Open mike: House prices and emigration

Bill Cook is concerned about the impact of house prices on emigration: "A young couple or a single person taking up a loan of say $750,000, amortised over a period of 30 years, could end up paying $4,500 per month! Regrettably, we do not keep records of how many of our brightest and best leave to be educated abroad and do not return, but even within my own circle of friends the number is quite scary. I am talking of 100s. And of course seniors who can't afford to live here sell their homes for top dollar to go and use the cash to have a better standard of living but unfortunately a more lonely life. We need to address this, and fast."

Comments

[m on 01.02.06 at 14:22]

and the sad thing is, 750k won't buy you much at all...something has to give....

[H Reardon on 01.02.06 at 14:28]

Bill,

What is wrong with letting economics sort this issue out (as it currently is)? I realize that everyone has an emotional tie to the place where he grew up, but does that also give you a right to live there until death? Should someone who grew up in Manhattan have the right to live there the rest of his life even if he can't afford it? At whose expense? Should rent control or housing price control be enacted in Bermuda? That would be redistributing wealth from property owners to non-property owners. Why is that a good thing? If I worked and scraped my whole life to afford a house and then your laws gave someone else the right to it for less that it is worth, where is the justice in that? Further, by definition the house will be sold/rented for less than it is worth, therefore creating a surplus of buyers. Who gets to decide who buys/rents the house when the price is fixed? The government?

The other solution is that we close the boarders and not allow Bermuda's "best and brightest" to leave, or that we don't allow seniors the choice of living out their days in Florida. Maybe we could use our new relationship with Cuba to provide tips on how to keep the population in.

[sandgrownan on 01.02.06 at 14:29]

Apart from the basic supply (limited) & demand (great) economics here in Bermuda, the vast rents some properties can command affect their values.

So, their are two radical options. One is to rent cap. Remove put a ceiling on what can be charged for a particular type of property to prevent those with very deep pockets skewing the market.
Secondly, perhaps even more radical, is to limit the number of properties an individual can own. Rent one, live in the other, and seel the rest. Property is never going to be cheap here, but we do need to put a check in the spiraling costs. Just a couple of suggestions.

[sandgrownan on 01.02.06 at 14:31]

oh, and build more high rise in Hamilton.

[SmokingGun on 01.02.06 at 14:39]

H reardon - please don't ever run for a position where you might actually be able to impliment your thinking. :0

First of all comparing Bermuda to Manhatten is absurd. One can cross the river from Manhatten and still buy a great place. You'd still be in the USA to boot. Bermuda is a finite little country that effectively limits the ability to house all levels of income unless it is properly and creatively managed.

If we leave it up to the "economics" of supply and demand we will soon lose a lot more than our best and our brightest. It will become a case of discrimination aginst those who cannot afford to pay the going rent or mortgage rates.

[NoVote on 01.02.06 at 14:46]

The fact that people are choosing to sell their homes and move elsewhere with the proceeds is a matter of personal choice.

Presumably these people are better off overall from doing so, even though there may be trade-offs such as being disconnected from family and other community networks.

Obviously there are also consequences for those left behind too, and the interests of these people may not always play as strong a role as some might like in each emmigrant's decision.

Personally, however, I believe that it's a good thing for those that are lucky enough to be in this position that they have this choice.

The more serious matter is the cost of housing as a proportion of people's income, and how this impacts those that do not have a house to sell. They do not have the option to leave and enhance their standard of living.

Ultimately this comes back to the low cost housing, which I expect has featured several times on LiB.com

[Simon on 01.02.06 at 14:47]

This is a tough one. What needs to happen is for there to be a serious market correction but given the demand I don't see that happening for a long time - unless something happens and Intenational business jumps ship. Then again that doesn't solve the next part of the problem with Bermuda losing the intellectual property that its well educated youth bring since no IB, then no demand for their employment.
If Govt could do something to limit the amount of Rent allowance some ex-pats are paid then that might lead to less demand for the high end rental proerties bringing down their rents which would probably trickle down the rental market. That may lead to a correction in the housing market since renting out properties may not then give the investment returns it currently does.

If we can't reduce demand then the other way of bringin down prices is to increase supply. There are at least 2 large expanses of land on teh Island that could and should be dewveloped on to increase the housing supply. It could be legislated that these homes are for owner occupation only to stop Bermudians buying up the properties just to rent out.

Just a few initial thoughts.

