Jamaica Mortgage Bank (JMB) General Manager Courtney Wynter says increases in the price of housing inputs such as lumber and steel might lead to an increase in unit prices and eventually a housing bubble in the local real estate market.
During a joint JMB and the Jamaica Developer’s Association webinar, Wynter said the cost of lumber has increased by 300 per cent and higher since January 2021.
“We are seeing a troubling trend where the average price per square feet is going to JM$30,000 – JM$35,000 per square feet. These are averages and do not include housing developed by the NHT”— Courtney Wynter, general manager, Jamaica Mortgage Bank
A housing bubble is described as a situation in which the market price of residential real estate sharply rises, creating an expectation, which attracts speculators who invest in the market. It often precedes a crash.
Analysts note that the stock market crash of 2008 was a result of a series of events that led to the failure of some of the largest companies in US history. The recession first presented as a housing bubble burst, which affected banks and financial institutions that were betting on the continued increase in home prices.
As a consequence, many lost their jobs, homes, and retirement savings.
Wynter warning that rising prices could lead to a housing bubble, though the price of homes have remained flat. “We are seeing a troubling trend where the average price per square feet is going to JM$30,000 – JM$35,000 per square feet. These are averages and do not include housing developed by the NHT (National Housing Trust).”
Other inputs which have increased in price since January 2021, he said, include steel, which has gone up by 50 per cent; and cement, which is now five per cent higher in price.
As regards the high price of lumber, Wynter said that this was due to a shortage caused by the downturn of economic activity in Canada. Alternatives for lumber, he added, include bamboo.
“However, we think this is an anomaly that will normalise,” the general manager pointed out.
Also speaking during the webinar, Pearnel Charles Jr, attorney at law and minister of housing, urban renewal and climate change, commended the developers for the webinar and asked members of the developers association to mentor those who were new to the industry.
He noted that the construction sector is leading the economic recovery and is likely to continue to do so.
Trevor Deleon, chairman of Jamaica Developers Association, noted that despite the pandemic the country has experienced a considerable increase in housing development both in the Kingston Metropolitan Area and outside communities.