Property prices seen ?flattening? in 2006
For the first time in more than a decade, potential home buyers should see prices flatten in 2006, according to one of the Island?s leading real estate agencies. Home prices have been sharply increasing since 1995, rising from an average sale price then of $400,000 to an average of more than $1.1 million last year, an increase of 175 percent or 15.9 percent a year.
Coldwell Banker Bermuda agency manager Susan Thompson said yesterday that rising interest rates is reducing demand and should therefore hold prices down.
But she said prices are more likely to hold steady or increase minimally rather than fall.
?It will be hedging more towards a buyer?s market rather than seller?s market,? she said.
Interest rates, which could be found last year at a 45-year-low of 5.75 percent, began to gain upward momentum towards the end of 2005. As a result of the increasing cost of maintaining a mortgage, fewer people will be able to enter the market and the cost of carrying a mortgage could also deter speculators.
?In the past, we had a lot of ?In the past, we had a lot of pre-qualified buyers,? she said.
?That had led to a lot of competition and into these pricing wars. With fewer qualified buyers, you won?t have as many people vying for the same properties hence it will put the buyer in a better position to negotiate,? Ms Thompson said.
The forecast for 2006 follows a year in which the total value of real estate sales set a record for a fifth consecutive year, with overall prices for residential and commercial properties plus vacant land rising an average of 13 percent.
Demand and tight inventory pushed prices for single family homes up 28 percent on average, she said. Price varied by parish, but the highest priced parish in 2005 was Southampton followed by St. George?s. In 2004, Smith?s and Paget were the highest priced parishes for real estate.
The most popular parish in terms of the number of units sold in 2005 was Paget followed by Warwick. In 2004, Pembroke held top spot followed by Paget.
At the same time, however the number of actual units sold has dropped dramatically from just over 900 in 2001 to fewer than 500 at the end of 2004.
The most significant decrease in transactions has been in the under $600,000 range which Ms Thompson said came down to a shift in supply and demand.
?Developers in general have been maximising land mass for multi-family units, but often with mid-market or high end ticketed units versus smaller affordable family oriented homes,? she said, adding however that the company?s new homes inventory shows that Bermuda?s housing stock is expanding at a strong pace with 75 new condominium units to be released to the market in 2006 and nearly 125 new condominium units that were added to the market in 2005.
Rapidly appreciating housing prices of the past five years, have also prompted many homeowners to view their homes not only as a place to live and raise a family, but also as an investment through which wealth can be built for retirement or to purchase other property. Second home purchases were particularly strong in 2005, Ms Thompson said citing the ?magic of low interest rates and more favourable lending terms.?
Bermudians have also been buying abroad in increasing numbers over the last two years.
Ms Thompson cites proximity to Bermuda, the price of the dollar and family relationships as the prime reason that North America has been the favoured spot for purchases. The company?s most popular referral city in 2005 was Atlanta with four successful residential procurements.