CHAIRMAN of the Real Estate Board Andrew James indicates that Jamaicans in the diaspora are partly responsible for the continuing robustness of the real estate market in the island, especially in the residential segment.

This, he said, may also account for newly purchased property which remain empty.

He told the Jamaica Observer, “Bear in mind a number [of owners] buy apartments for resale. They do not want to put a tenant in who will destroy it.”

James explained that both companies and individuals were profiting from pre-sales. “Some companies when they buy can make between 10 to 15 million dollars if they go in early enough and later sell. This is also a practice among people in the diaspora,” James asserted.

Despite the increases in interest rates, it has not significantly affected the real estate market. People are making a sacrifice to acquire property instead of paying high rents.

Even Proven and FirstRock (investment companies with a real estate subsidiary), among others, are expanding in this area (construction). They can maximise profit.

James admitted, “Home sale prices have gone up based on material and shipping costs. Also the demand is still there. We have not seen a reduction in demand.”

One means of profiting from real estate is property rental.

On the matter of rental rates, the realtor shared, “What I find is that rental prices are not necessarily increasing. They [homeowners] may ask a little more for new lets, but not much more. Rental rates are increasing but nothing compared to the uptick in sales price.”

Head of the Realtors Association of Jamaica Pierre Shirley told the Business Observer that from member feedback, “The rental market below US$1,500 is still vibrant; however, $3,000 and above is a bit slow [in terms of take-up]. However, the $3,000+ remain active players and the inventory is available.”

Global trend

The bullish sentiment on home purchases contrasts with trends in other global markets. The Economist, a source of financial analysis for several global markets, warned of a coming house-price slump, caused by “soaring interest rates”.

The Economist advised in October, “If your wealth is tied up in bricks and mortar it is time to get nervous. House prices are now falling in nine rich economies. As inflation and recession stalk the world a deepening correction is likely—even estate agents are gloomy.”

The analysts say that banks are not likely to be affected as they were in 2007-09, but that the poor outlook for real estate “will intensify the downturn, leave a cohort of people with wrecked finances and start a political storm”.

Edwin Wint, CEO of Better Homes and Gardens Jamaica Limited, said that there was some correction in the pricing of homes in the last two years but that this has “levelled off now”.

As to rental rates, he observed, “The rent in the older stock of rental units moved downward by 15 per cent to 25 per cent, especially rents over US$750.00/month.”

He concluded, “The market always corrects itself over time.”

Another realtor, an international property specialist who prefers not to be named, said that the industry is in for a rough ride. Prices would fall, she said.

“Many of the high-end rental properties are having difficulty renting [because there are] not enough expats to take up the units,” she stated, adding, “Increased maintenance, increase in mortgage rates and high inflation is going to make it difficult for landlords to keep rents where they are. I know of one complex where the maintenance has gone up by over 70 per cent.”

She said she believed that rising homeowner costs may force sales in some instances. “You will see owners being forced to sell if they cannot cover the expenses, especially if it is not tenanted.”

She concluded, however, that new opportunities would arise for individuals who previously could not afford homes because of stratospheric property pricing.