News
Island home prices drop as much as 30 percent
June 22, 2009
Home owners are dropping prices as much as 30 percent to sell properties in a continuing real estate slump.
Half as many homes have sold in the past six months compared to the same period in 2008 and inventory on the Island is mounting as homes sit on the market for one to two years without buyers.
Realtors report sales of homes priced in the $2 million to $3 million-plus range are especially sluggish and the average price of condos has fallen about eight percent over last year.
The price of a five-bedroom home with pool and apartment on St. Anne's Road, Southampton, was recently slashed by $500,000 to $2 million after being listed more than a year with agencies including Coldwell Banker Bermuda Realty.
Many other homes are also now advertising 'reduced' or 'new' prices in order to sell and a number of condos are being reduced to $750,000 or below to take advantage of the Government's stamp duty exemption for that price range.
The market is so uncertain right now, real estate developer Gilbert Lopes said his next development will consist of condos in town starting in the high $500,000s, a much lower price point than his previous developments consisting of executive condos in the $800,000 to $1 million-plus price range (see separate story).
"There's definitely been a slowdown," Mr. Lopes said. "There is a lot of property on the market, and prices are being reduced I'd say around 15 to 20 percent."
Johnette McNeil, of W.J. Seymour, agreed, saying: "Prices are dropping, offers are being made sometimes as much as $100,000 less than asking."
The good news though, Mrs. McNeil and other realtors say, is prices in Bermuda on average are not dropping as much as they are in the US and homes are still selling at a healthy pace, especially those priced in the $1.2 million to $2 million range.
Local agents say it's all about pricing a property right for this market, but they also say it could be another year or more before the market fully recovers.
But it may take even longer according to US housing expert and Yale professor Robert J. Shiller who wrote in the New York Times recently that US home prices are in the midst of a decline that may last for years, similar to what happened in Japan after its 1980s housing bubble burst.
He believes prices may continue to fall, or stagnate, in at least 2010 and 2011.
Coldwell Banker Bermuda Realty's Heather Chilvers, who specialises in the $2 million-plus price range, said: "I think it's down to consumer confidence. People are putting off buying and we are seeing owners becoming more negotiable, whereas before they were firm on their price.
"Traditionally, over the last three years we've had on average 15 to 20 sales in the $2 million to $5 million price range. Currently up to June we've had two sales and about four to five are under contract. Prices of at least four of those properties were negotiated down."
Ms. Chilvers says she's seen reductions as high as 30 percent in recent sales.
Buddy Rego, of Rego Realtors, said his agency is also seeing slower sales of $2 million to $3 million homes.
"There is a slowdown in the volume of inventory sold, but the average selling prices are reflecting smaller decreases than anticipated," he said.
"Average sale price of condominiums is about eight percent less than this time last year, however free-hold residences have dropped only around four percent from June 1, 2008."
Mr. Rego says figures show 231 condos and free-hold home closings were registered for the first six months of 2008 and right now, there are just 100 recorded.
But Mr. Rego noted there may be a lag in registrations because of the economy and sales numbers will be more accurately reflected about three to four months from now.
And he noted: "From 2007 to 2008, there was only a one percent change (lower) in the number of units sold, so it will be interesting to see how 2009 fully measures up when this is all done."
He added: "First time homes are selling consistently strong. We're actually working with buyers in all tiers of the market, but they are taking longer to make decisions.
"We also have serious prospects looking in the $10 million and over range but they too are really taking time to assess the value of their purchases.
"At this point, we see what needs recovery most is confidence and anticipate a 12 to 18-month period for the recovery of that to be reflected in the market.