We’re seeing increasing signs of a significant turn in Bermuda’s housing market.  It began with the many for sale signs scattered around the island that seemed to linger endlessly.  Today’s surprise was a couple posts on my company’s kitchen notice board advertising 2 bedroom apartments for under $2500 a month near Heron Bay Marketplace.  This leads us to note that the ‘executive’ moniker so popular during the boom period is rare to be seen and despite it being the last day of the month, numerous rental listings still exist as available Sept 1st.  New monikers dotting the ads include ‘spacious’ and ‘REDUCED RENTAL’, things you were less likely to see in the past.  Also shockingly listed is a 3 bedroom condo in Hamilton parish for $695k, a price for which only a few years ago you would have been lucky to get a 2 bedroom condo.

Bermuda’s real estate market increasingly seems to have taken a turn away from the boom period and is something we’ve been expecting for some time.  While certainly a boon for those renting and hoping for market prices to drop it is not a good sign for those who overleveraged themselves during the boom period to take on huge mortgages with little down payments only to watch the value of their homes decline while the mortgage stays the same.  Worse are those who struggled to afford the payments in the first place and may now be facing layoffs or already have been in the wave we’ve seen. 

As they say, leverage is a knife that cuts both ways and this may yet only be the beginning.  Especially as we get a better picture of the state of jobs in our economy when the June July August September? employment brief is released.

For anyone who contends that our housing crisis is a simple case of supply and demand, you are unfortunately quite wrong.  While supply and demand play a factor in our housing crisis, so does legislation.  Especially as we have put heavy restraints on who can build what and where.  That is of course if you’re not the government, because if you were, the rules wouldn’t apply to you.

So here we play witness to both a housing crisis and a shortage of affordable retail space and the top priority on the agenda is to build new hotels.  Of course, resurrecting our tourism industry is important so we don’t rely on a one pony economy, but is it more important than affordable housing and living for Bermudians?

Over at the PLP youth blog there’s a mention that Club Med squatters registered with BHC are going to be moved to the vacant staff quarters at Wyndham.  This is quite a reasonable solution and certainly should work for the time being assuming the Wyndham staff quarters are in ok shape.  If this is an idea that Col. Burch came up with I can see some value in why people think he gets things done though things would be much better off if he could cool down that fiery tongue he has when dealing with criticism.  Criticism is a part of politics and I’m not fond of attacking the opposition simply because they’re opposing something.

Until a plan is known, how is anyone not supposed to be critical of a vision only a handful of people can see?  There are few who want to go back to the days of blindly following government whereever they care to lead us so sharing more of the plan would certainly go a long way in helping calm our fears.

In terms of housing overall, I’d like a better idea of what the long term plan is to deal with any growth prospects.  The proposed developments for the coming year may or may not be enough to compensate with the lack of present supply, however it won’t balance things for long if we continue to see rapid growth as we have over the past few years.

The true cause of the housing crisis that has loomed over the last few years is very much to do with demand outstreching supply.  Quite unfortunately, each year more ex-patriot workers are welcomed to the island and each year’s new housing developments fail to meet the needs of the influx, thus driving up monthly rentals.  While much is being done to build new housing for Bermudians, the sad reality is that we don’t need to build more housing for Bermudians, we need to build more geared towards the increasing numbers of ex-patriots so that Bermudian homes are more likely left to Bermudians.

Population increases

According to the list of Facts & Figures for 2006, which is listed on the statistics portion of the gov.bm website, there were 29,200 residential dwelling units in 2005.  Though the 2000 Census places the average room per dwelling at 2.5 rooms, today that would equal more rooms then there are people on the island and given the housing shortage that likely is not the case.  Assuming instead an average of 2 bedrooms per dwelling, that leaves 58400 rooms overall, which makes for a good guestimate to use for calculations sake.

Taking 58400 rooms, our 2006 population of 65,773 according to the CIA World Factbook and assuming a simple calculation of persons per room for arguments sake works out to 1.12 rooms per person which will be used as a benchmark in calculations below.

Housing supply

From the 2007 Budget:

The 16-unit Anchorage Villas and 8-unit Butterfield Lane developments were completed last year and tenants are in the process of moving into their new homes.

New housing initiatives commencing this year include the delayed 100-unit Harbour
View Village at Southside, the 38-unit Perimeter Lane development, the 54-unit Westcott
Road development at Southside, the 24-unit Ewing Street mixed use development, the
100-unit affordable housing complex at Ireland Island.
Government has introduced a programme of providing ‘geared to income’ housing at
the 12-unit Butterfield Lane development.

Side note:  are these 12 Butterfield Lane units an addition of 12 or an addition of 4 to the 8 units mentioned above for completed already for Butterfield Lane?

