LUXURY DEFINED: For the purpose of this article, Sinclair Realty | Christie’s International Real Estate defines the Bermuda Luxury Market as freehold, single-family houses with prices of $3.5 million and higher & condominiums at $1.5 million and higher. We note, however, there are houses & condominiums available to Non-Bermudians with list prices starting as low as $2 million and $500,000, respectively. Photo: Georgetown:Bermuda’s Modern House
By Karin H. Sinclair
The Non-Bermudian Category House Market Is Small, But Remarkably Steady.
Few people (including many real estate agents) understand just how small the Non-Bermudian house market really is — and has always been. Based on our 25-year data analysis, with rare exception, between six-and-nine freehold single-family houses typically sell in the Non-Bermudian category in any given year. Of those six-to-nine houses, one or two will have purchase prices in excess of $10 million; between one-and-three will be in the range of $6 million -$9 million, and the rest will be under $5 million. 2018 performed at the upper end of average with eight completed sales (a further three Non-Bermudian category houses had pending contracts but did not make it through the immigration approval process in time to be counted in 2018). Some people mistakenly believe the luxury market is ‘down’ because eight is small number. But, in fact, that’s very average in a pattern that has remained steady for over two decades. There are no great peaks and valleys in the Non-Bermudian freehold house market, just slow, steady growth.
Within the Non-Bermudian Market Are Several Micro-Markets
What was different about 2018 is that while Bermuda continued to attract international purchasers who could easily afford $10 million – $35 million ( the current top of our market), those purchasers took a cautious approach, opting for smaller, less expensive homes. This isn’t surprising considering the global uncertainties and the downward luxury market pressures in Bermuda’s primary feeder markets — the greater New York City area and London. But we also note that, in comparison, 2017 was a record year in the ultra high end with double the average number of sales — and many of the same global uncertainties and pressures existed. So, it is also entirely possible that 2018 was simply the real estate equivalent of a musical tempo rubato (i.e. the temporary disregarding of strict tempo to allow an expressive quickening or slackening at the beginning or end of a phrase, usually without altering the overall pace). Time will tell.
the 2019 LuxUry Market Is Off To A Good Start.
It’s only the beginning of Q2, and at least four Non-Bermudian category house sales have already either completed or are pending completion, and there are others are at various stages of negotiation and contract – including large luxury homes. Remember it’s typically only 6-9 Non-Bermudian house sales per year … so we are already approaching ‘average’ with 9 months left to go.
Bermuda Luxury Real Estate Offers Excellent Value Compared To Other International Jurisdictions
If you consider luxury homes as a global asset class, the truth is Bermuda’s luxury properties offer exceptional value for money when compared to other jurisdictions where the wealthy chose to live. As an example, let’s look at the very top of the market. In Bermuda, a US $35-million guide price buys Chelston, an ultra-prime 14-acre beachfront estate with a 10,000 sq. ft. main house, four cottages, a swimming pool complex, and beautiful park-like grounds leading to a spectacular pink sand beach — all within minutes of the City of Hamilton. In the Hamptons, you’ll get only 4 acres of beachfront for the same price; in Cayman, a super-sized home on a smallish waterfront lot. And in London — even with its downturn — you’ll be fortunate to acquire a five-bedroom lateral apartment at £35 million… albeit in Kensington Palace Gardens. Photo: Windsong House On Riddell’s Bay
Non-Bermudian Category Homes Are Available In a Wide Price Range.
In December 2015, the Bermuda Government revised the ‘ARV’ system used to calculate land tax, and that same system also establishes which properties maybe purchased by Non-Bermudians. ARV stands for ‘annual rental value’, but the Government-assessed ARV may or may not be what the property would be expected to garner in annual rent. Prior to the policy change, a house with an ARV of $153,000 or higher could be sold to an international purchaser. In 2015, the ARV threshold was lowered to $126,000, which in turn increased the number of homes for sale at the entry level of the Non-Bermudian market (by about 30% at any given time). Prior to 2015, Non-Bermudian houses priced under $3 million were few and far between. Today, there is single-family home inventory ranging from $2 million – $35 million and condominiums from $500,000 – $6.5 million. One of the best values in the entry level of the Non-Bermudian category is The Paddocks On Trimingham Hill in Paget, listed at US $3.5 million which offers a supremely convenient location near Hamilton, marinas and schools; beautiful grounds with pool, and a high-quality contemporary renovation just right for an executive family.
