The private sector is developing suggested amendments to the Stamp Act and first-time home buyer exemption “on the basis” that the latter will be extended beyond June 30, a leading developer yesterday saying he “can’t begin to explain” how important that is.
Franon Wilson, the Bahamas Real Estate Association’s (BREA) president, told Tribune Business that the exemption, which relieved first-time purchasers of properties valued at under $500,000 from paying Stamp Duty, had enabled Bahamians to realise their home ownership dreams much quicker.
Confirming that BREA and the Bar Association’s real estate committee were working together on proposed reforms to the first-time buyer exemption’s processes and interpretation, Mr Wilson said they were aiming to present these to government before the May Budget.
Pledging that the commercial banks and other mortgage lenders would also be involved in the discussions, the BREA president told Tribune Business: “That’s something we’re going to be working on very hard to make sure it’s ready in time for this year’s Budget.
“We know we have to get it in sooner rather than later. At the end of the day, it can’t just be two organisations doing it and, all of a sudden, the banks say: ‘We don’t accept it’.
“Once the lawyers say they will sign off, the banks agree and the real estate industry knows what it’s got to do, that’s the three main players right there.”
Tribune Business revealed last year that problems had emerged over how the first-time buyer Stamp Tax exemption was being interpreted, and processed, by the Public Treasury and Ministry of Finance.
First-time buyer applications were being rejected by the Treasury, which was adding the value of any mortgage financing to the purchase, or conveyancing, price.
In many instances, this was pushing first-time buyers above the $500,000 Stamp Duty threshold above which they would not qualify for the exemption.
And other issues subsequently discussed with the Government were whether first-time buyer applications could seek the exemption on 100 per cent of the Stamp Duty due on the sale, rather than just 50 per cent, and that banks were requiring mortgage clients to set money aside to pay the tax due to uncertainty over whether they would get the exemption.
“It’s huge,” Mr Wilson told Tribune Business yesterday of the need to resolve these issues. “It would lead to greater certainty, and once we have greater certainty transactions can close faster, as the private sector knows what it’s got to do.
“It’s a matter of getting something together and putting it in the Ministry’s hands, so they can look at it.”
While declining to go into specifics about the reforms the Bar and BREA may propose, Mr Wilson said it was “oh, so important” that the first-time buyer Stamp Duty exemption, which is due to expire at end-June 2013, be renewed.
“It cannot begin to explain how important it is,” he told this newspaper. “That is something I hope the public does not take for granted, as it’s not a right, especially those who are considering their first home.
“That has helped a group of people to own a home that otherwise..... I wouldn’t say they’d never have done it, but they would have had to defer their dream a lot longer.
“One of the biggest hurdles to home ownership is the downpayment and closing costs, so if we can lower that and help people to get in, the Government gain revenues in the long-term.”
By reducing the upfront closing/transaction costs via the exemption, the Government is helping lower and middle class Bahamians realise home ownership ambitions that were either totally unrealistic or might have to be delayed for years.
Apart from stimulating real estate activity, the exemption is also designed to spur home upgrades and expansions, creating more imports, and increased activity for industries such as construction and landscaping.
And, as a result, the Government will more than make up for what it gave away in Stamp Duty via revenues earned at the ‘back end’ of first-time real estate purchases.
“That creative piece of government decision-making is truly one that I hope people will not be taking for granted, and we are moving on the basis that it will be extended,” Mr Wilson told Tribune Business.