.
It’s a more than 66 percent increase in total mortgage disbursements compared to the same period last time and reflects the continued strength of the construction sector which has been buoyed primarily by small to medium scale foreign investment projects.
“In domestic financing developments, total mortgage disbursements for new construction and repairs—as reported by banks, insurance companies and the Bahamas Mortgage Corporation – grew by 66.6 percent ($9.8 million) to $24.6 million, a reversal from a $12.5 million decline in prior year,” the Central Bank said.
“Underlying this outturn, residential mortgage disbursements expanded by 68.6 percent ($9.9 million) to $24.2 million, a turnaround from a 45.2 percent reduction last year. Conversely, the commercial financing segment remained weak, decreasing by 8.5 percent to a constrained $0.3 million, albeit markedly lower than the 63.5 percent contraction in 2020.”
The Central Bank uses mortgage commitments for new buildings and repairs as a forward-looking indicator of domestic activity.
During the second quarter commitments grew by eight to 86 for the three month period ending June 30.
The value of those mortgage commitments also increased by 20.1 percent to $16.1 million.
“An analysis by loan category revealed that commitments in the heavy weighted residential sector rose by 12 to 85, while the relevant value advanced by 35.4 percent to $15.8 million. In an offset, commercial approvals decreased by four to one, with the associated value contracting by 80.5 percent to $0.3 million,” the Central Bank said.
“In terms of financing rates, average interest rate for commercial mortgages firmed by 1.4 percentage points to 7.74 percent, while the average rate for residential mortgages stabilized at 6.45 percent.”
Unlike other sectors of the economy, the construction industry has been booming over the duration of the COVID-19 pandemic fueled largely by foreign direct investment and second home building projects.
Last month former president of the Bahamian Contractors Association, Leonard Sands, said he believed the construction sector was 80 percent responsible for keeping the economy from collapse over the course of the past year and a half as continued rebuilding efforts on Abaco and Grand Bahama as well as FDI projects built steam.
This growth in construction comes despite a global supply chain shortage in raw building materials like lumber and steel which has driven up the cost of building.
A recent Oxford Economics study revealed that it won’t be until well into 2022 that the cost of building materials reduces and become more readily available.