Investing is a path to buying a home
Article published Mar 1, 2006
Investing is a path to buying a home
With the average price of a Bermuda home costing at least 400 percent more than the US, Canada and UK, a local investor encouraged those trying to raise $150,000 for a home down-payment to invest in Bermuda.
Argus chief executive and president Gerald Simons said the time it would take to raise the 15 percent down-payment banks often asked for a $1 million mortgage ($150,000), depended on how much was invested per year and the time-frame of the individual.
"A 20-year-old may not plan to buy a house for ten to 15 years so they might stretch it over as long a period as that," Mr. Simons said at the Hamilton Rotary on Tuesday.
However, he warned that returns cannot be guaranteed.
"That's the challenge of all equity investments - equities represent ownership," he said. "Return depends upon how successful the companies are. Generally speaking though, experience has shown that over the long term investments in equities have out-performed investments in fixed-interest securities."
He said with the rapid inflation in house prices on the island, many Bermudians were being priced out of the property market.
After consultation with the Bank of Bermuda/HSBC and realtors Coldwell Banker, he learned that the average price of a condo hovered around $400,000 five years ago.
"It is now more than $770,000," Mr. Simons said. "Prices for single-family homes have risen by over 220 percent since 2000.
"The standard price for real estate in Bermuda is now around $1.6 million an acre, for undeveloped or redeveloped land, without a house or utilities.
"Housing in Bermuda costs, on average, at least 400 percent more than in the USA, Canada, UK and elsewhere."
This was perhaps why so many Bermudians considered the option of purchasing real estate abroad, he said, and only a few weeks ago he attended a Bank of Bermuda presentation on how to acquire foreign real estate.
Mr. Simons said the required monthly payment of a 30-year mortgage of an average $975,000 Bermuda property is $5,620.
"Although the median monthly Bermuda household income is $7,029, the banks generally require that no more than 50 percent of your income is used on your mortgage," he said.
The top ten local companies listed on the Bermuda Stock Exchange are, in order of capitalisation: Butterfield Bank, Belco, ARGUS, KeyTech, BF&M, Bermuda Container Line, Bermuda Commercial Bank, Bermuda Press, LOM and Masters, he said.
There were public, as opposed to private companies like A.S. Cooper's and Goslings.
The Bermuda Stock Exchange (BSX) was the world's largest offshore, fully electronic securities market, he said and avoided the pitfalls of the London and New York Stock Exchange, producingd a much more stable rate of return of 16.8 percent compared to long term average rates for major international markets between eight percent and nine percent.
Argus has taken advantage of the BSX boom, he said, with the Argus Group now being the single largest investor in local companies.
"The Argus Group now generates around 60 percent of its profits, not from life property or health insurance but from our successful local and overseas investment portfolio," he said.
"To put that into real terms, last year the income from investments made by the Argus Group generated $10.3 million while insurance operations generated $7.4 million.
Argus was one of the largest shareholders in Belco, Bermuda Aviation Services, Butterfield Bank and KeyTech, he said.
It was better to invest in local companies because you knew more about their strengths and weaknesses, he said.
"A company must still display a good return on investment, low debt, an attractive price and competent management," he said. "When discovered, these holy grail investments generally produce excellent returns for the investor's pocketbook."
But he warned not to put all of your eggs in one basket - as most investment professionals advised to take out a wide array of stocks, bonds, property and cash.
"If your dream house is currently beyond your means (and even if your nightmare house is beyond your means), think carefully about investing in the local economy," he advised. "It may be the means to the down payment on that house, the way to funding your child's college education or perhaps the ticket to that vacation for which you've been waiting."
Investing is a path to buying a home
With the average price of a Bermuda home costing at least 400 percent more than the US, Canada and UK, a local investor encouraged those trying to raise $150,000 for a home down-payment to invest in Bermuda.
Argus chief executive and president Gerald Simons said the time it would take to raise the 15 percent down-payment banks often asked for a $1 million mortgage ($150,000), depended on how much was invested per year and the time-frame of the individual.
"A 20-year-old may not plan to buy a house for ten to 15 years so they might stretch it over as long a period as that," Mr. Simons said at the Hamilton Rotary on Tuesday.
However, he warned that returns cannot be guaranteed.
"That's the challenge of all equity investments - equities represent ownership," he said. "Return depends upon how successful the companies are. Generally speaking though, experience has shown that over the long term investments in equities have out-performed investments in fixed-interest securities."
He said with the rapid inflation in house prices on the island, many Bermudians were being priced out of the property market.
After consultation with the Bank of Bermuda/HSBC and realtors Coldwell Banker, he learned that the average price of a condo hovered around $400,000 five years ago.
"It is now more than $770,000," Mr. Simons said. "Prices for single-family homes have risen by over 220 percent since 2000.
"The standard price for real estate in Bermuda is now around $1.6 million an acre, for undeveloped or redeveloped land, without a house or utilities.
"Housing in Bermuda costs, on average, at least 400 percent more than in the USA, Canada, UK and elsewhere."
This was perhaps why so many Bermudians considered the option of purchasing real estate abroad, he said, and only a few weeks ago he attended a Bank of Bermuda presentation on how to acquire foreign real estate.
Mr. Simons said the required monthly payment of a 30-year mortgage of an average $975,000 Bermuda property is $5,620.
"Although the median monthly Bermuda household income is $7,029, the banks generally require that no more than 50 percent of your income is used on your mortgage," he said.
The top ten local companies listed on the Bermuda Stock Exchange are, in order of capitalisation: Butterfield Bank, Belco, ARGUS, KeyTech, BF&M, Bermuda Container Line, Bermuda Commercial Bank, Bermuda Press, LOM and Masters, he said.
There were public, as opposed to private companies like A.S. Cooper's and Goslings.
The Bermuda Stock Exchange (BSX) was the world's largest offshore, fully electronic securities market, he said and avoided the pitfalls of the London and New York Stock Exchange, producingd a much more stable rate of return of 16.8 percent compared to long term average rates for major international markets between eight percent and nine percent.
Argus has taken advantage of the BSX boom, he said, with the Argus Group now being the single largest investor in local companies.
"The Argus Group now generates around 60 percent of its profits, not from life property or health insurance but from our successful local and overseas investment portfolio," he said.
"To put that into real terms, last year the income from investments made by the Argus Group generated $10.3 million while insurance operations generated $7.4 million.
Argus was one of the largest shareholders in Belco, Bermuda Aviation Services, Butterfield Bank and KeyTech, he said.
It was better to invest in local companies because you knew more about their strengths and weaknesses, he said.
"A company must still display a good return on investment, low debt, an attractive price and competent management," he said. "When discovered, these holy grail investments generally produce excellent returns for the investor's pocketbook."
But he warned not to put all of your eggs in one basket - as most investment professionals advised to take out a wide array of stocks, bonds, property and cash.
"If your dream house is currently beyond your means (and even if your nightmare house is beyond your means), think carefully about investing in the local economy," he advised. "It may be the means to the down payment on that house, the way to funding your child's college education or perhaps the ticket to that vacation for which you've been waiting."
posted by James Haft at 3:49 PM
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