The 38-unit Perimeter Lane development 31 and the 100-unit Ireland Island complex will also provide ‘geared to income’ housing. Additionally, there are several public-private partnership developments in various stages
of discussion that will come online this year.

Of the first 200 properties identified [Through the vacant and derelict homes plan of the 2006 throne speech]  -25 have been initially targeted and action on these will commence this year.

By my count, that is at least 24 homes added last year, 316 homes planned and at least 25 derelict homes targeted for renovation.  In total that is some 341 homes that will have been added to the supply through the next year. 

Housing Waiting List

The 583 people on the housing waiting list at 1.12 persons per room works out to 520 rooms required.  Given that this number is updated as of 2007, that means supply is short of demand by at least that much.

Government will have 341 homes that will have been added to the pool totaling some 682 rooms at an approximated 2 rooms per dwelling.   

The X Factor  (Expats)

From the 2007 Budget:

The overall number of jobs in the economy was provisionally placed at 39,611 in 2006, reflecting a net addition of 664 jobs across the entire economy. Bermudians held 27,316 of these jobs or 7 out of every 10 jobs in our economy.

From the 2006 Budget:

The overall number of jobs in the economy was provisionally placed at 38,815 in 2005, reflecting a net addition of 452 jobs across the entire economy. Bermudians held 27,219 of these jobs or 7 out of every 10 jobs in our economy.

While the budget states that there are 664 more jobs, the difference between the estimates is actually 796.  Comparing the number of Bermudian jobs, there was an increase in 97.  By simple subtraction that means there were anywhere from 567 to 699 ex-patriot jobs added last year alone.

if only 14.6% of new jobs on the island last year were held by Bermudians and a comparable percentage were applied to the 452 listed in the 2004/05 budget, that results in an estimate of only some 66 jobs added for Bermudians and potentially 386 added jobs that required foreign workers.

Thats an average of more then 540 new expats arriving each of the last two years.  What happens if this year is like the last two?  At the same 1.12 people per room estimate above, that is more then 480 rooms that will be needed, or 240 dwellings.

Supply vs. Demand

Going on the 520 rooms estimated to satisfy the housing waiting list, and the 480 rooms needed for growth in ex-pats, that amounts to 1000 new rooms or some 500 new homes that will be needed.  It will be a gamble as to whether private sector development will make up for the 159 homes needed to be built to reach a break even point.

Another major question is what about all of those who arn’t on the BHC waiting list who would still like a place to themselves, such as the youth?  For the moment they have some form of housing but will have to wait before they can expect to be able to affordably move out on their own.

If those 159 homes are not developed, that will mean that supply will only match just over 92% of the demand.  Given the rise in rental prices, it is not unreasonable to consider that the average price per room presently lies at around $2000 a month (estimated by watching rental offerings over the past months on e-moo) in rental fees.  If demand outstreches supply by some 8%, can we expect that rents shall continue to rise comparably by 8%?  (I’m no economist, so if you’ve got better numbers, feel free to offer a correction)

Every year that demand outstreches supply the rental market is inflated (as it has been for years now).  Only when supply begins to outstretch demand will the rental market begin to deflate.  If demand matches supply the existing rental market will remain at it’s inflated value.  This is why it is critical that the market be flooded with enough supply to saturate and begin a deflationary trend to bring housing prices back down.

Housing is a fundamental need of every individual and it’s high cost directly impacts cost of living for every individual which in turn impacts every industry and resource that relies on the work of people to survive.  A great example is construction. Building new homes costs more because construction workers cost more to house which means you have to pay them more.  Same goes with Policing and even things like buying groceries.  Because workers cost more, those costs have to be passed on to consumers.  As long as demand is allowed to outstretch supply we will witness a snowballing effect on every single facet of our society that relies on housing, which is very wide reaching.

Why housing for ex-pats?

The Labour Market Indicators summary posted by the department of statistics pegs the average annual income for Bermudians in 2005 at $45,559.  Non-Bermudian spouses were pegged at $56,426, Perminant Residents making $48,499 and all other non-Bermudians at $58,315.

The reality of ex-patriots vs. Bermudians is that in many cases, ex-patriots have a greater combined budget then Bermudian families.  Each expat can afford to spend $1500 to $2000 a month per room due to their higher average salaries, while for your average Bermudian, this is not the case.  A Bermudian family simply cannot compete with 3 expats splitting a home at $1500-2000 each a month. 

Because Bermudians are less likely to earn as much as ex-patriots due to numerous factors (experience, education, etc), Bermudians are least likely to be able to fend off bidding wars for apartments due to their lower average incomes.

