Thousands of homeowners in T&T are facing the prospect of a dismal 2024, with a sharp reduction in their disposable income, as a result of the reintroduction of the tax on property, the proposed escalation in the price of electricity and higher home insurance premiums.
Taken together, the increased costs will hurt all homeowners, but they will be particularly painful to retirees and people on fixed incomes, such as public servants and members of the protective services.
The consequences of the three added expenses for homeowners are likely to be a decline in the standard of living for thousands of citizens, Business Guardian investigations have revealed.
The knock-on impacts of the Property Tax, the higher electricity rates and the hike in home insurance are likely to include increases in rents throughout the country, a softening of the real estate market, less money going into the stock market and other assets and a reduction in the purchase of goods and services perceived to be non essential. That, in turn, could have an impact on the entire retail sector, including groceries, apparel stores and restaurants.
Last Saturday, as more and more people started to get notices of valuation in the mail, Minister of Finance, Colm Imbert, issued a news release taking “note of a misunderstanding regarding the meaning and effect of the Notices of Valuation which are being posted out to residential property owners.”
Imbert said although these notices of valuation do not refer to Property Tax and are not issued by the Board of Inland Revenue, it is being erroneously promoted by mischief makers that the annual rental value is equal to the property tax that owners will have to pay.
“For the record, the Property Tax Act makes it clear Property Tax is only three per cent of the annual rental value for residential properties, after first deducting 10 per cent from the annual rental value. It is NOT the same amount as the rental value,” according to the news release from the Ministry of Finance.
The formula for the calculation of the Property Tax is annual rental value (ARV) x 0.9 x 0.03.
Actual experience
A homeowner in west Trinidad, a retired senior public servant who has lived in her house for more than 30 years, showed the Business Guardian her notice of valuation, which indicated her annual rental value is about $150,000. Using the formula provided by the Ministry of Finance: $150,000 x 0.90 x 0.03, the homeowner determined that her potential annual property tax liability was $4,050 or $337 a month.
“That $337 a month may not sound like a huge amount to some people, but it is significant to me as I am already living retirement cheque to retirement cheque. The $337 is close to what I spend on pharmaceuticals each month,” said the homeowner.
Last month, the Regulated Industries Commission (RIC) released its final determination of the request by the T&T Electricity Commission (T&TEC) to increase its electricity rates.
The RIC recommended that electricity rates to residential customers should increase by between 15 and 64 per cent, depending on their usage.
The commission also recommended that T&TEC issue electricity bills on a monthly basis rather than every two months.
The proposed rate increase is now before Cabinet with the Minister of Public Utilities, Marvin Gonzales, suggesting last week, that the rates are likely to be increased in 2024.
“As minister, my responsibility is to make sure all of the details and all of the information that is required by the cabinet sub-committee is presented to them so that we can make a decision as quickly as possible,” he told a newspaper, adding.
“But based on the process, I don’t anticipate, as I’ve indicated in a recent interview, that this can happen, meaning the implementation of the rate as approved by the RIC, I don’t think that can happen before the end of 2023.”
Actual experience
The Business Guardian reached out to a homeowner in east Trinidad, who said his last T&TEC bill reflected two-month consumption of 3,038 kWh. That resulted in his last monthly bill being $1,188.07 for two months or $594.04 a month.
Assuming his monthly consumption does not increase, this homeowner would receive a new monthly bill for $812.72, which is $218.68 more, or an increase of 36.81 per cent.
Musa Ibrahim, managing director of Tatil, confirmed that home insurance premiums in T&T have increased.
In an interview with the Business Guardian last week, Ibrahim said the significant changes in climate activity and catastrophe losses have increased worldwide, which has a direct knock-on effect on the Caribbean including T&T.
“T&T has been a predominantly low market because we are not traditionally a hurricane-affected country.
“However, the same reinsurers that support the Caribbean countries, which are affected by hurricanes, support our country. So, they look at it on a portfolio basis and increase rates. We have seen double-digit price increases over the last couple of years.
“I would say in the vicinity of 10 to 15 per cent on the retail market for commercial and residential properties. It’s not a Tatil or Colfire conversation, this is an industry conversation,” Ibrahim explained.
Putting the 10 to 15 per cent increase in context, the insurance executive said if one were to look at a house costing $ 1 million, generally the premium level of $2.50 to $3 per thousand of insurable value would amount to between $200 and $300 more per annum.
Asked in what circumstances the increase would be more, Ibrahim said that depends on the type of peril.
“If you are in a flood zone, there are different ways of underwriting portfolios, there would be opportunities for some reinsurers to consider higher deductibles. But generally, those flood-prone areas are known, so it may not necessarily manifest itself only in a price increase. It could be price increase along with deductibles, so only in the event of a claim would the insured have to pay a higher deductible to trigger the policy,” he detailed.
Last December, the Association of T&T Insurance Companies (ATTIC) said in a news release that its member insurance companies were bracing for a hardening reinsurance market.
A spokesperson for Guardian General Insurance said that on average, customers’ premiums have increased by between 10 and 20 per cent for motor insurance and between eight and 20 per cent for home insurance.
On the issue of home insurance, Guardian General added: “We note that some customers have been under-insured, i.e. the sum insured for the vehicle or replacement cost of the property is below insurable value, and there are those who have tried to correct their sums insured, and as such their increases could be higher than the averages above.”
Asked when did customers start receiving their notices for the increased home premiums, the company, which is part of the Guardian Holdings Ltd group, said: “The timing of the customers receiving notices of increased premiums varies depended on the anniversary date of their specific policy. However the first of our notices of increase were issued in February of this year.”
Actual experience
A homeowner in south Trinidad paid $3,792.15 for the 12-month period ending in December 2023 for a house valued at $1.4 million.
The renewal notice for the period December 2023 to December 2024 indicated an annual premium of $4,550.58. That is an increase of $758.43 a year, or $63.20 a month, which is an increase of 20 per cent.
Insurance premiums are calculated based on a fixed rate. In 2023, this homeowner paid $2.50 per thousand of the insurable value of his home, whereas in 2024, he will pay $3 per thousand, which is also an increase of $20 per cent.