[Zoom on 01.02.06 at 14:48]

"There are at least 2 large expanses of land on teh Island that could and should be dewveloped on to increase the housing supply."

This is not the solution - open land should be protected. More intensive redevelopment should be encouraged in existing areas.

[Simon on 01.02.06 at 15:09]

I don't agree - what are those pieces of land currently being used for? Bermuda can not afford to leave this land unused. The main priority for a Govt should be to make sure that its people can afford to live and to encourage its youth to invest for their future. The land at Southside and Morgan's Point is ideal to a development of affordable houses - not these cheap mobile home things DeVent brought in, but proper homes.

[ace on 01.02.06 at 15:14]

"So, their are two radical options. One is to rent cap."

We have rent control in many areas. I have two units under such restrictions.

[tilti on 01.02.06 at 15:24]

H Reardon, I beleive taht you are missing the second and significant part of the issue. There are a number of university students - myself included - who feel that coming back to Bermuda to apply their education is not worth it to them on a financial level. There simply is no 'starter' housing. The government needs to look at building restrictions and change them so that affordable and small apartment buildings can be build while a person in their early 20's is starting a career.

[H Reardon on 01.02.06 at 15:32]

SmokingGun,

There isn't a policy that I would need to implement--this is the way it works today. Although I would reverse out the moratorium on sales to expats by Bermudians.

Let's explore your statement "It will become a case of discrimination aginst those who cannot afford to pay the going rent or mortgage rates." That is what economics is--money is used to ration goods, housing, ect. Is the waiter who can't afford a big house in Tucker's Town "discriminated against?" Of course he is, and money is used as the thing to determine who gets what goods. There never has been and never will be a better way to ration goods.

If you are concerned that the waiter will not be able to afford a place to live, then who is going to serve food at the restaurants? The economics of the situation will have to change such that the waiter will be able to afford the rent--either by higher wages or the market finding lower income housing. If not, no waiters, ditch diggers, garbage men, ect.. Society will have to adjust its economics to afford these things if the population demands them.

Consider the alternative of some of the other posters:

"limit the number of properties an individual can own."

"If Govt could do something to limit the amount of Rent allowance some ex-pats are paid"

Limiting wages and limiting ownership--that's scary shit. I do agree, you start doing things like that, and you won't have to worry about housing prices--IB will be in Dublin. Now your wages on the other hand....

[SmokingGun on 01.02.06 at 15:35]

I too believe that there are far more practical ways to improve the housing condition before dipping into our future reserves and using up extremely valuable open space such as Morgan's Point. Southside on the other hand is a viable place to look at because there is a definite need to draw the economy away from the central parishes and down to that end of the island. It has a great infrastructure in place. The more people that can live in the eastern parishes the more it will help build better services, create jobs closer to home and put less pressure on the rest of the island.

[H Reardon on 01.02.06 at 15:37]

Tilti,

I don't disagree with your point--if government would remove some restrictions, affordable housing could be built--particularly on the old bases. I would do it if I could, but Government wouldn't let an expat like me.

What I am concerned about is several who will argue for more Government restrictions to try and solve the problem (limit wages, limit ownership, as seen above). That is never a long term solution.

[thisgrassman on 01.02.06 at 15:39]

oh, and build more high rise in Hamilton.

Posted by sandgrownan on 01.02.06 at 14:31

Exactly right! And why has this not become a major focus of the sustainable development plan?

Its not some huge conceptual leap either. 50 years ago Hamilton had a sizable resident population that lived in a predominantly 2 story city – numbers have now shrunk below 1000. If high rise residential development was allowed then why cannot we contemplate Hamilton sustaining a population of over 10000?

[Simon on 01.02.06 at 15:47]

Rent allowances distort the rental market since they are generally paid on a use it or lose it basis. As such there is no incentive to reducde the rent of a place he/she is looking at since it does not benefit them so long as the rent is no higher than their allowance.

[Missy_Lobo on 01.02.06 at 15:50]

I agree, what we need is cheaper high rise appartment building. Not like Atlantis with the Deli, the gym and the pool. Just simple appartment buildings for young Bermudians returning from school or even those e-pats without the high paying jobs, and rental allowance. Somewhere where a young single person or even couple can live and save money to one day buy a house. With the rents the way they are, once you are renting a place there is not enough money left over to try and save towards buying your own house. Something needs to be done and soon.

