A developer is advocating for more focus to be placed on affordable housing as more people steer away from parts of the luxury market.

Rohan Grant, founder and CEO of Garco Construction Services Limited, is highlighting that more developers need to be deliberate about what is obviously a changing real estate market. The Garco boss recently completed commercial real estate developments such as JMMB’s Hope Road property, the Sagicor JDF Up Park Camp project, and Real Equity Professional Suites on Mountain View Avenue, all in St Andrew. This is in addition to other residential real estate projects that have been executed in the last three years.

“The luxury market, in my view, is a little bit saturated. There is not a great desire for the luxury market because of what is considered to be tight liquidity. For most people you know now, the luxury units are big and most professional people are on the go. They’re not looking to invest that much money in any kind of fixed asset as it is now,” Grant explained in a recent interview.

Interest rates have risen considerably in the last three years and that has led to a jump in mortgage rates, with one of the top two commercial banks increasing rates from 6.49 per cent in 2022 to 8.99 per cent today. That commercial bank just added an extra 50 basis points on its mortgage rate which was 8.49 per cent prior to the latest increase on what was already a ‘cheap’ market rate. A rise in interest rates pushes up the monthly cost of a mortgage in the absence of other factors, such as closing costs or a rise in home insurance premiums.

“Regarding luxury market, there have been trends of it slowing down in the last couple years. Primarily, the wealthier group of Jamaicans and the diaspora have been propping it up, but the supply is now seeming to exceed the demand. This can be seen in ‘luxury’ properties being on the market longer or returning to market after a transaction has fallen through,” said a real estate agent who asked not to be identified.

Different high-end real estate projects have either seen a lull in sales or just a general slowdown in development activity within the last year. Terra Nova cancelled its planned residential development in October 2022 due to adverse external economic conditions. What currently stands in its place is a partially built structure with no ongoing activity.

The Garco CEO is currently working on The Vineyard Reserve development which will be at 43 Langston Road, Kingston 2, which will have units starting at $33.50 million. The Vineyard Reserve is being developed with a focus on redeveloping the surrounding community through attractively priced properties. Real Equity is a real estate investment, acquisition and development firm with partners attorney-at-law Sean Shelton, entrepreneur Neil Crooks, Rohan Grant and professional engineer Garold Hamilton.

“We have all the funding in place, so we shouldn’t have any difficulty in completion. Pre-sales are going very, very well. We have 46 units that we’re selling and four are reserved for the directors as we believe that any project that we build, we must have a shared interest,” Grant added.

While affordability is a very subjective term for many young professionals, real estate prices in major urban hubs like Kingston and St Andrew (KSA) are never static. An example is with Via on Braemar Road which had studio units being advertised for US$156,459 (J$21 million) in 2019 are now being priced at US$232,258 (J$36 million) in 2023. That development was undertaken by Proven Properties Limited, a subsidiary of Proven Group Limited.

Proven Management Limited CEO Chris Williams mentioned at Proven Group’s 2023 AGM that they are focusing less on Kingston which was described by him as being upside-down. Proven Group has done several high-end residential real estate developments over the last decade but has now shifted to the north coast for new projects along with increasing focus on industrial or logistics joint venture projects.

“In terms of affordability, I’d say anything under $35 million in KSA is ‘affordable’ and anything under $30 million in St Catherine would be the same; of course conditions apply, though. There’s still an overwhelming demand for housing under $25 million, especially for first-time homebuyers. This is why there’s a specific drive to Old Harbour where houses can be attained for $16-$25 million. The demand is also strong in Spanish Town and Portmore as well, but those areas will come at a heightened cost,” the real estate agent added as a recent Portmore development was fully reserved within the last couple months.

The call for a push to more affordable real estate projects comes at a time when there are changes taking place regarding the financing of real estate. The change by the National Housing Trust from its prior Joint Financing Mortgage Programme to the new External Financing Mortgage Programme has seen some deposit-taking institutions (DTIs) reduce their interest in actively growing their mortgage book. This is coupled with the introduction of Basel III, which will shift the dynamics on how DTIs will treat new mortgages between residents and non-residents. According to a finance executive, Basel III would see a Jamaican resident’s mortgage having a capital charge of 40 per cent versus a Jamaican non-resident, with greater means for affordability, having a mortgage with a capital charge of up to 150 per cent.

Sygnus Real Estate Finance Limited just sold two investment properties on 56-58 Lady Musgrave Road, which it had originally earmarked for a commercial project. These properties were acquired within the last two years with the disclosure stating that the sales were done at attractive valuations. Sygnus Real Estate and Kingston Properties Limited are both looking more towards industrial real estate investments.