RSIR: Bermuda Real Estate Market 2021 Review

January 23, 2022 | 1 Comment

All categories from 1-bedroom apartments and cottages to family and executive homes “have seen a resurgence in demand,” the luxury residential sales market “saw a significant increase in contracts in 2021,” and “Bermuda’s most scarce resource – land – saw a measurable increase in sale volume and average sale price.”

This is according to a review from Rego Sotheby’s International Realty, which said, “This article provides an in-depth discussion of the Bermuda Real Estate Market in 2021 across all sectors highlighting significant increases, on-going and new market trends and providing insight on what 2022 is expected to bring. Included is the Sotheby’s International Realty Luxury Outlook Report which examines global trends and market opportunities in real estate around the world.

1. Market Overview

Making a rebound across all sectors

“No one expected the property market to rebound as it did in 2021 during the second year of a worldwide pandemic, downturned economies and stay-at-home mindsets. Market confidence was alive and well despite lifestyle changes, low interest rates and pent up consumer demand. With fewer people taking vacations and spending on luxury items like boats, cars and real estate, the market has seen competing offers on properties. Increased average selling prices were the norm in 2021 across all sectors. Non-luxury residential properties saw a 17% increase with an average sale price of $1,023,000, while condominiums under ARV $25,800, enjoyed a 30% increase in average sale price of $322,000.

Rego Sotheby's International Realty Bermuda Jan 2022

“Most obvious to residential landlords and prospective tenants was the scarcity of available properties; therefore, resulting in higher rental values. All categories from 1-bedroom apartments and cottages to family and executive homes have seen a resurgence in demand from both long-term and short-term tenants. Work From Bermuda entrants [AKA “digital nomads”] have depleted the short-term market inventory and taken up some of the long-term rental and sale properties.

“The luxury residential sales market saw a significant increase in contracts in 2021 with a record breaking 73% bought by Bermudians, PRC holders, BOTCs and Trusts. The average sale price in 2021 also increased over the previous year to $6,000,000 with Rego Sotheby’s International Realty [Rego SIR] responsible for 50% of these transactions.

“Bermuda’s most scarce resource – land – saw a measurable increase in sale volume and average sale price. A significant contributor to those increases included the introduction of the estate lots at Riddell’s Bay, moving the market average sales price of land to over $1,000,000 compared to $331,000 in 2020.

2. Rentals Market

“Despite decrease in overall market supply, Rego SIR rented the highest volume of properties in the past 5 years with the average price of residential homes decreased by 14%. This is reflective of the supply shortage of large family homes in the local market.

Average Rental Prices Increased for Residential and Condos

“Average rental prices did increase across the board for both residential and condominiums, except for 1-bedrooms which are typically under rent control. The most significant increase was in the average price of 4+ bedroom family homes which grew by 56% from 2020. This reflects the low supply of high- end large family homes in 2021. Like residential properties, it was the larger 4+ bed condominiums that had the highest price increase of price by 79%.

Significant reduction in market supply by 30%

“The peak in market supply of rental properties was in January 2018 following America’s Cup and remained steady from 2019 – 2020. Since the pandemic, the rental market has experienced a plunge in the number of listings from approximately one third of the inventory was available compared to 2019. This is an extremely significant reduction in supply which has led to rental price increases.

“What we’ve experienced in 2021 is the customer’s perceived importance of the role of the agent. In a market of short supply, even as real estate technology and public data sharing has advanced, renters are relying on the expertise, resources and market knowledge of real estate agents more than ever to help them find a property and be one of the first to see it. Large family homes that are in good condition, in a good neighbourhood and offer extras including a pool or view are often receiving multiple offers over the asking price.

3. Commercial Sector

Demand for Class A Rental Spaces remain high with minimal inventory

“Following the trend that began in 2020, 2021 saw a high demand for class A rental spaces. With Point House now fully let and minimal inventory at the Waterfront Complex, the capacity to accommodate tenants at this end of the scale is dwindling. Class A rentals range from $50 PSF to $90 PSF, depending on a variety of factors such as location, views, amenities, age of building and parking. In addition to the square foot rental cost, Class A buildings often reflect higher service charges ranging from $15 PSF to $25 PSF, and these do not necessarily include electricity, Corporation of Hamilton Tax and Bermuda Government Land Tax. The Class A market is dominated by insurance, reinsurance, hedge funds, financial institutions and law firms from both existing and new to island businesses.

“On the other hand, inventory in the Class B market remains largely available with a smaller audience. Inventory in this bracket has been on the market for upwards of one year. Class B rental rates range from the mid $20s PSF to high $30s PSF with service charges ranging from $8 PSF to $12 PSF. These buildings are not usually in the Central Business District, may not have all modern amenities such as elevators, generators and often do not offer water views or parking. Most of the interest in these buildings came from the local market and firms that are not motivated by prime west Hamilton locations.

“Hotel Tourism sector was very active as the remaining Villas at The Loren at Pink Beach sold to international buyers. The Loren Villas, St. Regis Bermuda Residences and Azura Resort condominiums with their lock-off design and owner incentives, proved attractive to investors and owner occupiers. As the year ended, internationally available condominium inventory dwindled to 4 physically ready units between St. Regis Bermuda’s first phase at Jobson’s Cove and Azura. St. Regis Bermuda’s second phase of 15 additional residential condominiums under construction was nearly 47% sold or reserved by year end.

Decrease in unit volume and average sale price of commercial properties

“There was a total of six commercial sales in 2020 with market average sales pricing at approx. $1.3M. There was a higher demand for warehouse / industrial buildings outside of the City of Hamilton reflected in the type of inventory that traded.

“In comparison, there was a total of four commercial sales in 2021 [to date recorded by the Land Title Registry Office] with the average sale price slightly less at approx. $1.23M. The demographic of buyers includes Bermudians and those who will be owner occupiers. Rego SIR represented 75% of commercial sales in 2021 including 26 Burnaby Street [previously the BMA & Butterfield Bank Private Banking] and 93 Front Street after a total of 141 days on market. Another notable sale by Rego SIR in St George’s was the 12,000 SF Somers Wharf Building. Prices per square foot varied widely from $135 PSF to $370 PSF depending on location, attributes, rental income or potential and existing building conditions.

What to expect in 2022

Bermuda Market

“In 2022, our observations suggest that tenants and buyers will continue to seek out value when not able to acquire move-in ready accommodation in both commercial and residential property. New, renovated properties will dominate the transactional activity and unless more properties enter the market volume is likely to be subdued this year.

“The health of our economy will depend hugely on the health of our citizens this year and consequently the tourism industry. We will need all boats to rise with the tide this year if we are to survive the onslaught of quarantines, curfews and testing.

Global Market

“2022 is likely to be the year of the international buyer as borders open and vaccinations and boosters roll out. Sotheby’s International Realty® 2022 Luxury Outlook Report identifies the trends likely to shape the world’s prime housing markets in the year ahead. The comprehensive report offers insight into the high-end real estate industry as the starts-and-stops of the pandemic’s reopening fueled even stronger demand and inventory struggled to keep pace. The global report reveals that relief from the market frenzy may not happen quickly as prices are expected to rise in 2022. In addition, a shift to a hybrid work model is fueling more buyers to invest in real estate and seek larger homes that can accommodate remote work while remaining within commuting distance. Read the full report here.”

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Comments (1)

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  1. Toodle-oo says:

    Bermuda is basically in a depression right now complete with stagflation , people leaving the island in droves and others unable to make their mortgage payments or keep their jobs. After years units remain unrented everywhere and house prices plummeting. Many even loosing their homes and they want us to believe this fairy tale ? haha
    Pull the other one please.

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