[SmokingGun on 01.02.06 at 15:50]

H Reardon - I don't think a waiter who cannot afford a house in Tucker's Town is necessarily being descriminated against at all. Heck I can't afford one and I don't in slightest feel any sort of discrimination.

I would however feel it if I was told by my boss that my fellow employee who has the same skills and work ethic was being paid a stipend to cover the cost of their rent and I was not. And I would be somewhat angry if I found that each year my rent kept going up and up to the point that I had to seriously consider leaving my homeland because I couldn't keep up.

It's one thing to get a raise based on performance it's a total different thing to be penalised because those that you pay your taxes to havn't got a clue as to how to manage things for the good of the country as a whole.

[NoVote on 01.02.06 at 16:15]

My solution to the housing problem goes like this:

- Government imposes a law that mandates rental owners must direct a proportion of the income from renting their properties to specialised investment vehicles (that the rental income earners will thmeselves own).

- The proportion of rent directed to these investment vehicles would increase on a sliding scale depending on the amount of rent earned.

- The property owners would own the investment vehicles, but the funds contained within them would only be allowed to be used for the financing of government approved residential development schemes in Bermuda.

- The owners of these specialised investment vehicles would only be able to liquidate them through the sale of residential property (with an occupancy certificate)contained within the investment vehicle.

Obviously the fine detail would need to be worked out so that such a mechanism wasn't abused, but the intention is that some of the 'surplus' incomes from high rents are directed back towards increasing the supply of residential property in the market.

[D'Olivier on 01.02.06 at 16:36]

Smoking Gun points to another problem exacerbating the housing problem: rent allowances for expats living here. Which I think is absolutely insane, since it is a subsidy that distorts the housing market for locals.

The solution (build more houses) is the best, long-term, but some restrictions have to be overcome. The restrictions that should be chucked out by Government are 1) that law restricting buildings from being taller than the Cathedral and 2) planning regulation on how "Bermudian" the building should be (which causes delays when Planning thinks you need more BDA characteristics based on some archaic thing written by some bureaucrat 50 years ago with no imagination).

Of course there will be protests from the Nimbys ('no way am I going to have some high building blocking my view') and the environmentalists. The second groups can be swayed, though the first probably can't. What's needed in this case is a Minister with backbone to force through these changes and allow construction companies and real estate agents the opportunity to sell these apartments to everyone (or at least rent them to expats)for the greater good. Sadly, there's no one in the PLP has that sort of a spine, I think.

[Bill Cook on 01.02.06 at 16:39]

Reardon,

That there will be and always has been movement of natives leaving and foreigners arriving in most countries, with the possible exception of Japan.

When we think of sustainable development however, our most precious resource in my opinion is our people and in particular our youth, especially our best educated youth, as the wall sitters cant go anywhere as who would want them ?

We have spent time and money producing these young people in many instances and while they are free to pursue their futures anywhere they choose, I feel that more should be done to encourage them to remain.

The fact is we must bring in others to perform the positions that we cant fill.
This brings with it a variety of problems that are less problematic than in other larger countries.
We find that having so many outsiders in such a tiny place causes great uneasiness to Bermudians and causes some social problems etc.

I personally feel that many people do not want to own their own homes and be saddled with lifetime debt, so they would rather rent.

If we were forward thinking, we would not be in this position and the government should be the landlord of inexpensive or affordable housing, that would house everyone who wanted the basics only.
There are all manner of high raise storm proof buildings that could take care of this which would need a degree of subsidising to a reasistic level.

The day will have to come when we are forced to go up with high raise apartment buildings.

It is all well and good to say the elderly are lucky to have a house they can sell and move overseas, as the cost of a house that for example I bought for 15 thousand pounds in 1969 now worth 2 million dollars etc as having to leave your friends and family is harsh for some.

[H Reardon on 01.02.06 at 16:40]

NoVote,

It is easy to take money out of someone else's pockets, huh. So I suppose your scheme would apply to my former secretary who moved out of her house with her husband and two kids to rent it out to expats to save some more money. She was using the money to send her kids to private school. She and her husband made a decision to sacrifice the comforts of their home, rent a far inferior home, and send their kids to private school. You would tax them for making this choice, and probably leave them without the ability to send their kids to the private school.

