If you want to find one of the most beautiful places on earth, just head east about 650 miles from North Carolina to Bermuda, officially an overseas territory of the United Kingdom, but in reality a micro-country with it's own way of doing business.
Bermuda is an island paradise with fabulous beaches, wonderful weather, astonishingly-clean water and cars that are driven on the left side of the road. If you want to buy there, the economics look like this: Figure about $2.6 million to non-Bermudians for an average property plus a 22 percent tax -- a total of more than $3 million.
While money alone rules out most buyers, so does something else: Bermuda wants to preserve its housing stock for Bermudians. Toward that end it has erected world-class barriers to foreign ownership.
The "problem" for Bermuda is that it measures about 22 miles long and 2 miles across at its widest point. The total land area , about 21 square miles, is roughly one-third the size of Washington, DC, and our capital city is hardly huge. The islands do not have much land for Bermuda's 66,000 citizens -- or the very large number of non-Bermudians who would like to live there.
If Bermuda allowed non-citizens to buy property it would in time make its own population homeless. Even though Bermudians on average enjoy one of the highest per-capita incomes in the world, there's no way the typical Bermudian can afford market-rate real estate prices on islands that attract lots of very rich people. Already, according to the Royal Gazette newspaper, non-Bermudians own 37 percent of the island's real estate -- and most won't be selling any time soon.
Other than an occasional hurricane or two, there are few if any places in the world which are as beautiful and secure. If you were rich, Bermuda would be on your short list of places to live -- especially since it has no income tax.
The catch is that even if you have a few billion dollars in the bank, buying in Bermuda is just about impossible. The reason: The Bermuda Immigration And Protection Amendment Act of 200 .
Under this law, if you're not a Bermudian you're a restricted person. The only way you can become a Bermudian is to marry one of the opposite sex -- and remain married for at least 10 years.
How does Bermuda limit foreign real estate purchases? In general terms the rules for restricted persons look like this:
- Bermudians may sell their property only to other Bermudians.
- Non-Bermudians may sell their property to either Bermudians or non-Bermudians.
- Non-Bermudians may not buy homes below a certain value -- roughly $2 million.
- Non-Bermudians may not buy raw land.
- A "restricted person" includes partnerships, trusts and corporations.
- Owning property does not create a path toward citizenship.
The idea behind the law is to preserve and increase the housing stock for Bermudians and surely it seems to be working: In 2005, says the Royal Gazette, there were just four sales by non-Bermudians to other non-Bermudians.
Already there's a pronounced difference between home prices for Bermudians and for non-Bermudians. Bermudians can buy for a lot less in their own homeland, a result which hardly seems unfair.
There is, however, one perverse by-product of Bermuda's real estate regulations: The homes of non-Bermudians are more valuable than those of the local citizenry.
Imagine that you have two identical homes, one owned by a Bermudian and one by a foreigner. The property owned by the Bermudian can only be sold to other Bermudians. The property owned by the foreigner can be sold both to Bermudians and non-Bermudians. Since very few properties are available to non-Bermudians, the home owned by the foreigner actually has a higher market value because it's available to a huge pool of wealthy buyers -- buyers off-limits to Bermudians.
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