Bermuda Real Estate Investments

The value of real estate in Bermuda has been escalating over the years and people who got in early and did their homework did very well. For the overseas buyer, Bermuda is an interesting alternative as it seems that real estate values do not fluctuate as much and are not as easily affected by the economic cycle.

In fact, the condominium market has been particularly strong with an average of 18 percent increase in the price of condominiums sold between 2009 and 2010. In addition, 2010 showed a 300 percent increases in houses that were put under contract as compared to the previous year. Statistically, the 2010 figures show that 100 percent of non-Bermudian purchasers of houses in 2010 were American; with condominium purchasers being predominantly British.

Bermuda Real Estate

Property Development Control

Investors into Bermudian real estate generally are confident of the continued escalation in the value of their properties as there are limited supply of these options for non-Bermudians.

It must be remembered that the Bermudian government controls property development rather tightly therefore limiting the development potential but this has the effect of at least maintaining, if not increasing the value of existing property bearing in mind that 21 square miles of space is all there is on the island.

In addition, the Bermuda government introduced a policy in 2005 that stipulated that non-Bermudians are eligible to buy property but only from other non-Bermudian owners thereby limiting the amount of property available to the overseas investor. This is yet another reason for the value of such properties to be on the increment.

Current Status of Real Estate Market

For those reaching for their check books, perhaps a hint into the dollars and cents of what we are talking about is relevant. Early 2011, there were 20 properties available for purchase for non-Bermudians with the prices ranging from $3.75 million to $25 million; whereas the condominiums available were from $925,000. The alternative is to consider fractional ownership, or if you are keen to invest but do not have this kind of money lying around, it may be viable to consider pooling with other like-minded investors in order to fulfill the financial requirements.

The rental returns are pretty healthy too with the average rental of non-Bermudian owned properties being in the five-digit zone therefore suggesting that the duration to derive a full return on investment is much shorter.

Things to Notice

There are minor details that potential investors into Bermudian real estate should be aware of. Firstly, non-Bermudians cannot buy vacant land however may opt to buy land with a building on it and then tear it down for an alternative development.

Secondly there is a licence fee that must be paid. This one-off payment applies to each purchase and basically buys the licence to own that particular piece of land. The ballpark figure of the licence fee is about 25 percent of the purchase price at maximum. When purchasing condominiums however, the licence fee is a mere 6.5 percent of the purchase price.

Thirdly, there are stamp duties to be paid and while this cost may be split with the seller, it works out to between 2.5 to 6 percent in total. There are also the legal fees that work out to less than one percent of the purchase price and is commonly split between the vendor and the purchaser as well.

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