[Tiggy on 01.02.06 at 16:47]

More highrises in Hamilton? As long as they don't have the sticker prices of Atlantis - $650,000 for a tiny one-bedroom apartment??? That building must be full of expats with housing allowances or perhaps the companies are just paying the rents. Affordable housing - what a concept! I have two friends, both working with good jobs, both Bermudian, who can't afford a place of their own. They're both in their 40's - not like they're just out of college with no savings. It's very sad indeed. It seems the only way for Bermudians to get a piece of the rock is to inherit it from their parents!

[C Broadhurst on 01.02.06 at 17:03]

Any taxing or capping of rent would only punish those of us who did multiple jobs and struggled to get somewhere instead of blowing all our money on BMWs early in life.

Another ridiculous argument I've heard is you restrict the rent someone can charge if his house is paid off (no debt). My wife and I made many sacrifices to pay for our house - and I get truly pissed at people who say I'm 'lucky' to not have a mortgage.

I also did without a car for the last 14 years so I could pay that mortgage.

[Guilden M. Gilbert, Jr. on 01.02.06 at 17:13]

If there is any concenr by environmentalist, etc. about high rise apartment buildings, why not use 20 acres within Southside and 20 acres within Morgans Point, divide the property into 1/8 acre lots. This yields 320 lots. Each lot will have a very basic house on it - 2 bedrooms, a bathroom, living/dining room and a kitchen. All of this can be done in 900 sq. ft.

Government can buy the materials to ensure volume discount is passed down to eventual homeownwers. A number of smaller contractors can be hired to build these homes. Surely this would mean that each home could be built for about $180/sq. ft. or $162,000.

All stamp taxes and conveyance fees will be waived and the home, if sold within the first 10 years cannot be sold at a profit. The homes would only to sold to first time homeowners.

Actually, the houses can be less than 900 sq. ft.

Bedroom No. 1 - 12 x 14 = 168 sq.ft.
Bedroom No. 2 - 12 x 12 = 144 sq.ft.
Bathroom - 5 x 8 = 40 sq.ft.
Living/Dining - 10 x 20 = 200 sq.ft.
Kitchen - 8 x 10 = 80 sq. ft.

The layout to fit these rooms would have to be established.

Total = 632 sq.ft.

The price than reduces to $113,760.

We are not talking luxury here, we are talking necessity.

[Bill Cook on 01.02.06 at 17:13]

Chris

I hear you loud and clear as I too did not own a car prior to owning my house.

I did not own a car until I was 35 yrs old.

[H Reardon on 01.02.06 at 17:15]

Well said Mr. Broadhurst.

[SmokingGun on 01.02.06 at 17:49]

Guilden - what you propose is something akin to what the US created for its troops returning from WWII. They had the land, we don't. It would be a terrible waste of such a precious resource. If I were to be forced to live like a cockroach in a 632 sq ft den I'd much prefer it to be on the tenth floor with a view.

CB - that is the way it should be done. You have proven it can happen. I have no problem with market forces I just have a problem with appointing people in charge who are not savvy enough to understand and work with them without having to try to figure out a way to get some direct benefit on a personal level. Which in a nutshell is what I think is the reason for a great deal of Bermuda's issues. And I'm not just laying the blame on our current crop of cowboys.

[VB on 01.02.06 at 19:56]

"Bermuda's problem is not the high cost of living. It is the cost of living high". So said my father at the kitchen table one night in the late 60s.

The cost of real estate then, as now, was very high relative to wages at the time.

We lived in a house with 1 TV, 1 phone, a simple self contained radio/record player. We cut our own grass, painted our own house, did our own repairs, went out to dinner maybe a couple times a year, traveled for pleasure once every 3 or 4 years. My father in fact never left the Island from 1946 till the day he died in the late 80s. He kept the same car from 1946 till 1983.

Today everyone expects to have a TV in every room, cable or WOW with the premium channels of course, a new car every 5 years, a new bike in less, phones in every room, a cellphone for everyone in the house, 2 or 3 vacation trips every year, home theatre system, computer with unlimited DSL, dinner out whenever you feel like it (often) plus all the convenience foods & appliances at home & don't forget the landscapers who come by every couple of weeks.

Oh yeah, we expect all of this with a 35hr week, 3 weeks starting vacation & be able to pay a mortgage too.

Too those who think that rents are expensive take a look at building costs at $300sq' & see what the net return is on that money after all expenses are paid.

Want a house? Cut back on living high.

