“it’s going to reduce the amount of persons who could qualify for mortgages in The Bahamas”
NASSAU, BAHAMAS — Rising construction-related costs will have an adverse effect on the residential segment, according to former Bahamian Contractors’ Association (BCA) President Leonard Sands, with Central Bank data revealing a falloff in total mortgage disbursements and commitments.
According to the Central Bank’s quarterly economic review for March 2021: “Total mortgage commitments for new buildings and repairs — a forward-looking indicator of domestic activity — fell by 31 to 98 compared to the same period in 2020, while the corresponding value decreased by 26.9 percent to $17.1 million.”
Sands told Eyewitness News many people who barely qualified or struggle to qualify for a home mortgage will likely find themselves in a much more difficult position.
“I think it’s going to reduce the amount of persons who could qualify for mortgages in The Bahamas,” said Sands.
“I think in 2019 there was already a slowdown of persons who could qualify for mortgages based on the costs that existed. Now you’re talking about an overall cost increase of 15 to 20 percent; that’s going to further impact persons who can qualify for mortgages at the bank.
“I think it could mean that although we will have activity, it’s going to be in the upper-income bracket earners. I don’t see persons who are in the lower-income bracket being able to afford a mortgage, not in this particular climate.
“That’s the way I see it. It’s not something that I’d like to say, but if you’re talking about someone who barely qualified two years ago, they most likely won’t qualify now with these increases unless their economic conditions change.”
Sands added: “How do you adjust for that? Persons are going to have to be more creative and perhaps start looking at smaller homes. A person may have to buy a foreclosure in a less desirable area.
“Banks are very risk adverse right now. They’re not extending credit like they used to. That’s just the environment we’re in right now.”
According to the Central Bank, construction sector activity during the first quarter remained supported by ongoing small to medium-scale foreign investment projects.
“Meanwhile, domestic private sector activity stayed weak during the first quarter of 2021,” the Central Bank noted.
“In domestic financing developments, total mortgage disbursements for new construction and repairs — as reported by banks, insurance companies and the Bahamas Mortgage Corporation — decreased by six percent ($1.6 million) to $24.4 million, albeit a moderation from the 18.1 percent reduction a year prior.
“Underlying this out-turn, the falloff in residential mortgage disbursements slowed by 6.8 percent ($1.8 million) to $24.2 million, from a 16.7 percent decline last year.
“Further, the commercial segment amounted to $0.2 million, following no new disbursements in the comparative 2020 period.”
The regulator also noted commitments in the heavy weighted residential sector reduced by 30 to 95, while the corresponding value declined by 25.3 percent to $16.2 million. Further, commercial commitments decreased by one to three, with the associated value contracting by 47.7 percent.
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