Bermuda luxury house and condominium sales up
Last Updated: January 08, 2013
But overall, Bermuda home sales are significantly down – they were around 75% down in 2012 on five years ago, according to Coldwell Banker Bermuda Realty. Condominium prices continue to decline, and rents too continue to decline, except for the most expensive houses, and for the rent-controlled sector. And the economy remains sluggish.
Properties below $1 million are the most popular. Around 74% of the sales (as of August 2012) were in this category; 45% of which were under $750,000.
- The average price of condominiums was around $653,000 as of September 2012, down by 29% from 2011, according to Rego Sotheby’s International Realty President Buddy Rego, writing in his latest market update;
- Stand-alone residential homes maintained a “remarkably stable” average selling price for the past 4 years. However, the median price fell by almost 10% to $930,000 in 2011, from last year’s median price of $1,025,000.
The average residential price in Bermuda rose 40% between 2003 and 2007, from US$976,000, to around US$1.6 million. However, in the aftermath of the global financial meltdown in 2007 the price rises halted. Single family homes, which were priced at around $1.6 million in 2007, fell by 16.9% to $1.3 million in 2009.
Investment properties in Bermuda: rental yields range from 3.91 % - 6.41%
Renting in Bermuda is cheaper this year, based on the Global Property Guide survey of properties for sale and properties for rent. Which means that rental yields have slightly dropped.
The average rental yield of condominiums is around 5.46%, slightly lower than last year’s 6.25%. The same downward trend is observable for houses in Bermuda, where average rental yields dropped to 4.37%, from 4.87% last year.
Prices of smaller investment properties in Bermuda have gone up a bit. One bedroom condos sell for an average of US$616,000, slightly higher than last year’s US$594,000. Similarly, two-bedroom houses now cost an average of US$1,085,235, up from last year’s US$1,042,813.
Surprisingly, two-bedroom condos have the highest rental return at around 6.41%, while one-bedroom condos earn the lowest rental return at 3.91%.
A three-bedroom condominium still costs around US$1 million, a similar price to last year.
The data we collected for Bermuda were not limited to high-end areas, data was also gathered for surrounding areas within Hamilton.
Bermuda's rental income tax is high
Rental Income: Property tax is assessed on the property’s annual rental value and is imposed at progressive rates. Tax rates on residential units start at 0.60% and can go as high as 18.23%.
Capital Gains: There is no capital gains tax in Bermuda.
Inheritance: There are no inheritance taxes but there are stamp duties for the “Affidavit of Value of Deceased Estate” levied on the net asset’s value and imposed at progressive rates.
Residents: Bermuda residents can buy and rent out property freely.
Buying costs are very high in Bermuda
Roundtrip transaction costs, i.e. the cost of buying and selling property, are around 25.80% to 38.50% of the property value. The greatest part of this is the acquisition license, normally paid by the buyer, which is 25% of the house’s value or 18% of the condominium unit’s value. This is payable to the government upon being granted a license to purchase.
Bermuda's pro-landlord rental market
Bermudian rental practice favors landlords, despite the increased coverage of the Rent Control Act.
Rents: Rents and rent increases are freely negotiable under the Landlord and Tenant Act, which applies to all properties except those with an ARV of less than BM$24,600, which are subject to rent control.
Tenant Eviction: If the tenant refuses to vacate the premises after the expiration of the contract or of the notice to terminate the lease agreement, the landlord can apply for a court order to repossess the property and claim compensation. It takes only an average of 50 days to evict a tenant.
De facto CaribbeanWhile not geographically part of the Caribbean, the British overseas territory of Bermuda (pop. 64,000) has what other Caribbean countries boast of – gorgeous islands (138 of them, with a total area of only 27 sq. mi.), serene beaches, and a thriving offshore sector.
Bermuda uses the Bermudian dollar, which is pegged to the US dollar at a fixed rate. The US dollar can be used interchangeably with the local currency.
Since World War II, Bermuda enjoyed a steady economic growth. Its strong financial services for international business as well as its tourism sector propelled economic growth over the past decade and currently remain the biggest contributors to GDP.
The country has one of the highest GDP per capita incomes in the world, at around $85,996 in 2011. Real estate and renting activities are big contributors to the economy, accounting for 17.4% of GDP in 2011.
From 1997 to 2007, average GDP growth was 7.3% per year. In 2008, Bermuda’s GDP slowed with a 3.7% growth (0.8% in real terms), and eventually contracted by 5% (5.1% in real terms) in 2009.
Recession in Bermuda continued with real GDP dipping by 2.2% in 2010 and 2.8% in 2011. The construction (-23.2%), manufacturing (-12.8%), and international business (-8.3%) sectors felt the strongest impact of the recession and experienced lower economic activity, based from the Department of Statistics data. Fitch Ratings expects the economy to contract in 2012 and to remain flat in 2013.
The tourism industry, Bermuda’s second largest industry, posted around 651,700 visitors in 2011, 12.3% higher than the previous year. Customs revenues buoy government coffers, as almost everything is imported.
One Bermuda Alliance (OBA) won the general elections in December 17, 2012. The OBA is a result of a May 2011 merger of most members of Bermuda's two main opposition parties, the United Bermuda Party and the Bermuda Democratic Alliance. This new government has signaled greater fiscal restraint, alongside stronger policing and more spending on schools.