[Silencio on 01.02.06 at 20:35]

The market is God and Bermuda should do whatever it takes to ensure that capitalism thrives in Bermuda. Can't find a house in your own country? Too bad, the market is being satisfied without you. Don't you all realise that Bermudians are irrelevant in Bermuda's economy? Bermuda can import as much labour as it needs to satisfy its businesses' needs.

[Tim Taylor on 01.02.06 at 20:44]

Excellent point by VB, but here's an actual comment by a respected Real Estate agent working for a top class company, as of November 2005: "If you don't already own property, and you and your spouse aren't employed in the exempt company sector earning huge salaries, you can not, and will never be able to buy a family house in Bermuda under the current economic conditions. The math just doesn't add up. You simply can't earn that much money to pay the mortgage and bring up a family. Either house prices have to fall dramatically, (which current homeowners don't want), or the stock of price controlled available housing has to rise dramatically, (which has not happened, nor sems likely to happen under the current administration). Other than that, the average young Bermudian has zero chance of buying a family dwelling in the forseeable future."
That's scary. And why would a young, smart, educated and upwardly mobile Bermudian want to commit themselves to a whole working life of paying a ludicrous mortgage here, when they can make a better life overseas?

[D'Olivier on 01.02.06 at 20:45]

VB, even if people cut all their expenses down to the absolute bare minimum to save for even a deposit of, say, 40%, it will still take around 30 years to pay for a house (that includes taking out a mortgage and paying a 20-year mortgage off 10 years early).

People can only do so much. The average price of a house is around $1m. Wages for a professional in Bermuda would be, maybe, $100k. I may be off the mark in estimates, for houses and salaries, but something is definitely wrong where the average house is 10 times salary, as opposed to the UK, where they are complaining that the properties are growing increasingly outside the reach of the first-time buyer, but there are flats that you can buy with a mortgage on 3.75 times salary.

Let me repeat that. 10 times salary in Bermuda vs 3.75 times salary in the UK.

So if you want a house in Bermuda now you either 1) throw away your life and save money money and pay a mortgage until you die, and become a monk in the process, or 2) leave Bermuda, find a job overseas then find a flat that you can pay off in twenty years and still have something left over to enjoy other aspects of life.

It's a no-brainer for the house-hunter.

[jake on 01.02.06 at 20:54]

I think $4,500 per month for a couple is reasonable.

If they are really "best and brightest" they earn enough to afford it.

[loki on 01.02.06 at 21:00]

"I think $4,500 per month for a couple is reasonable.

If they are really "best and brightest" they earn enough to afford it"

How very elitist, Jake. Are you kidding? My wife and I bought our house four years ago for $325K. It was valued in the last six months for $900K. That's nuts. Simply nuts. Our house is a nice 2 bedroom in a quiet Southampton neighbourhood; very much a nice starter home. I think it's crazy that a couple should have to pay $4500+ per month for their first home. We're lucky that we got in before the housing boom but, Christ, I count my lucky starts that I'm not a first-time homebuyer in today's market.

[RedOnion on 01.02.06 at 21:02]

I am very concerned about the brain drain that is clearly happening here. Bermuda desperately needs these educated young people for our very survival in future years. The more Bermudians that emigrate, the more foreign staff that need to be imported to meet the demand, each and every one requiring housing and often having their employer meet the cost of that housing via allowances which Bermudians can't rely on. Does the term "vicious cycle" sound about right?

Before anyone jumps on me, I have no issue with foreign workers being here, there is clearly a need for them, however I am looking at the long term effect, that is the big picture.

[Tim Taylor on 01.02.06 at 21:07]

Loki and Jake,
I don't know about Jake, but I know Loki is in a good position, earnings-wise. What about a guy who drives a truck for the Corporation? He can never, ever afford a home in his own country, and doesn't have the qualifications or ability to go abroad and start again. Does he, in Mr. Reardon's economic universe, simply have to "work harder", or is he, in real life, "shit out of luck"?

[Guilden M. Gilbert, Jr. on 01.02.06 at 22:43]

Tim,

"If you don't already own property, and you and your spouse aren't employed in the exempt company sector earning huge salaries, you can not, and will never be able to buy a family house in Bermuda under the current economic conditions. The math just doesn't add up."

There in lies the crux of the problem. That is a sad, sad reality. There is no hope for those who will not be fortunate enough to receive property via in heritance.

