Real Estate Sector Gets No Respect – 12% of Zero = O,O,O
By Mario Carey
According to the National Association of Realtors (NAR), every house sold in the USA equates to three full time jobs. This is as a result of the obvious domino effect. Let us assume this statistic applies to the Bahamas.
As noted in 2010, the Government reported that funds collected from conveyance stamp duty had reduced by approximately $41 million. Let us assume that this number has gotten worse given the current worldwide economic crisis.
The worlds’ largest economies have made and continue to make drastic changes, long term and short term to their policies in response to the current economic crisis. They all see the need to foster growth, provide relief and to alter policies using a range of tools.
When the Bahamian Government used its tools and policies and decided to raise the stamp duty and real property tax, it was and still is a bad decision. There is no one that I have spoken to that will not agree that a reduction in any cost of doing a real estate transaction can lead to increased business, increased jobs and increase monies for a troubled debt ridden Government.
Our Government needs to move decisively and aggressively through its tools and policies to decrease stamp duty, real property tax, interest rates, lending requirements and find a suitable solution for the disposal of foreclosure properties.
How can economic growth and job creation be achieved by reducing the stamp tax?
Currently, there are approximately four hundred and fifty licensed BREA Agents in the Bahamas. If the stamp duty was reduced for a two year period of time to 6% across the board and fifty percent of the Agents each sold only one home in one year on an average price of $550,000. One can see the obvious domino effect.
225 Agents, 225 homes = 225 x 3 jobs = 675 jobs
$550K x 225 Agents x 6% Stamp duty = $7.425m in income
For a period of two years, 1,350 permanent jobs, $14,850.000 in stamp duty collections
What happens if each agent sells 2 homes = 2700 jobs: +30 million in Income
Look at what the world powers like China, India, USA and Europe are all doing to stimulate economic activity. They all focus on the real estate sector as they assess it to be an important pillar of the economy.
On January 7th, 2012, the federal Chairman Ben Beranke noted,”The ongoing weakness in housing has made it more difficult to achieve a vigorous economic recovery”. He goes on to say, “With additional housing policy interventions we could achieve a better set of economic outcomes”.
The Real estate sector in the Bahamas gets no respect. Whenever the Government talks about economic forecasts and the pillars of the economy, rarely is the real estate sector mentioned. In most economies around the world the housing market is a primary pillar.
The Bahamas can greatly benefit from stamp duty policy interventions. At present every sale lost because of the high cost of stamp duty results in zero, zero, zero. Loss of income, loss of jobs and the loss of a possible, better economic outcome.
Each time a piece of real estate is sold in the Bahamas it has a positive effect on one or all of the following jobs:
2. Title Company
5. Banker (Loan Officer)
13. Referral of Friends
14. Car Purchase
15. Gas Station
16. Mechanic Repairs
17. Car Cleaning
19. Pool Maintenance
20. Generator Sales and Maintenance
21. House keeping
23. Medical Services
24. Food Shopping
25. Liquor Store
26. Boat Rentals
27. Visits to Family Islands
28. Donation & Charities
30. Hair dressers
31. Massage Therapy
32. Night Clubs
33. Real Property Tax
35. Interior Designer
36. Information Technology
37. Cellular Phones
38. Government Jobs
a. Registrar General
d. Water and Sewage
e. Currency exchange