Real Estate Market Review: The Bahamas (The Country of 700 Islands)

Fast facts:

3rd richest country in the Western Hemisphere

Neither resident nor non-resident income tax is paid.

Capital = Nassau

Population = 323,000

Currency = Dollar

Economic Summary

Does everyone have their pina coladas ready? Does everyone have one of those little umbrellas? A chunk of pineapple and maybe some nutmeg sprinkled on top for full effect? Alright? Excellent!!!

Now, take your first sip and think ‘The Bahamas’…and suddenly you’ll be transported to a turquoise sea teeming with marine life and sandy beaches that stretch for miles. You sit in your beautiful Villa, while you are served a seafood cocktail with prawns and crayfish, while you feel the sun tanning your extremities… So… do you want to go?

Although tourism is an important player in keeping the economy afloat, it is not the only thing that is happening on this paradise island:

Neither residents nor non-residents pay income tax, capital gains tax, or inheritance tax.

Tenant laws favor landlords and only properties valued at less than B$25,000 are subject to the Rent Control Act.

The economic and political environment is stable and GDP per capita is among the highest in the Caribbean.

Seasonal property rental yields top 10-12% per season.

In terms of GDP per capita, there has been an increase since the early 1990s, when GDB growth was a constant 3%.

The only flaw in this steady GDP per capita growth was in the early 1990s, when inflation peaked at just over 6%.

But even high inflation couldn’t keep tourists away, as seen in Tourist Arrivals.

Inflation has been on a steady downward spiral since 1990 and has therefore driven GDP growth.

Although the economy is highly dependent on the US economy to ensure growth, tourist arrival numbers have been stable since the early 1990s.

Real Estate Market Review

So even though the Bahamas is heavily dependent on the US economy to ensure its growth, the real estate market is still very much in favor of investors…….

This is why:

Restriction of foreigners to buy property?

There are no restrictions for foreigners buying property:

The only exception is a permit from the Government prior to the transaction, if the property is undeveloped land and is greater than five acres.

Are rental yields constant?

Yields hover around 5-6% for properties located in the coastal areas of Nassau and other islands.

Rental returns are good in gated communities because there are many expatriate accountants and lawyers.

Seasonal rate properties have yields of 12-15% as Grand Bahamas is so close to the US that many commute back and forth.

Is Bahamas Law Pro-Landlord or Pro-Tenant?

Bahamas Landlord and Tenant law is Pro-Landlord:

Rentals can be freely agreed for short and long term leases.

The landlord must give the tenant adequate notice of the rent due and possible eviction for nonpayment of rent.

If the tenant does not pay the rent on time, the landlord can call the local police and repossess the property.

Although a court order is not required to evict a tenant, most landlords take delinquent tenants to court and sue them for uncollected rent.

How much will I pay in taxes for my property?

Neither residents nor non-residents pay income tax, capital gains tax, or inheritance tax.

The maximum property tax is 2% for properties with a value greater than US$500,000 (GBP: 250,000, ZAR: R3,500,000)

As an investor, the only ‘restriction’ that the Bahamas poses is the purchase costs involved in the purchase process:

Registration Fees: The buyer must pay various fees for the property to be registered. These fees are minimal and are not expected to exceed 0.5% of the property value.

Documented Legal Acts Tax: The Documented Legal Acts Tax must be paid at the time of delivery of the property. Stamp duty is usually split between the buyer and the seller.

Up to 20,000

2%

20,000.01 – 50,000

4%

50,000.01 – 100,000

6%

100,000.01 – 250,000

8%

more than 250,000

10%

Legal Fees: Each party pays for its own attorney. Legal fees are determined according to the value of the property:

First 500,000

2.5%

Next 500,000

2.0%

Next 4,000,000

1.0%

More than 5,000,000

0.5%

Real Estate Agent Fees: Real estate agent fees are set by the Bahamas Real Estate Association.

Rates are determined as follows:

Vacant/undeveloped land on all islands except Grand Bahama

10%

Improved residential properties in the Outer Islands

8%

All types of property in Grand Bahama

fifteen%

Improved residential properties (houses, condos) on all other islands, including New Providence (Nassau location) 6%

Conclusion

At a glance, you could see the Bahamas as an unattainable paradise, only reserved for the rich and powerful. Exclusively frequented by celebrities to escape the spotlight and for us mere mortals to just watch and wait…….

But in fact, the Bahamas is a place that has all the elements that make investors go cross-eyed: no income taxes, pro-landlord laws, and good rental returns 🙂