SmokingGun,

Instead of 632 sq. ft. make 1,000 sq. ft. There would be very few "affordable" apartments in ANY highrise apartment building constructed in Bermuda due to the cost of material and labour. Someone said earlier that construction costs are now at $300/sq. ft.

There is a lot of talk about the need for low cost housing but it is only talk because if someone truly made an effort to create low cost housing, such as the proposal I made above (I am not saying it is necessarily the answer but ideas need to be put on the table) it would be shot down and you wasted no time in proving that.

You shoot it down but you do not offer an alternative. If it is the highrise apartments please explain how they will be affordable. Maybe you can start with your definition of affordability and does your definition account for those truck drivers, garbage collectors, postal workers, etc.

I don't think it takes a rocket scientist to figure it out but in order to create low cost housing there has to be some sacrificing. Its easy to say if the economy does not allow you to participate you should find alternatives. So what is Bermuda going to do if people do actually seek alternatives? Who will sweep the streets, collect the garbage, handle the mail, deliver goods to your home etc?

I hear the cry on this site about the government not doing anything about affordable housing but the very minute they actually try to do something (PLP or UBP) there will be cries, "Not in my neighbourhood" or "Why use that land?" or the more common one, "That's won't work, that's not the solution!"

It is time to seriously address a serious and growing problem. The state of the housing market is causing and will continue to cause many social ills. It is a matter that needs to be addressed by the country as a whole, not just the government.

I read in the Royal Gazette that by the year 2025? the population in Bermuda is projected to be 75,000 plus. Forget independence, if the housing situation is not addressed with urgency it is the number of homeless and poverty stricten that will destroy Bermuda.

[Aruba on 01.02.06 at 23:53]

I'm in my 20s and am currently shopping for a condo here. It can be done and although it will involve considerable sacrifice, I still believe it's worth doing. The mortgage I can get on my current salary won't even cover it, so I'm having to top it up with a home equity loan using my parents' house as collateral (so I better not default on it...). I will be responsible for all the payments so it's not as if they're giving me a house to live in.

I'll need to rent out the second bedroom to afford the monthly payments, which will amount to about 4K incl maintenance fee. Some say I should find a wife but that would be even more expensive so a roomate will be fine for now. I'm optimistic about my future prospects here (currently training as an accountant) and my current salary is quite modest by Bermuda standards. But assuming I finish my exams, I think I will have good career opportunities here, better than most other places. So that's why I'm committed to buying a property.

I don't support expat housing allowances at all. Bermudians with mortgages working for these same companies should receive the exact same benefit but I don't know if they do or not, maybe someone here can clarify.

[Bill2 on 02.02.06 at 07:46]

I don’t normally post on this sight but I have a couple of thoughts.

Reardon, I believe you are almost exactly right, the market will sort itself out one way or another. History shows us that government intervention generally causes more problems in the long run than it solves in the short term.

Legislating property ownership, rental levels etc would be a very sketchy thing to do in a place like Bermuda. Many people put literally everything they have into property. There are lots of people out there without any other form of investment and have worked their whole lives to create what is essentially their retirement fund.

Introducing more housing is as far as I can see the only way to correct this issue without pulling the rug out from under people’s feet. If our population increases as forecast houses will still be valuable regardless of the increase.

I think Guilden’s idea is fantastic and it would produce many houses using a very small percentage of the remaining open land we have to play with. I also think legislating the price for ten years that the houses can be sold on at, is a very good idea. However, inflation should be taken into consideration as we don’t want the owners to loose money.

I don’t think government has the wherewithal to do a project like this. But I think if they made the land available, as Guilden suggests as well as guarantee that all stamp taxes, and conveyance fees will be waived and formed a board of directors who are very experienced in construction to oversee the project, who are wealthy enough not require a financial gain but rather do it for the good of our country and who can guide the small contractors and ensure they are being efficient whilst still making money fairly. We could all benefit.

Whilst I realise I am still suggesting we fiddle with the market, I feel it could be effective. Choosing the appropriate directors would clearly be the challenge but I imagine there are people out there who have maybe recently retired or stepped back from their jobs.

I am young, 22 and hope to return to the island in the near future. I have know idea how I am going to get into the property market but I am sure it is possible and I am determined to do it. However if the government where to start introducing legislation I suspect I would just rent a place with a bunch of friends to keep the costs low and put anything I can save into mutual funds.

