Is it time to be looking at real estate?

Experts talk realty at Mayberry forum

Sunday, April 04, 2010

Every good decision is made with wise advise, and as the global recession shows signs of easing, one of the questions on the lips of the prudent investor is "should I consider real estate going forward?" That is where wise advise can come in very handy.

Mayberry Investment Limited assembled three real estate experts to examine the opportunities and threats in the industry at its monthly investor forum held at the Knutsford Court Hotel on Wednesday. The panelists were Karl Allison, founding partner at chartered (valuation) surveyor firm Allison Pitter and Company; international real estate expert Pierre Shirley; and Sandra Watson, general manager of the Real Estate Board.

Strata options

Watson got the forum under way, explaining the rules and regulations of strata developments in the wake of the 26 amendments made recently to the Registration (Strata Titles) Amendment Act.

According to Watson, the amendments will help investors to be more confident in investing in Strata Developments (a real estate item similar to an apartment complex) as it forces all Strata lot (similar to a single apartment lot) owners to take part in the up keep of the Strata development. It also provides some semblance of order as the Strata Commission will act as a third party in settling disputes.

Local opportunities

Allison dissected the local real estate market, examining each subset and income bracket.

Real estate, Allison said, just like any asset class, moves on the fundamentals of the economy. The lowering of interest rates, Allison expects, will cause an up tick in the sale of real estate units as the cost of construction will go down and the cost of borrowing funds to buy homes will be lower as well. Also, lower interest rates will mean that large institutional investors will have to seek other alternatives such as real estate when seeking suitable returns.

In his analysis of the different types of real estate options, Allison recommended that investors look to middle income residential homes (residential property that is on sale between J$8 million and J$20 million) as the high end residential market has dried up and inventories have swelled.

He also highlighlighted that there was increased demand for small office spaces, somewhere in the region of 3500 square feet. He said any development in office units must take into account that their must be adequate parking space available as more individuals are driving to work.

In terms of commercial retail real estate, Allison explained that in Jamaica the level of transactions have been low and that has made it difficult to estimate were this market subset is going. But in his estimation, the market has generally been stagnant, even declining in some sectors as landlords have been reducing rental rates, especially in the prime retail areas such as Constant Spring, to keep tenants. On the north coast of the island, Allison says that while the numbers of visitors have increased, the amount of money that they spend in the country has declined and this has affected the commercial retail market.

He believes industrial and agricultural real estate will continue to lie dormant as the level of industry in the country shows no sign of life.

International diversification

Shirley, who is certified to sell real estate in the state of Florida, encouraged local investors in a brief but informative presentation to look to Florida as the place to diversify their real estate holdings internationally. He explained home prices are at all time lows with values having plunged in the economic downturn.

Which one of the following assets do you most favour to buy now and hold until the end of the year in Jamaica?
	Corporate bonds
	Stocks
	Gold
	Real Estate
	Government bonds

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