High property transaction costs hit competitiveness

By YOURI KEMP

Tribune Business Reporter

ykemp@tribunemedia.net

A Bahamas-based contractor yesterday said the construction industry can mount a “110 percent recovery” from COVID-19 as he warned that high real estate transaction costs were making this nation uncompetitive.

Costa Berdanis, Tarcon Construction’s president, speaking on a webinar hosted by the The Counsellors’ Business Outlook series, backed the government’s bid to further stimulate the sector by dropping the duty rate on a variety of construction materials from 45 percent to 20 percent.

K Peter Turnquest, deputy prime minister, said the tax cut was designed “to spur construction activity, and thereby mobilise domestic capital”, by reducing duty on “all building materials” such as wood, glass, granite, steel, electrical supplies and fixtures, carpet, landscaping material and plumbing materials.

“As far as construction I think that we are going to be just fine,” Mr Berdanis said. “The preliminary outlook looked a little grim, but I think a lot of the bigger cities have also gotten hit. Due to the fact that we have a smaller footprint, I think that a lot of revenue will start coming back into the construction industry due to the fact that a lot of people want to relocate out of the bigger cities.

“We’ve been getting a lot of activity from very big firms in New York, and people are actually looking to get out of the city and are looking for more of a Nassau, Bahamas real estate market. One thing I think can help the real estate market coming in is if we can maybe strategise that, along with some of the infrastructure we have in place with the Ministry of Tourism for marketing, we can bring some of that business this way.”

Describing construction as The Bahamas’ second largest industry apart from tourism, Mr Berdanis said the industry’s weekly payroll meant money was constantly being injected into the Bahamian economy.

“I do think we have the potential to come back, and we have the potential to come back 110 percent; we just have to get through a small window,” he added. “I think the planning just needs to be organised, and I think we can restructure a bit of the marketing.

“We have a lot of things that stagnate construction. You’ve got shipping costs. Right now, to bring in a 40 foot container, it’s $4,000 roughly for the average consumer. If you’re a bigger company, maybe you can do it for a little bit less if you are competitive. But you can bring in a container from China for $5,000, and you can ship one from Miami to here for $4,000.

“Then there is a two-week process to clear it. It’s quite a process, and it is very difficult for the average consumer to want to build their own home, so that was difficult on the construction side. Stamp tax, per se, is still ten percent. On a $600,000 home or a $700,000 home, you’re talking about $60,000 on the closing. So the local market is very hesitant to deal with that, and it makes us a non-competitive country on the global market.”

Mr Berdanis backed the COVID-19 lockdown for controlling the pandemic’s spread in The Bahamas, and added: “Now that it’s passing I think we can learn from this, and we can stimulate construction again by focusing on where our weak points were.

“There are a lot of properties here that are stagnated right now, owned by a handful of people, no one paying any real property tax on it, and they are very difficult to acquire and move. Something needs to happen. We need to have middle class housing for everybody; nice housing, and it should be affordable and easy to attain. There is a lot of cost we can trim, and I applaud the government for reducing the duty on tools and equipment from 45 percent to 20 percent.”