Property License Fee May Be Dropped

Good afternoon ladies and gentlemen and thank you for the invitation to address your AGM. Let me also thank your president Mr. Leroy Douglas for this kind invitation and for the way in which he has led the lobbying effort on behalf of the Division.In my experience there are three kinds of audience in public speaking. There is the friendly crowd to whom one can say almost anything and expect applause. There is of course the unfriendly crowd who heckles, pose difficult questions and come with a determination to disagree with whatever one says; they meet on Fridays at 10am this time of year.

Lastly, there is the expectant crowd. They have turned up to genuinely hear what one has to say, looking for some relief, some substance and perhaps even some entertainment.

Mr. President, I hope you have provided me with an expectant crowd and that I will not disappoint.

Let me begin by saying that no useful purpose is served by rehashing the well-worn arguments over the legislation we mustn’t mention. The rationale for the amendments that have come to be known as the 2007 Act is widely known and the opinions on its effects are varied and deeply held.

I respect the opinions that have been expressed about the legislation and the record will reflect that I voted with my Government in favour of the law in the House of Assembly and thereby supported the rationale of the Bill.

What cannot be denied is the fact that the practice of fronting which gave an unfair advantage to some in the housing market had to be addressed. The state of the real estate market at that time was such that too many people were either excluded from realizing their dream of home ownership or being forced to make challenging financial decisions to achieve that goal.

In such circumstances it is the responsibility of Governments to act and to act in the interests of its people. Policy making seldom achieves universal happiness and this policy is no different.

Almost five years later however, prudence demands that we examine the policy, any policy, to determine if the aims have been achieved and what its continuation, unaltered, will mean to the economy and the very people we set out to help.
Before the House rose this summer I indicated that it was time to review land policy in Bermuda.

With the support of my Cabinet colleagues I put together a group of technical officers to take a look at just where we are in 2011. We invited submissions from the public and among the 44 received I am pleased to say that the Division was among them. Nothing in the submissions was surprising and nothing set out was unexpected.

As a snapshot, the submissions confirmed what has been in the public domain and the diverse opinions to which I referred earlier. It was incredibly useful to hear from the public and I wish to thank the people who took the time to write to the Ministry.

The working group had several meetings and the exchanges were direct and lively. The debate mirrored the public discussion. With the research and data they collected I engaged my Cabinet colleagues in a wide ranging discussion of the issues.

Without betraying the secrecy of Cabinet, the Throne Speech of just a few days ago sets out the Government’s intention, at least with respect to one of the issues. At page 6, the Speech reads: “the Government will remove legal barriers denying home ownership to non- Bermudian members of Bermudian families”.

Unfortunately, the debate around this issue has been forged with a theme of division and wrongly pits the Government of all Bermudians against those of our citizens who choose to marry a person of a different nationality.

The unique feature of this debate is that the Government regulates the activities of spouses of Bermudians in so many other ways which never seem to see the light of day in the public discussion, many of which you might easily term “discriminatory”.

The politics of just why this is so are not unfamiliar to me, but it has been an unnecessarily dangerous game which has added to the body of inaccuracies that have now taken on the ring of truth.

The requirement for couples of this nature to have a license to purchase property in Bermuda is not new. It pre-dates the 2007 Act and it in fact pre-dates this Government; but we have certainly reaped the blame.

I believe that it is the responsibility of Governments to be more than responsive but to be responsible. Governing is an eternal balancing act.

I have considered what is at stake with this policy and in my analysis; the needs of the affected group, their life expectations and the importance of stimulating the economy outweigh any continued, intense regulation punctuated by intrusive vetting, additional fees and administrative delays.

Therefore, I have recommended to Cabinet that the requirement for a license in these circumstances be removed and that this legal barrier denying home ownership to non-Bermudian members of Bermudian families be eliminated.

The issue of ARV bands and the sale of properties to non-Bermudians are equally as topical. Some of your colleagues have urged that I throw the rule book overboard and let fly the colours of genuine capitalism. To borrow a phrase from my predecessor: “it ain’t gonna happen”.

Historically, the ARV band at the highest level was adjusted periodically to ensure that about 250 properties were available to non-Bermudians at any given time. The advent of the fractional product and the ability of foreign purchasers to participate in this form of the market have slightly changed the paradigm.

I am also conscious of the debate surrounding the sale of any property by a Bermudian to a non-Bermudian and I recognize the tried and tested use of real estate to fuel personal wealth in Bermuda. Investment properties have formed the crux of many portfolios over the years and again, the balance to be struck in this area must be weighed carefully. The time is right to also review this aspect of the policy.

I have done so and I support an urgent review of the ARV bands with a view to permitting the sale of properties by Bermudians to non-Bermudians provided they fall within that highest ARV band. This too has been recommended to Cabinet.

The holders of Permanent Resident Certificates and their rights in the acquisition of property have also been reviewed. In many cases, these persons have Bermudian children and our research indicates that through their children PRC holders are able to purchase properties outside of what might ordinarily have been available to them.

Rather than view this as a criminal circumvention of the law or policy, I take the view that this is a demonstrated commitment to Bermuda and a validation of this Government’s policy to provide these long term residents with the permanency natural justice demands of a modern society.

I continue to consider how best to address this unique class of individuals and property rights. That consideration includes an examination of the fees that are payable when PRC holders purchase land in Bermuda.

I am 1200 words in and had not expected to speak as long as this, however, it is bad politics to waste a microphone and in this “season” every opportunity must be taken. The importance of real estate to the local economy means that I am compelled to address some other, related issues.

The wave of new economists in Bermuda often complains or observes the lack of genuine diversity in our economy at the macro level. In the Bermudian context, I take that level to be the Government, revenue-earning, “other pillar” portion of the economy.

However, irrespective of what one’s views may be on that level of diversity or the lack thereof, too little focus is trained on the micro-economy; that is to say, personal, family or individual economic well-being in this community.

So much of our personal economic energy is focused on home ownership that we as a people too often over-extend ourselves in our early years; diminish our quality of life in our prime to make the payments; then still remain reliant on the care of others in our senior years because we are property rich and cash poor.

I do not intend to discourage anyone from pursuing the dream of home ownership. As a community however, and perhaps even as a Government, we must encourage our people to diversify their economic portfolios so that their hard-earned money can truly work for them and they can sustain themselves at the time in life when we all need it most.

Secondly, and equally as important is the one missing feature in the discussion around stimulating the economy in this area of real estate or even generally. What is the private sector prepared to do? The license fee for couples requiring one is only $1,375.00. If we assume that fee to be removed, what is the genuine economic impact for the couple personally? It is negligible. Therefore, consider the following:

• Will the lending institutions reduce the incredibly high down payment required for first-time homeowners?
• Will law firms reduce the fees charged for basic exercises in conveyancing?
• Will agents reduce their commissions from 5%, even symbolically, for a period until the market turns around?

Before my audience rapidly transforms from relatively friendly to one of the other categories I mentioned at the beginning, I must challenge private sector activism because Government de-regulation can only go so far.

We can lighten the touch of regulation, increase the intangible confidence factor and even eliminate processes that unduly delay closings and real estate deals. However, the real action must come from those who control access to capital and from those whose profits depend on Government action.

I am committed to action and unless we act together to strengthen this economy we will not defy the odds as we have always done and we will not deliver for our people as we have often done; and when most successful, we have done it together.

Thank you.

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