PropertPristine turquoise water and white sandy beaches make the country a go-to destination for tourists. Many know the nation as merely a tourist destination. Most fail to see the potential of making property investments in the Bahamas. In the new world, the Bahamas ranks as the third richest country after the US and Canada. Tourism accounts for 60% of the country’s income and 50% of the employment. For savvy investors, tourism is something they can exploit in the Bahamas.
Economic Status of the Bahamas
The Bahamas became an independent country in 1973 when the country removed itself from the UK’s exchange-control legislation. Since 1717, the state does not charge taxes on companies and individuals but instead raise capital through excise fees and duties. They set up their offshore banking and investment industry, which now serves as a financial centre and ship registry. The financial services are the second most important industry in the Bahamas. It accounts for over 15% of its GDP. Agriculture and manufacturing contribute about 7% of the GDP.
The 2019 Economic Freedom Index ranked the Bahamas as the 76th freest in the world, with a score of 62.9. Its economic freedom score dropped by 0.4 points, due to declines in judicial effectiveness and government integrity. These declines overshadowed growth in investment freedom and fiscal health. Among the 32 countries in the Americas region, the Bahamas ranked 15th.
The current government is working its way to reduce the country’s fiscal deficit caused by the recession. The country simplified the procurement process, business licensing, and business-related immigration to attract more investors. It is also encouraging local investments. The nation’s regulatory system is aimed at fostering an excellent entrepreneurial activity.
According to the Transparency International 2018 Corruptions Index Survey, Bahamas is the 29th least corrupt nation out of 180 countries.
The economy of the Bahamas is experiencing a slowdown, with actual growth of only 1.60% in the past year. From Q2 to Q3, the country only posted a 1.80% growth. It is projected to have a moderate increase of only 1.80% in 2020.
Liveability in the Bahamas
The Bahamas is known as the place where most celebrities have second homes. For some average people, it might be challenging to live in this country as it can be pretty costly. As if the prices cater to tourists. Rents and transportation costs are comparable to the US. Utilities, entertainment, and leisure activities are also pretty expensive. However, the Bahamas provides excellent healthcare and affordable childcare. School system is also outstanding, with the literacy rating of over 95%.
Property Investments in the Bahamas
There are no restrictions for property investments in the Bahamas. Anyone can buy a property here. Most of the new constructions in the main areas for tourism, such as Nassau and Paradise Island are now under the ownership of foreigners. Many foreigners invest in property here to serve as a vacation getaway, to receive preferential visa treatment, or to exploit the robust rental market.
With a Homeowners Residence Card, holders together with their immediate family can legally reside in the Bahamas for the duration of the card’s validity (usually one year). Some prefer to apply for an annual residence permit.
Poplar living areas in the Bahamas include the capital city of Nassau and the other regions such as the Ocean Club Estates on Paradise Island, Port New Providence, and Lyford Cay. While the government has intensified its efforts to provide more housing space for locals and foreigners, investors must still prepare to spend a more significant part of their budget on housing.
Property Market Trends in the Bahamas
The Bahamas spent years in a real estate market slump. Thankfully, the country’s property market is improving. Property investments in the Bahamas are experiencing an uptick as prices stabilized. Residential construction is on the rise again. While it is not on fire, overall house prices remained stable in the last three years, with a balance of supply and demand.
After the financial crisis, the Bahamian property prices experienced an average correction of 20%. Some areas saw prices decline by as much as 60%. While there are no official house price figures, house prices dropped by 40%. In the past two years, the market is on an upswing, with increases in sales volume. This upswing is more prominent in the luxury market from foreign investors who view the Bahamas as a safe investment haven. Upscale properties increased by $200 per square foot. Foreign investors can buy a luxurious property for $1 million, with prices ranging from $650 to $2,000 per square foot.
Most of the foreigners who make property investments in the Bahamas come from Canada, France, the US, Italy, and Britain. Foreigners are free to buy any property they like. They have to secure a permit from the government if the property they wish to purchase is undeveloped land, with a square footage of more than five acres. While foreigners can legally live in the country and those with properties valued at least $500,000 can have a priority permanent residence application, it does not give them the right to seek employment in the country.
CHG Recommendation: Take Advantage of Tax-Free Property Investments in the Bahamas
One of the factors that attract foreign investors into the country is the absence of taxes. There is no income tax, capital transfer tax, capital gains tax, or estate tax in the Bahamas. Those working in the country have to shoulder national insurance contributions – 3.9% from the employee and 5.9% from the employer. Self-employed individuals have to shoulder the whole amount by themselves. Note that by 2015, the value-added tax of 7.5% was introduced. Stamp duty is also payable on property and mortgage transactions, and additionally real estate tax. Tax savings often offset the high cost of living.
Rental yields in the Bahamas is high. However, since most of the property rental data is seasonal, it is difficult to get accurate figures. As surveyed by Global Property Guide, inland condominiums in Nassau have the highest yields, with about 8%.