Disclaimer: This opinion piece is a curation of excerpts from real estate blogs, industry expert opinions, official publications and interviews with potential buyers. The reality is that we cannot predict the future, but we can use information and experience to make forecasts and predictions which, we will have to continuously review and adjust as time progresses.
By Danny Lowe
Historically, The Bahamas has had a relatively stable real estate market, attracting both local citizens searching for their permanent residences and second homeowners seeking the perfect vacation home. According to a 2019 article published by Bahamas Guides, the average real estate transaction is 37% higher than other Caribbean countries, which echoes the country’s attractiveness amongst luxury home buyers. Generally, the factors that drive foreign investment in the Bahamian real estate sector include strong political stability, currency parity to the US dollar, proximity to the United States, a strong tourism driven economy, and the continuous development of attractive real estate products.
COVID-19 Impact on Real Estate Sector
The most noticeable effect on local real estate has been the tremendous reduction in unit sales volumes, which can be attributed to:
- Unpredictability in the global market and fluctuating stock markets,
- Sudden and drastic economic changes, caused by strict measures inclusive of the closure of borders in The Bahamas; and
- Fears stemming from uncertainty of the local economy due to the government mandated shut down of non-essential services, inclusive of real estate showings.
Globally, property owners fear the adverse impact of COVID-19 on their property values, while potential buyers wonder about the possibilities of securing a good deal post COVID-19. These sentiments echo in The Bahamas as well.
Realistically, the medium to long term effects are unknown at this time, but based on what was seen from previous pandemics in other markets, there may be a temporary slowdown, and as the virus subsides, markets will rebound per normal with a sluggish start. Due to lack of demand, it can be expected that most buyers may take a “wait and see” approach.
The Bahamas, being a tourism driven economy, will likely see its economic rebound coincide closer to the return of and increase in tourist arrivals. Other considerations for the long-term economic effects include the duration of the virus, development of vaccines and treatments, the Bahamian government’s economic stimulus measures, and, of course, the US market’s performance. There is a saying that goes, “When the US sneezes, The Bahamas catches a cold,” which is often true in times of economic blessings and trouble.
Technological Innovations in Real Estate
According to an old proverb, “Necessity is the mother of invention.” I believe this stands true for current trying times. The ongoing pandemic is pushing us to become more creative and innovative to better serve clients. The use of technological innovations is becoming more frequent in marketing and selling property and include the use of high definition video tours, multiple listing services (MLS), Matterport software and social media integration with high quality websites. Potential buyers now have the ability to view and tour homes from anywhere in the world.
During the pandemic, agents can create visibility for potential buyers, allowing them to view their options and, if desired, place a bid to purchase contingent on an in-person visit to the property. Even in these times, agents are receiving inquiries on properties from potential buyers who hope to visit properties once the borders are reopened. Real estate sales, while slow, persist. The market is NOT at a standstill. However, it will be important to continuously assess market conditions because it is likely that conditions will change quickly.
Market Possibilities After COVID-19
While the lasting effects of COVID-19 are difficult to predict, what is foreseen is a likely acceleration of decision making after a long period of “watch and see.” Sellers that were intending to sell prior to COVID 19 may do so quickly for liquidity reasons with some buyers inclined to quickly jump on good deals. On the other hand, buyers may opt to delay purchasing property with the intent to save cash for the uncertain future.
Emotion-driven decisions after the extended lockdown period are also a distinct possibility for some. For example, a buyer may choose to purchase a property that he/she always wanted with the rationale that life is short. It is predicted that able and willing buyers will attempt to purchase properties at a deep discount.
In relation to foreign buyers, residents of countries hardest hit by this crisis may look to quickly move capital into safer more stable markets and The Bahamas is positioned to be a prime location for this. There is also the possibility of persons looking to relocate from heavily populated city centres into less dense markets. Some South Florida brokers predict the movement of buyers from harder hit northeast US markets, like New York, into warmer and more scenic destinations, such as theirs. The Bahamas may benefit from spillover of this possibility, inclusive of the Family Islands.
Although some experts, are of the view that the economy will see an upward swing in economic activity in 2021, (e.g. the International Monetary Fund is of the view that The Bahamas will rebound with a 6.7 percent increase in GDP) there is no telling how long this pandemic will last. Ultimately, real estate and the overall economy in The Bahamas will continue to be impacted by the pandemic and will likely continue to be dependent on the improvement of the global economy.
The areas of the market likely to be most impacted include those with:
- Excessive supply of real estate, for example, commercial banks with a large volume of foreclosed properties;
- Overpriced supply, for example, inventory on the market for more than 365 days, with the exception of the ultra-luxury market; and
- The segment of the market in which the majority of the unemployed reside, ultimately creating excess supply if banks and the government do not provide relief.
According to John Burns Consulting: “Historical analysis showed us that pandemics are usually V-shaped (sharp recessions that recover quickly enough to provide little damage to home prices), and some very cutting-edge search engine analysis by our Information Management team showed the current slowdown is playing out similarly thus far.”
Unfortunately, it is too soon to confirm the medium to long-term effects of COVID-19 on the real estate sector in The Bahamas; however, we remain optimistic and continue to follow local and global trends.
Although most hands point to a recession, it won’t be forever and economic experts have projected that while a swift decline will be experienced in economic activity in the second quarter, a sharp rebound will begin in the second half of this year.
Daniel Lowe is an experienced real estate professional having participated in over 125 transactions. He is a holder of the Certified International Property Specialist designation and Bahamas Realtor Institute designation. Lowe has a Bachelor of Economics in International Trade from the University of Business and Economics in Beijing and is one of the few Mandarin speaking real estate agents in The Bahamas. His accomplishments include spearheading a housing project for the relocation of more than 30 families for a major multinational company in New Providence, a feature on HGTV’s Bahamas Life and top producer awards in various sectors at Better Homes and Gardens MCR Bahamas Group.