Prices are firmer in the residential property market this year than they have been in the falling market of the past two years, according to the latest Government figures.

But buying and selling activity has fallen significantly, as prospective buyers shop around and take their time to decide, while many sellers are finding they have to bring down their price expectations to match market reality.

On the commercial property market, tenants coming to the end of their leases are in strong negotiating positions amid a wealth of available commercial space.

In addition to the extra square footage that has come online through the opening of large new office buildings, many companies are seeking tenants to fill room created by downsizing, or more efficient use of their own premises. This is known as "phantom space" because it often goes unadvertised.

These are some of the trends that have been observed by Buddy Rego, president of Rego Sotheby's International Realty, and his agency colleague Penny MacIntyre, manager, commercial sales and leasing.

Government records of property transactions for the first eight months of the year — which have not yet caught up with all the deals actually completed — show an average residential unit price of just shy of $1.62 million. When one property large enough to skew the figures is removed, the average price is $1.46 million, compared to $1.35 million during the same period of last year.

The average price of a condominium unit rose by more than $80,000 from the first eight months of 2009. Last year, the average condo sale was worth $888,436, compared to $970,825 this year.

Mr. Rego said that although the average had been skewed upwards by some higher end sales, the median price for a condo (the "middle" number in the list of values) was also higher, indicating a firming up of condo prices.

"What we are seeing is the better condos are selling, while the ones that have not been refurbished or renovated are suffering," Mr. Rego said.

The trend of a declining number of transactions in the real estate market appears to be continuing. Total real estate transactions fell 38 percent from 2008 to 2009, while the total value of the deals fell 39 percent.

In the January through August period, 119 transactions have been recorded so far, down 48 percent from the 248 booked in the same period in 2009. That gap will decrease, however, as more property deals from the period are recorded.

"People are taking much longer to make decisions," Mr. Rego said. "There's no question it's a buyers' market."

On the rental market, inventories are higher as the impact of guest workers leaving the Island as their companies downsized during the economic downturn is felt. While the lower end rents ($500 to $2,000 per month) were holding pretty firm, changes were happening higher up the scale.

"If you have a two-bedroom condo that you were renting out for $4,500 a month two years ago, you are not getting that today," Mr. Rego said. "There are many similar properties to choose from.

"We have seen falls of between ten and 30 percent over the last two years. But we have seen some firming up at the higher end, the $10,000 or $12,000 a month properties."

The fall in mid-level rentals had hit some Bermudians who had invested in properties to rent out, he said. Those who had relied on the top-of-the market rents of two or three years ago to repay mortgages would be feeling the impact now.

Mr. Rego added that the conservative lending practices of the banks had ensured that Bermuda had seen no repeat of the wave of foreclosures hitting some parts of the US.

Many Bermudians were taking advantage of those depressed US property prices, particularly in Florida, he added, which had probably impacted buying activity in the local market.

On the commercial market, supply had climbed as new office buildings like 141 Front Street, the SE Pearman Building and Washington Mall III had come online, Ms MacIntyre said.

Tenants whose leases were coming to an end were looking for a deal and many had taken advantage of the competitive rents to upgrade.

Some landlords were trying were trying to sell entire floors to tenants, blocks of about 5,000 to 8,000 square feet, but many tenants were looking for smaller areas, as they aim to optimise their use of space.

"It's definitely a renters' market," Ms MacIntyre said. "Some landlords are still holding out for single-floor tenants, but it is better to have half the floor rented than nothing."

While many had moved out of older buildings to move to swankier, newer homes, they were finding a catch, Ms MacIntyre said.

"Up to about six months ago, I would say that many companies were saying 'let's upgrade'," she said. "But the rude awakening for them has been the fit-out cost for the tenant.

"Sometimes there has been overlap, where the tenant is still paying rent for the new premises as well as the old one, while the new one is being fitted out."

Some tenants have negotiated deals with landlords to pay for the fit-out of the new offices, to be repaid in instalments in the form of additions to the monthly rent, Ms MacIntyre has observed.

Paying up front for the tenant's fit-out was a "hard concept for landlords to accept" in Bermuda, she added. The days where landlords could expect a line of prospective tenants vying to rent space were gone.

Many companies are adding to the commercial space available by sub-letting parts of their own premises, in an attempt to achieve efficiencies.

"These companies don't generally like to advertise, because it may look like the company is downsizing," Ms MacIntyre said. "That's why it's known as 'phantom space'. But there is a lot of space out there being sub-let, probably about 300,000 square feet."

Most of the business on the commercial property side involves relocation and lease renewals. Newcomers looking for space tend to be operations with two to four staff, seeking 5,000 to 10,000 square feet, she added.