[Silencio on 02.02.06 at 08:06]

Well done Jake! Like you, I believe that if you don't have a degree, are married and each earn $80k per year, you just shouldn't be able to own property in Bermuda! Screw honest, hardworking people who haven't got the brains or personality to become an underwriter, accountant, lawyer or CEO. Bermuda is for the world's elite - not Bermudians!

I have very little pity on this issue. Bermudians have received exactly what they asked for. We have no national identity, so we don't think like a collective. Those who have always had money have run this country for their own benefit, at the expense of future generations. Denying 70% of your population equal opportunity started the brain drain decades ago! And those who now have the power to do something about it are busy filling their own pockets, or are bowing down to the conscience of capitalism.

This is what happens when you don't believe that Bermuda should first and foremost be for Bermudians! This is when you don't give a damn about your own people! So every man for himself! Screw that national identity stuff. Let's keep pissing on anyone who thinks that Bermudians are important.

We're a bunch of friggin' Dollar Zombies. It's the only thing we believe in. As long as we do not value ourselves, and give action to our own collective viability, we will continue to sell ourselves out! And we HAVE been selling ourselves out long ago.

[Bill Cook on 02.02.06 at 08:51]

I have spoken to a very experienced contractor discussing affordable housing in Bermuda.

He assured me that it is possible if we allow prefab units to be brought in and mini hi rise to avoid the cost of elevators and have better use of land.

These unit clusters are very comfortable and combine several features new to the traditional Bermudian way of construction roofs water tanks etc but very much cheaper to do, and durable even moreso than traditional houses.

We would have to change the mind set and compromise traditional archetecture to bring this about but it could still be quite attractive at about 1/3 cost PSF of present cost.

I wish plans could be shown and I can not reveal names at this point but I thought it was the best I have seen even though I am convinced that 10 storey or higher is the best way to go and fully support assistance from government to control costs.

[C Broadhurst on 02.02.06 at 09:52]

It is simply unfeasable for the average couple to buy the average house in Bermuda yes. But it has been so for a long time.

In 1989 the average house was about $450,000 so guess what? My wife and I went and bought the cheapest place for sale in Bermuda ($230,000)and made do with an eleven year old car. The house was 550 square feet up a very undesirable street, but it was ours. We ate a lot of mac n cheese that year but sold it and made 25% on it in 13 months.

We upgraded twice more to eventually get what we wanted. It was a struggle yes but it can be done. It requires sacrifice and dedication.

Moaning about not being able to buy a million dollar house first time out is just setting your expecations too high. The average couple must start at the bottom and work their way up.

It can be done - just realise that your first address wont be anywhere upscale.

[Guilden M. Gilbert, Jr. on 02.02.06 at 10:34]

Chris,

I think you make a whole lot of sense and you and your wife were wise to do what you did. However, unless I am mistaken, there are very few houses on the market in Bermuda (including condos) for less than $650K - $700K. You happened to get in the market before the swift upward movement of housing prices.

The reality for most couples is that if you are not already a homeowner in Bermuda and have a substantial combined annual income your chances of homeownership are slim to none even if you live off canned tuna fish.

The banks now offer 90% financing, which allows more people to meet the downpayment requirement but financing 90% of a $700K home, provided you cna find one at that price, means that most of your income is going to making the mortgage payment. The average salary in Bermuda is now what, $45,000? Forget about insurance, property tax, maintainance, etc. It is a reality that the average Bermudian cannot afford to own property even with sacrificing everything.

From what I have seen, if you can find a house with a price tag of around $700K it is a fixer-upper, which will require a few hundred thousand dollars to fix-up.

For all its success, the Bermuda economy has squeezed Bermudians out. I fully agree with Silencio, this is what happens when chasing the almighty dollar becomes more important than the people of the country.

[Silencio on 02.02.06 at 11:09]

"In 1989 the average house was about $450,000 so guess what? My wife and I went and bought the cheapest place for sale in Bermuda ($230,000)and made do with an eleven year old car. The house was 550 square feet up a very undesirable street, but it was ours."

CB - In 1989 you were able to buy a HOUSE in an "undesirable location" for $230k. What would you call undesirable? I doubt that you could find a house at that price on 42nd Street these days! Today a 30 year old one bedroom "condo" (ex apartment) in an "undersirable location" all the way in Somerset will cost you $600k+. And then you have to contemplate the possibility of a housing bubble. There was no question about the wisdom of buying a house in 1989, but now, at overinflated prices, there is much concern about getting screwed.