Non-Bermudian Land Acquisition Fees Have NEVER Been MORE FAVOURABLE
As high as 25% for many years, the Non-Bermudian purchaser’s license fee for acquisition of freehold homes has been calculated at 8%of the property price since 2012 and will now continue at this rate until the end of Q1-2021. The fee for regular condominiums is 6% ( formerly 18%), and 6.5% for hotel residences/tourism properties. Permanent Residency Certificate Holders are a special sub-class of Non-Bermudian buyer who can purchase any home with an ARV and at a reduced license fee of 4%. Photo: Heron Hill On The Great Sound
SElling Bermuda Can Take time For Good Reason.
In this age of social media and instant response, observers sometimes ask why it can take years rather than months to sell luxury homes. First, it’s important to acknowledge that high-end real estate — anywhere in the world — often take one-to-three+ years to sell. A Bermuda real estate purchase is usually part of a much larger international planning sequence involving corporate structure, family offices, and international tax considerations, along with more personal factors like lifestyle and education. From the moment an overseas purchaser first inquires about a Bermuda property to the time they execute a sale and purchase agreement, it is not unusual for at least one year and sometime more to pass — so that’s one year on the market if the very first prospect through the door becomes the successful purchaser. Bermuda Government’s policies also dictate a careful purchase because if a Non-Bermudian wishes to sell and buy a different property, he or she will pay the 8% license fee again. Bermuda is not for everyone, but it works very, very well for certain profiles of international buyers. It’s a small, highly specialised market and it can simply take time to make the fit.
One Thing That Will Never Change Is The COnvenience Of Bermuda’s Location.
As a British Overseas Territory uniquely located just two-hours from New York City and 6+ hours from London, Bermuda’s gracious way of life, sophisticated business infrastructure, quality schools, and semi-tropical climate make it the quality choice for today’s International Purchaser who values being near (but not necessarily ‘in’) the United States.
Luxury List Pricing Operates On A Different Algorithm.
In the luxury sector, sellers and buyers alike tend to be successful, savvy and relatively patient. Sinclair Realty | Christie’s detailed analysis of list price vs. purchase price differentials clearly demonstrates that list pricing is less important to the Non-Bermudian offering process than other market sectors. Recently, there has been a move within the local real estate brokerage community to apply North American-style price drops models typically used in the middle and starter home markets to the the Non-Bermudian category. Of course, there will always be circumstances when a list price reduction is either necessary or warranted. But it is an absolute fact that luxury buyers who are ready to buy rarely let a ‘high’ list price stand in their way of making an offer based on their own sense of value. And luxury sellers — more often than not — prefer to quietly accept a reasonable offer rather than play the price drop game.
MANY HOLD THEMSELVES OUT AS EXPERTS, FEW REALLY ARE
These are words of warning as much as fact. Especially in small communities like Bermuda where social, business, and influence circles are closely knit, people tend to believe what they hear and read because they are familiar with ( and therefore a bit more trusting of) the person who supplied the information. Trust is a wonderful thing; but when mis-placed, it can breed an inordinate amount of inaccurate information which then circulates and is even published as ‘fact’ ( think of the children’s game, Telephone). Regrettably, it is all too common in Bermuda’s agent community to distribute information without fact checking, and to flavour it with heavy doses of exaggerated spin. Further, there is still no central, electronic source of real estate data, and it will be some time before the new Bermuda Government Land Title Registry is fully operational and reflective of the market on a real-time basis. So unless your agent or personal advisor is conducting thorough, objective research and analysis, the ‘expert’ advice you may be receiving and relying on as the basis of your real estate decisions is, at best, diluted through third-party re-tellings and may feature degrees of inaccuracy ranging from inexactitudes to outright falsehoods.
Here AT SiNclair Realty | Christie’S Int’L Real Estate, Quality of Information IS Paramount. If you have questions about buying or selling, John and Karin Sinclair look forward to hearing from you at estates@sinclairrealty. com or T. +1-441-296-0278.