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21/02/07 -
The Property Market in Barbados |
There is nothing that breeds social unrest more than the
uneven distribution of wealth and the limited opportunity it can create at the bottom end of the prosperity ladder.
This is shown in many sectors, but especially in the level of civil disobedience, crime, indiscipline, education,
unemployment, housing and home ownership. Barbados has been fortunate to escape the full brunt of these potentially
destructive elements in society, but we have seen enough evidence from our Caribbean neighbors to recognize that the
danger, and therein lies the threat that they could escalate if warning signs are not observed. In simple terms all
residents, irrespective of where they sit on the prosperity ladder, should share our economic growth and general
prosperity.
Barbados has achieved much since independence was declared in 1966. Visionary leaders from every business and
political sector have combined to put our small island on the world map across many economic sectors, not least
property investment. We have simple procedures for overseas property ownership and investment, and Barbadian society
has welcomed overseas property owners and visitors in much the same way that they have warmly welcomed millions of
holidays-makers over the years. Barbadians by their nature are open and friendly people and fully understand the
importance of tourism, overseas investment and property investment opportunities at the higher end of the market.
But while overseas ownership is a small fraction of overall property ownership, it is important that those same
visionary business and political leaders provide the adequate ownership opportunities for local people, many of whom
sit on a much lower rung on the prosperity ladder.
In simple terms this means the huge vacuum at the bottom end of the property market has to be filled to allow
everyone the opportunity to buy his or her own home. Many people will lay the fault firmly at the door of
government, but while political leaders are blamed for most things in the modern world, they need the help of other
business and social players in Barbados to kick-start this much-needed property revolution. The property market is
driven by market value and in recent times property costs and prices have risen significantly, and to exacerbate the
problem, most developers have chased the mighty dollar and concentrated on high-end properties to meet the huge
overseas demand. When you add the amount of construction resource committed to the ICC World Cup program, then
almost inevitably the lower and mid market has been sacrificed.
Identifying market bands is almost an art in its own right, but if BDS$300,000 is used as a bench mark for the
middle market (estimated mortgage cost of $2,200 per month for a 95% loan) then a buyer would have to be earning
around $6,600 per month to qualify for a loan. If the property purchase benchmark were reduced to $100,000
(estimated mortgage cost of $800 per month for a 95% loan) then the total earnings or surplus income of a buyer
would need to be in the region of $2,400. In real terms these are challenging figures for first-time local buyers,
but the issue is almost academic given that there is virtually no available product in these price sectors.
The solution will be difficult to achieve but it has to involve political leaders, developers, lawyers, and lenders,
or many young people in Barbados will become disillusioned at the prospect of never being able to afford their own
property. Inevitably that could lead to social unrest and all the negative factors that have become so prevalent in
some less visionary Caribbean islands.
The initiative should involve government freeing up huge pockets of land that they own and offering 999 year leases
to prospective buyers, it could also involve tax concessions to both builders and buyers to make the cost of
construction much lower, it could involve a basic conveyance fee of $500 if a panel of lawyers was appointed and
given concessions to do work in this sector, and finally it should compel or entice lenders to make some provision
to assist first-time buyers. Lenders in Barbados make obscene annual profits and laugh at critics who dare to
challenge their social conscience, but the reality is that they charge too much and deliver too little for the
borrower. The current mortgage market lacks real competition and needs the influx of outside lenders to drive the
product range into new areas and to give homebuyers and existing customers real value and service. And it is not
charity, given that the cost to obtain and repay loans is high, but the opportunity to cross-sell other products
allows an enterprising lender yet another opportunity to capture more business. |
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