BERMUDA's rentals market is suffering the "shockwave effect" of our international business sector's precarious state, according to one of the island's leading realtors.

Rego Realtors president and Bermuda Chamber of Commerce real estate division chair Buddy Rego believes that unless we see a "net in-flow of new people" to counter vacancies in the job market, rental prices will continue to decline.

"Bermuda has a very thin market," Mr. Rego said.

"When a few people leave, it does have some shockwave effect. There have been some vacancies, and inventory – that is, the number of available rentals on the market – tends to increase.

"This puts more downwards pressure on the asking price. If we don't have a net in-flow of people, then it will continue to decline."

Mr. Rego told the Mid-Ocean News that he has already experienced a decrease of between five and 25 per cent in monthly rental prices in Bermuda's residential market.

"It has already softened significantly," he said.

"What we've seen is a significant reduction of rental value in the middle and upper end of the market – those properties priced at $3,500 per month and up. The upper end especially has seen a significant decrease in re-rental values over the last couple of months. A lot of the activity isn't new business, but people moving from one property to another, taking advantage of more favourable conditions. That's been the most obvious impact of the economic climate."

While Mr. Rego has yet to see a "mass exodus" of renters in the upper end of the market, he reports a rise in the availability of condominiums, especially at the more expensive end of the spectrum – that is, those typically rented by employees of exempt companies with the benefit of housing allowances.

"Some people have left, there's no question," Mr. Rego said. "There isn't a mass exodus, but there is certainly more inventory, especially condos. I think we will see that market – that is, condos – slow down, as a personal opinion."

Mr. Rego added, however, that he doesn't believe Bermudians' mortgages will be affected by a declining rentals market. Many Bermudians rent out properties while living elsewhere, using that rental income to subsidise their own monthly mortgage payments.

Mr. Rego explained, however, that the lending practices at Bermuda's banks are far more stringent than those in the US and elsewhere, taking the possible loss of rental income into account when deciding whether to lend money for a mortgage.

"Bermuda is very fortunate not to have the same mortgage climate they have in the US," he said.

"We have different products and practices. I've spoken to people at the banks here, and they have indicated that their mortgage portfolios are as sound as ever.

"Our mortgage lending practices are much more stringent than those caused the sub-prime debacle in the US."

He explained that Bermuda banks do not take into account a perspective borrower's rental income when deciding whether to lend money. Each potential customer for a mortgage is evaluated on his or her ability to repay debt without that extra money from rent – a precaution that should prevent a catastrophe on par with the current US foreclosure crisis.

"The value of the rental income is discounted for mortgages," he said.

"You are deemed to be able to handle the servicing of the debt. They don't give the perspective borrower the full value of the rental income. This is coming from the banks. We don't see foreclosures as an issue."

He added that Bermuda's real estate market, in rentals as well as otherwise, has always been cyclical, with upturns and downturns to be expected every few years.

"Thankfully, things go in cycles," he said. "But I do foresee a slowdown in rentals, yes."