The supply of Bermudian homes will continue to be eaten up by ’housesharing’ expats who when combining their ability to split rents can vastly outspend Bermudian families.  What is needed is adequate legislative changes and support/incentives for proper apartment buildings to be built in town.  While many Bermudians would not want to live in such housing, apartment buildings are ideal for many single expats as they would live close enough to work to not require cars and are typically more used to urban style living then Bermudians are.

Government desperately needs to take action to increase housing supply especially for ex-pats as this will cause a reduction in the strain on homes for Bermudians. 

This can take the form of government

• subsudizing the construction of apartment buildings. 
• bring in foreign labour to begin development of apartment buildings en-mass (unfortunate to require foreign labour, but it’s one means to quickly increase supply and reverse the trend).  As per my proposal in the Bermuda Sun last year, potentially house the workers in cruise ships temporarily to cut the impact of costs of housing workers.
• revise the building height limits (there is evidence that this is taking place in Hamilton with recent projects exceeding the 7 storey limit)
• introduce zoning requirements that include a percentage of housing to be built along with any office space (at present office space is much cheaper to build and given it’s high demand it is often the choice developers make)

Agree?  Don’t agree?  I’m happy to hear your thoughts for I don’t have all the answers, but together we might.

The unelected Col. Burch has come out to suggest that he did not refer to the people living in Club Med as Monsters despite the earlier quote in the article Burch: You should be arrested

The Senator also appeared to call some of the residents “monsters”, telling Sen. Spence-Farmer: “If you ever expect to govern those very same people you have turned into thinking Government will be my mamma, my nanny and change my diapers and do everything for me will be the same monsters that we are having to deal with today.”

Here’s what Burch suggests he actually said.

He alleged he had in fact said Sen. Spence-Farmer had “created a monster” by encouraging Club Med residents to break the law. During yesterday’s Motion to Adjourn, Sen. Burch said: “I’m a little annoyed when people who sit across this table go out and rewrite the truth.

“You encourage people to break the law, you are creating a monster — I’m not calling anybody a monster.

Here’s the deal.  If Burch truly wants people to believe that he said "created a monster" then bring forth the evidence.  He should acquire and publish audio or video recorded accounts from the senate sessions that support his revised correction to prove his case.  If it were even possible, I’d download the audio and clip the segment myself but surprise, surprise, audio and video recordings of senate sessions are not easily accessible if they even exist.

If there is no actual evidence, then this simply comes down to a his word versus hers.  For all those ready to jump up and down claiming the media distorts the truth, well, the reality is that if the PLP is unwilling to publicly broadcast, distribute and make readily available for download, copies of senate and parliamentary sessions, then quite frankly the distortion is well-deserved.

Ultimately for Col. Burch, it doesn’t matter what he said for it is well known that actions speak louder then words.  His treatment of those in Club Med and the Leopards Club is appalling, sickening and a latent wake up call for any who think the PLP is a ‘people’s party’ for quite simply Col. Burch was never appointed by the people to lead the W&E Ministry in the first place and yet still retains the support of the party through his continuing appointment.

It is evidently clear who the real monster is and considering that it is highly unlikely that given all of the other past history that has deemed him the title of a ‘PR trainwreck in slow motion’ that he will be dismissed for his irreprehensible conduct.

I hope those members of the PLP who sit back and allow this sort of ridiculousness to happen realize that through their inaction they make the PLP appear like it itself is comprised of monsters for condoning and supporting such actions by someone who was never elected by the people in the first place.

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I’d like to take a moment to bring attention to the quietly launched PLP blog for it’s Youth Wing.  It is tremendous to see the PLP embracing such technology while some members condemn it.  None the less, I am pleased to see the progress in terms of some actual new faces in the blogosphere and extend a welcome to the PLP youth wing and commend their achievement.

I do wish the blog site was more open as at present I have to log in to be able to make posts and the confirmation email is slowcoming.

I also wonder about the .bm domain name.  A year ago when I was fighting hard to get a .bm domain for my own efforts, I was denied at every turn by our domain registrar.  Every time I turned up I would be handed a different and growing list of requirements.  What I was told I needed on the first visit changed when I appeared the second time with what was asked of me, just as it changed the 3rd, 4th and 5th visits.  No matter what I did it became clear that government was not interested in allowing me to have a domain name for my stated purpose, which is a solid part of the reason why I have chosen to establish a .com domain hosted off island and speak out against suppression of freedom of speech.

I hope that with this new PLP blog comments that go against the grain will not immediately be banned simply because they fail to follow the desired opinion of the bloggers themselves.  If I had the access now there are already some things I would like to say on the site.  It shall be an interesting test to see how open the PLP will be to a devil’s advocate approach to debating some of the issues the Progressive Minds group has decided to discuss.

We’ll see how open to freedom of speech the PLP really is as I’ll be certain to reference or copy any comments I make onto my own blog.

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