High-end real estate market holds strong amid COVID-19

High-end real estate market holds strong amid COVID-19

Wednesday, October 21, 2020

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The unexpected economic changes brought about by COVID-19 have resulted in significant shifts in the investment market. Still, high-end real estate appears resilient. Multiple properties have been sold. For example, Seaside Villas in Runaway Bay have sold for upwards of US$1.5 million each. The sale of these properties signifies some degree of resilience in the high-end segment of the real estate market.

Gabrielle Grant from Coldwell Banker Jamaica Realty observed that even though we see this thrust in the market, a lot of higher-end properties are having to take price cuts for long-term rentals.

“So, whereas you were able to rent your two-bedroom apartment or three-bedroom apartment for US$2,500 before now, you'll have to take a cut on that and potentially allow the tenant to pay in Jamaican dollars,” Grant said in an interview with the Jamaica Observer.

“But, in terms of the sale of luxury properties and expensive properties, those have continued. I believe that people with that amount of liquidity are not necessarily paying with mortgages. They would not necessarily have issues associated with qualifying for mortgages and they would potentially be looking for deals,” Grant added.

This trend has also been observed by Toni-Ann Neita Elliott, assistant vice-president for personal financial planning at Sterling Asset Management.

Neita Elliott noted that many of her clients and new investors have been selling high-end properties and using the proceeds to take advantage of opportunities in the bond market.

“Bonds offer you higher returns for less hassle and allow you to lock in your income for a much longer period than a typical lease agreement. They also hedge your devaluation risk. With the decline in rental yields, sophisticated investors are exiting real estate and rotating into more liquid, hard currency assets,” she told the Business Observer.

Deborah Cumming of Century 21 Heave-Ho Properties, in commenting on the matter, said that people who have money are less affected than those employed in various sectors of the market that are greatly affected.

“So yes, we are seeing high-end properties selling, but, I think we are going to see a slow down because I don't believe that we're really seeing the full effects of COVID-19 as yet. I think everybody needs to tighten their belt and sort of wait and see, taking one day at a time,” Cumming said.

While the prospect of real estate seems promising, however, renters and potential buyers have faced some setbacks. The initial shift from stocks to real estate has resulted in an influx of rental properties on the market. The pandemic has amplified the competition for tenants, and it doesn't seem to be changing any time soon.

COVID-19 has forced the central banks of many countries to reduce interest rates. As a result, bond and equity prices have increased and bond yields have fallen.

Any investment, especially those focused on retirement, should be at the forefront of everyone's minds.

According to Marian Ross, vice-president of trading and investment at Sterling Asset Management, “investors now need more money to retire because interest rates are so low. Investors are also being forced to take more risks during their retirement years to simply survive.

“Despite these challenges, investment opportunities are available. Investors should position themselves to capitalise on the market and turn their focus on the world with COVID,” added Ross.

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