House prices are rising, says Rego

Rego Sotheby's International Realty have waited six years to report signs of a recovery in the real estate market. An increase in the dollar value and unit volume of real estate transactions is evident based on recorded sales to date.

I have said previously that if “flat is the new up” we will be satisfied in the short term. A welcomed change from the 30% year over year decline we have experienced since 2008.

Last year's dollar value of property transactions increased 1% over 2012 from approximately $193 million to $195 million. The dollar volume and percent of increase will certainly rise as more records are received by the Registrar's Office.

Why has this increase happened? -- Largely due to the participation of the PRC buyers in the residential and condominium market up to $2 million. That is the good news.

Further signs of recovery include the 4% rise of stand-alone residential home prices sold during 2013. Even more promising is the improved average price of condominiums and undeveloped land sold which increased by almost 15% during 2013. In contrast, the median price of condominiums above $32,400 ARV (Annual Rental Value) increased by only 2% yet those below $32,400 increased by 13%.

Tempering the enthusiasm is the disappointing sales volume trend of condominiums overall. Those with an ARV below $32,400 experienced a decline of almost 70%. Those with an ARV above $32,400 fell by 10%. This illustrates the lack of resiliency by the entry-level property buyer.

The strongest rebound occurred in the residential home sector with an ARV less than $177,000 where the average sale price rose to just over $1.2 million in 2013, an increase of just over 12%. The median price in this sector increased 10% to $1,020,000, up from $927,000 in 2012.

Not so encouraging were the sales of luxury homes. Those with an ARV of $177,000 or more during 2013 saw a decrease from 7 to 5 properties sold compared to 2012, four of which were purchased by Non Bermudians. Likewise the number of luxury condominiums sold fell from 52 in 2012 to 32 in 2013. While the majority of condominiums continue to be purchased by Bermudians, the number of Non Bermudian purchasers increased from 4 in 2012 to 6 in 2013.

Hopefully the reduction in license fees payable by Non Bermudians will gain traction in 2014 and return the market to an average level of 10 properties sold per year in the luxury sector.

Signs of change tend to appear first in the rental market. A positive sign was the unusually low number of high-end executive rental homes available for rent. Our residential rental professionals observed fewer vacancies during 2013 compared to 2012 particularly for luxury rentals of $8,000 per month and up.

The 3rd Quarter 2013 posed a challenge with less than five high-end executive rental homes available as more new incoming international executives sought homes ranging between $10,000 up to $20,000 per month.

Overall market rents appear to be stabilizing with our listed apartment achieving rents averaging $1,600 per month for a one-bedroom, $2,500 per month for two bedrooms and $4,000 per month for three-bedrooms. Our condominium inventory averaged of listed units achieved $4,000 per month for two-bedrooms and $6,500 per month for three-bedrooms.

Rental properties receiving the highest volume of interest are located in the central parishes Devonshire, Pembroke and Paget with a minimum of two bedrooms, two bathrooms and rents ranging from $3,000 to $6,000 per month.

We are greatly encouraged by the success and continued interest in Bermuda’s hospitality product, which has been dormant for so many years. We are pleased to be part of this revival by participating in the brokerage and sale of the South Beaches Development Site formerly known as Sonesta Beach and the Coral Beach and Horizons Properties. Pending interest in the Pink Beach Club and The Newstead/Belmont Hills properties indicate that Bermuda may finally be in a place where growth may be cautiously observed.

Hope remains alive and well in 2014.

Buddy Rego is the president of Rego Sotheby's International Realty