Estate agents and the government remain at loggerheads in a seven-year battle after what the industry believed were unintended consequences of 2015 changes that removed the ability for work permit holders to buy condominiums outside hotel/tourism developments. (See section Real estate business Page 11).
But government officials counter that additional legislative changes in the same section of the Immigration and Protection Act amendment leave the door open to more condo purchases by certificates of permanent residence holders.
At the center of the controversy, the sluggishness of condominium sales.
Condos were first built in Bermuda in the last century in response to a housing shortage and as an investment opportunity for Bermudians.
Estate agents and the government both agree that the market has long faced very low turnover and estate agents have cited steep price declines of up to 30-35% since the global crash of 2008.
It also seems clear that what the industry believes to be the unintended consequences of restrictions on condo purchases are in fact exactly what the government was looking for.
The government believes that the intentional restriction on condo buying by non-Bermudians is enabling more young Bermudians to buy their first home.
Today, the only way for non-Bermudians to purchase a condo is with a PRC or residential certificate.
The policy did not come without complications, as Penny MacIntyre, chair of real estate for the Chamber of Commerce, pointed out.
She said: “In 2015, the change in government removed the ability for work permit holders to purchase condominiums outside the (most expensive) hotel/tourism developments.
“In 2021, international buyers could only buy condominiums in hotel/tourism developments, unless the buyer already had a residence certificate.
“This has narrowed the buying public to just Bermudians for one of the private non-tourist condominium owners for sale, going forward.
“Meanwhile, the Economic Investment Certificate, launched at a time when resort condominiums were already in demand, as local and international buyers sought new units during the pandemic. This has led to far fewer selling inventory options for move-in ready condominiums in resorts.
“As of the last quarter of 2021, foreign investors/owner-occupiers only had a total of three condominiums to choose from, island-wide.
“The only new developments with remaining inventory are St Regis Bermuda and Azura. The next stocks of these developments in the pipeline are either pre-sold or unavailable for another 18-24 months.”
Estate agents have had the opportunity to present their case to authorities in at least a handful of meetings, but the government is resisting any change.
Their view is that with permission to buy PRCs, the condo market will end up being considerably larger.
When approached by The Royal Gazettea spokesperson for the Ministry of Economy and Labor said: “In the 21 years under the previous residential certificate policy, which ended in 2019, purchases of condominiums outside of hotel and tourist accommodation have been boundaries.
“As it stands, this law has not changed and there is no indication that a significant number of residential certificate holders have purchased condos. (Government figures only show an average of 14 certificates even residential ones issued in the last 20 years).
“The possibility that the new policy will have a negative impact on condo sales is negligible.
“In addition, the government met with the Chamber of Commerce’s Real Estate Division and requested additional statistical data on this issue. No information to support the need not to restrict condominium purchases to non- residents has been received.
“On the contrary, the recent change in law (November) allowing long-term residents to obtain a PRC will significantly increase the number of people able to purchase a condominium in Bermuda (effective March 1, 2022).”
Real estate agents say the market would benefit if the government reinstates a condo owner’s option to sell their condominium (non-resort) to work permit holders and international buyers.
Ms MacIntyre said the benefits would include:
1, Introducing move-in-ready and remodel-ready condominium inventory opportunities that the current and next two-year pipeline struggles to deliver to buyers;
2, reopens to a wider, previously successful buyer audience that continues to be interested in Bermuda and encourages work permit holders to invest more in an economy where the government is already seeking foreign investors in the state ;
3, Stimulates more stamp duty for our cash-strapped economy and government;
4, Potential to generate more business in our local economy for architects, planning department, general contractors, electricians/plumbers, designers, furniture companies, movers, local hardware stores, lawyers, real estate agencies, etc. ;
5, Improves older/dated condominiums, especially in which sellers are less likely to reinvest when struggling with a depreciation in value;
6, helps Bermudians and non-Bermudian homeowners finally get out of an asset they may have had on the market for years without reasonable upfront interest;
7, Helps stop the bleeding of old private development condominium sales values.
Ms MacIntyre said: “The government’s EIC initiative can continue alongside these recommended corrections/reintroductions of sell and buy rights and may be more successful for Bermuda in providing broader inventory options than the foreign investors are easily found in competitive markets elsewhere.”
With the new policy, international buyers are required to acquire an EIC, and it would then normally take them five years for the next step to acquire the residential certificate necessary for the rights to purchase a non-hotel condo. This is the way, the mandated process.
But a government source said that with the November provisions, the changes not only widened the market for property sales, but protected Bermuda’s interests.
He said the November changes provide an opportunity that allows an additional 400 to 500 non-Bermudians eligible for CPP status, some of whom may be interested in a condo.
He said the EIC creates a pathway for the wealthy to bring investment here, revive the economy and get a residency certificate in exchange.
The alleged success of the EIC was recently highlighted in a social media campaign, in which the government said 14 EICs had been issued and, together with their dependents, covered 32 people, injecting 260.6 million dollars in the economy.
It included about $46 million in real estate and some $209 million in new business.
He also said that the total investment in the EIC pipeline is approximately $110 million, adding that current and future investments in Bermuda speak to the high level of trust individuals have in the island.
A spokesman for the Ministry of Economy and Labor said The Royal Gazette last month, of the $260.6 million under the EIC, there were certificates issued from March 1, 2021 to February 28, 2022, about $30.4 million of investments were made after January 2021 and approximately $230.2 million of investments were made before January 2021, including a previously made significant commercial investment.
In addition, the government’s position has long been that previous residency certificates sought to attract retirees from around the world. But there was no way of knowing what substance they were bringing to the island.
The new policy provides a way for the government to track and measure the overall success of the program, through the initial $2.5 million contribution to the IEC that leads to the residency certificate.
Penny MacIntyre, president of the real estate division of the Chamber of Commerce; partner at Rego Sotheby’s International Realty (Photograph provided)
Condominiums at St. Regis in St. George’s, Bermuda