If you are going to compare 1989 to 2006, you also have to ask have salaries increased at the same rate. Would you be able to do the same thing you did in 1989 at your inflation adjusted salary? I doubt it. Your average starting salary has not increased at the same rate, and I know for damn sure that very few people have seen a 150-300% increase in salary for the same job.

Congrats to you and your success, but you are micing if you think the same opportunities are possible today with the same sacrifice.

[Triforce on 02.02.06 at 11:17]

Crap. And if you are single and don't have that additional income coming in then you're really out of luck. Or is it simply unrealistic for a single person to want a small house here?

Even rents are absurd. As NoVote mentioned, the cost of housing as a proportion of income is insane (sure if you're able to pull $100K a year it's probably more manageable). Even rents are crazy. Should someone making $55K or thereabouts be paying $2500 a month in rent? Lord forbid having to raise a child on top of that.

MissyLobo said something earlier that I have been thinking for a long time. We don't need a pool and indoor gym, just a simple one-bed apartment to start with. People should have the ability to rent AND save up at the same time.

[real world on 02.02.06 at 12:00]

Why would you even dream of buying a house in the current run of things. There's a very good chance that Bermuda could be independent in a couple of years with the likes of scumbags like Burch the head honchos. Me, I'm saving for another two years and then leaving, if I'm going to buy a house it ain't going to be here.

[Silencio on 02.02.06 at 12:19]

The other thing a lot of people forget is that a lot of those "average homes" were financially feasable because they had an apartment on the side. Yeah try finding a house with income for less than $1.4.

[H Reardon on 02.02.06 at 12:24]

Mr. Broadhurst has done an excellent job of outlining exactly why house prices are so high--because people value owning their own home. Mr. Broadhurst and others like him put a high value on owning a home, so they worked hard for it. When many people want the same thing, and that thing is limited, the price goes up. With people like Mr. Broadhurst and his wife working so diligently to attain their goal, it forces others to do the same and results in higher prices--in this case the price was more mac and cheese and an old car.

Many of you seem to have a sense of entitlement to own a home because you are Bermudian. It just doesn't work that way. Home ownership in the US has recently reached it's highest level in history, with about 2/3rds owning their home. What that still means is that 1/3 don't own a home. The unemployment rate in the US is about 5%, therefore about 30% of working Americans don't own a home. I'd be interested to see comparable Bermuda stats.

I saw a lot of merit in Guilden's earlier post about building small low cost houses at Southside and Morgan's Point. What I would be interested to hear is if Bermudians would live there, or if Bermudians would not want the stigma of "living in the projects."

[Guilden M. Gilbert, JR. on 02.02.06 at 12:34]

Reardon,

You last question is a very interesting one. Bermudians, for the most part, as can be seen in SmokingGun's response to my proposal, believe that they are above such accommodation.

Based on the present situation, I think Bermudians need to humble themselves and understand that there is no shame in having to settled for a smaller, less expensive home. One's worth is not based on how much money one has or what one can afford.

Besides what I have propsoed does not have to be considered a "project" if each person takes pride in his/her possession and maintains it such a development could be kept look very attractive.

[C Broadhurst on 02.02.06 at 12:51]

Silencio. I am not in a mice. It may be more difficult today to buy a house than in 89 - but not that much. The point is it is possible. But it requires a great deal of discipline, sacrifice, and hard work.

When I said we bought the cheapest place on the market I meant exactly that, it really was the cheapest - I still have the newspaper listing. We recognised that it was necessary if we were to get into the market at all. The same applies today if you are at all serious about purchasing. It can be done.

Also, in 1989, the Bank would only lend a maximum of 70%, and at 9% interest, over a maximum of 15 years. Compare that with the deals today.

This meant that most average people could not buy the average house - since it was too expensive and required too big a down payment.

Does this sound at all familiar?

Fast forward to 1992, we went into debt to the tune of $512,000 when our joint salaries (including several nights a week playing in smokey bars) was about $70,000.

All our friends had fancy cars, satellite dishes, and took several trips a year. We got rid of our car and took no trips in order to assist financing the house.

Then you must increase your payment every time you get a raise at work. That way you dont get complacent and you reduce your loan quicker.
Our final payment was June 2004.

Real estate will never be cheap here - but it is also your best way to achieve wealth. It is truly the one purchase you should make that is beyond your means.

Don't give up.