Award Winner: Second Homeownership in Bermuda Serves the Rich while Protecting Local Interests
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Bermuda: Endless views of pastel houses and endless water.
In case you missed it the first time back in January 2016, on June 16, 2017, this post was awarded “silver” in the “Best International Real Estate Story” category by the National Association of Real Estate Editors (NAREE).
Bermuda is a cluster of 130 picturesque islands you think is located in the Caribbean, but it’s actually in the North Atlantic Ocean about 650 miles east of North Carolina and 950 miles north of the Bahamas. Bermuda is known as much for its beauty as it is as a tax haven for multinational businesses.
Driving around Hamilton, you’d think the world consisted of bars, restaurants, insurance companies, and banks surrounded by ocean. That’s because while 400,000 tourists visit the island annually, 60 percent of the island’s GDP is derived from financial services.
As much as I detest corporate tax avoidance, I understand that without it, this island would be a lot poorer than it is. Certainly Bermuda has fallen into a sleepiness since its heyday in the 1960s as a jet set destination. While meticulously maintained, large hotels tend to be of that era. Tourists tend to be visiting executives eager for sun, sand, and high finance as well as east coasters wanting something more tranquil than some of the other more touristy islands of the Caribbean.
Bermuda is a British Overseas Territory so driving is on the left, but oddly the Bermudian Dollar is pegged to the US dollar (1-to-1) which makes currency conversion as easy as it gets. The local population of about 67,000 consists of those who trace their lineage to the UK and Africa (a legacy of the slave trade). Like many conquests, the original populace were wiped out by smallpox and STDs brought over by the original Europeans (how cheerful).
Bermuda from the Air. Courtesy of Wikimedia
So you want to own property? Not to fast!
Housing stock on Bermuda tends to be single-family homes with a few condos in the larger towns like Hamilton. I didn’t see a single high-rise on the island, just a few scattered mid-rises. Also of note is that the island doesn’t have a municipal sewage system … all homes are connected to a septic tank. And if you’ve wondered why all the roofs are white and generally so clean you could drink off of them, it’s because you likely are. Those roofs are part of a water catchment system to bring fresh water into homes (that’s filtered before drinking).
Also, selecting your perfect home often involves liking the furnishings as well. You see, being a small island that’s hours away from the US by plane and days away by ship, everything has to be imported, from Oreos to mattresses. It’s equally logistical to take furnishings from your sold home away with you. So it all stays behind outside a few mementos.
This makes renovating quite a bit more expensive and time consuming … but then again, if you’re buying in Bermuda, those irritations are but trifles handled by others. You see, there are no poor second homeowners on Bermuda.
Typical Bermudian Home on the Water. Courtesy of My Bermuda House
Bermuda for the Rich or Local
Bermuda has two types of property markets. Bermudian citizens can own any dwelling or parcel on the island but foreigners can only own existing homes and condos that meet certain criteria (translation: only the most expensive).
Non-citizens can only own property that qualifies for a set minimum Annual Rental Value (the rental revenue generated in a year by the property). For houses Annual Rental Value is $153,000 and $32,400 for condominiums. Rough calculations place the purchase price for this type of property at about $3.5m for a home and $550,000 for a condo. Non-citizens are also barred from purchasing vacant building sites.
Non-citizens are only permitted to own one Bermuda property concurrently. If a current owner purchased a second home, the first home must be sold within a year. Non-Citizens may also purchase property in a trust provided that there is a locally licensed trustee (hordes of local banks makes this easy). Trust ownership is also limited to one generation and upon death, the property must be sold within two years.
The point of this is to keep lower-priced properties affordable and a freer market available to Bermudian citizens.
Courtesy of Tripadvisor
License Fees
Once you think you’ve met all the requirements, there are the licenses and fees. Non-citizens need a license from the Minister of Labour and Home Affairs. License fees equal 12.5 percent of the home price or 8 percent for a condominium. Any property in a designated resort has a license fee equal to 6.5 percent of the purchase price. If you’re a Permanent Resident Certificate holder, the fees are 6 percent.
Applying for a license costs $1,416 (only refunded if the license is granted). Those applying need banker’s and personal references (preferably Bermudian).
Still hot on a Bermudan home? Read more about Bermuda Government rules and regulations here.
Downtown Hamilton. Courtesy of Tripadvisor.
Finding a Realtor
Good-effing luck. In researching this article, I contacted many local real estate brokerages to discuss Bermuda property ownership and feature their business in this post. Exactly zero responded. This has never happened before with brokerages happy to spend a quiet hour discussing and showing their properties. Not Bermuda … Christie’s, Sotheby’s, Property Group, and even the local Coldwell Banker failed to reply.
There’s also no island MLS so be prepared to spend shoe leather and phone time hunting down the major brokerages to see their properties … that’s if you can get them to respond. Of course with all the fees and hurdles associated with home ownership, I think I’d rent a property for a vacation and leave the hoop-jumping to those more suited to that sort of tedious exercise.
But as a final note, I can say that every single person I met while in Bermuda was absolutely nice and happy to go out of their way help with any request. This is in stark contrast to other resort destinations. So I’d be happy to go back, but I’d rent, rent, rent.
Remember: Do you have a secondshelters.com location you’d like to see featured? I travel quite a bit and enjoy poking around real estate. Realtors, have clients who’d like to document their second home journey? Shoot Jon an email. Marriage proposals accepted (they’re legal)! sharewithjon@candysdirt.com
