Building boom continues
Jamaica Mortage Bank however urging developers to cater for middle-income segmentWednesday, July 21, 2021
Thirty-seven new developments have been added to those already in planning for the parish of St Andrew, representing more than half of the 64 new developments registered at the Real Estate Board since the start of 2021.
Developers are investing in increasing room stock in the parish which has 700,000 or about one-fifth of the island's population, according to the Statistical Institute of Jamaica.
Comparatively, new developments registered for other parishes are five for St Catherine; Clarendon one; Kingston one; Manchester six; St Ann three; St Elizabeth four; St James two; St Mary one; Trelawny two and Westmoreland two.
The Jamaica Observer canvassed financiers of the housing development sector and responses indicate that projects which were mobilised within the last three years are continuing to see good take-up of housing units, and that, among them, no loan facility has been impaired due to a delay in unit sales.
Courtney Wynter, general manager of the Jamaica Mortgage Bank (JMB), said that pre-sale performance has met the requirements in the last year, even though these requirements were doubled in 2020 as a means of reducing risk.
At the same time however, the sector leader is cautioning developers to focus on the middle-income category of housing supply, in order to match local needs and avoid unsold inventory growing to unmanageable levels.
Barita Investments, a part of the Cornerstone Group which does some housing financing, indicated that the novel coronavirus pandemic has impacted the construction industry globally, with some real estate developers requiring liquidity support or other special accommodations from their financiers.
Terise Kettle, vice-president of Investment Banking at Barita Investments Limited, said that in Jamaica, while the construction industry may have been faced with supply chain disruptions which would have impacted pricing of raw material, the industry continued to be buoyant despite the pandemic.
Many investors, she observed, chose to hold real estate as their preferred asset class, while others played the “wait-and-see” game, holding off on investing until they believed they saw signs of recovery in the local economy.
Kettle said, “This impacted some construction projects, and thus would have had a ripple effect on construction-related industries. Subject to the appropriate nuances associated with the profile of specific development projects, our overall outlook on the construction sector is a positive one and we stand ready to provide the required capital (including working capital support), consistent with prudent risk management, to businesses within the industry.”
She said,”Barita has not experienced any credit-related issues with its clients operating within the construction industry and this further strengthens our position to ably support these and other businesses during these challenging times.”
Wynter told the Business Observer, “The JMB supports a recent BOJ report on the construction sector where, although not experiencing a bubble at the time of their reporting, issued some caution for the medium term.
“ The JMB is carefully monitoring the price effects on housing, in particular, given the recent cost escalation, since the pandemic, especially in the $28m+ price segment of the market. The JMB urges developers to focus on the low to low middle income segment of the housing market where there is still significant demand for solutions between $10m to $22m.”
He outlined that there is no inventory overhang. “Based on the JMB data, all projects approved and funded up to December 2019, met their pre-sales requirements”.
Similarly, 99 per cent of all projects maturing up to December 2019 were liquidated. During 2020, the pre-sales requirement of the bank was increased by 20 per cent as a risk mitigation strategy, and approximately 90 per cent of the approved and mobilised projects met the requirement.
Wynter said overhangs or unsold inventory was predominant primarily among projects in the higher price range which comprised about ten per cent of units.
In general, he said, purchasers are sometimes sceptical to sign pre-sales agreements, until developers can show proof of funding or physically see foundation work started and in some of these cases, the bank will give some concession.
Wynter stated, “Projects mobilised in 2020 will liquidate later in 2021 or 2022. The bank continues to monitor sales on a monthly or quarterly basis. During 2020, five projects were mobilised for 93 units.”
Sheree Martin, head- Retail Banking Division at NCB Financial Group, said the group's mortgage performance related to home construction continues to be robust with an annual compounded growth rate of over 13 per cent since our return to the mortgage sphere in 2012.
Martin said, “A closer look at our year over year average growth for 2019/ 2020 and YTD 2021 has revealed annual growth of over 11 per cent. We continue to view the enablement of Jamaicans to purchase properties as an area of focus.”
She concluded, “Based on our analysis, the mortgage market and housing sector as a whole has been resilient even through the pandemic. The housing market continues to see the birth of new developments and Jamaicans both at home and abroad continue to avail of mortgages. We are not at this time experiencing challenges as it relates to our corporate or commercial customers who we have supported with financing of housing developments.”
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