According to the most recent data from the Planning Institute of Jamaica (PIOJ), real estate is eight per cent of the nation’s gross domestic product and employs 75,000 persons of varying professions and skills.
Within that context, Andrew James, president of the Realtors Association of Jamaica sat down with Caribbean Business Report to discuss several issues surrounding the real estate industry in Jamaica.
Further, there is an economic saying that when there are many cranes in the air, the economy is supposedly booming. Yet, there is push back from persons who feel left out and the view that while apartments are selling, there are many that are not being rented leaving investors holding the bag.
James takes the view that real estate, like anything, requires a strategy to be successful and he shares his views on several hot button issues.
“There is old money and new money made from the stock market. People are pulling down their investments and savings to go into real estate. It doesn’t make sense to have money sitting in the bank and earning low interest rates…”President of the Realtors Association of Jamaica, Andrew James
So what is driving prices in the country?
“Simple, demand and supply,” James explained. “What you find happening is a lot of money in circulation in the market. There is old money and new money made from the stock market. People are pulling down their investments and savings to go into real estate. It doesn’t make sense to have money sitting in the bank and earning low interest rates, so people are looking to real estate. However, it is more than that. In the past, people would be happy with just a roof over their head. Now, persons are looking at real estate as an investment. So the young professionals, instead of waiting for 10 to 20 years ‘til their 50s to buy their dream home, now, once they have enough for a deposit, they are looking at investing in another home to get income coming in.”
Yet there is the idea that with all the apartments going up, there is going to be a glut in the rental market. That is, people will buy apartments for investment but cannot get them rented and are stuck with empty properties.
James responds, “Let’s look at what is happening with countries that have a glut. Usually there is a downturn in the economy. Yet, what is happening in Jamaica is that several industries are on the rise. A lot of investment is taking place. If you look at unemployment, it is the lowest that it has ever been. So, based on what is happening in the economy, I don’t have a problem. Each time there is a new development is going up, you realise that the property is almost sold out before the development is completed to show you that there is demand. The truth is, that based on the demand, supply cannot catch up and so prices will continue to rise.”
Yet, what about rentals? Is the rental market equally robust as the property development and sales market? To that James says, “It is. You must decide where you want to be in the marketplace. Several persons are buying property to go into the short-term rentals. You now need to decide if you are going to do short-term rental or am I going to do long-term rentals. And there is a market for both sectors.”
James asserts that based on his information, he does not agree that there are a lot of new buildings going up with no tenants. “There is a great demand for properties right now so I couldn’t say why some persons have experienced vacancies. There is a great demand for long-term rentals. My office gets several calls each day from persons who need property to rent unfurnished. Most persons who are buying new properties are going short-term rentals. So, what about the long-term market? There is a great demand.”
There is also the issue that young professionals feel priced out of the market and they have no hope to afford the apartments available. “What young professionals need to understand is that your first house that you buy may not be your dream house. So, guess what? You start somewhere, maybe a one bedroom and that might be an older apartment. Then in another two or three years, you make more money and you can buy into another apartment. You must start somewhere. If you can’t afford a $200,000 mortgage a month, yet you can afford $100,000 per month in a mortgage, start there. But most persons refuse to stay within their budget. They [would] rather stretch themselves to go to the luxury apartment when their reality is that they can afford a studio or a small one-bedroom apartment, or a house in Portmore. You have to be realistic with your budget.”
The greatest demand going forward for 2020, according to James, is commercial properties. “There is a great demand for commercial properties these days. Whether it is retail, warehouse, or for Business Process Outsourcing (BPO), there is a great demand for commercial.”
Regarding residential builds, James explains that the apartment trend has left out families who need more space. “There is a great demand for townhouses. There is not much townhouses in the $50 million price range. Most developers are focusing on the one- and two-bedroom apartments. But what about the family? Single family homes are in demand.”
For persons in the $100,000 to $300,000 salary band, James offers this suggestion, “Check around as there is a number of things happening in the marketplace. The National Housing Trust has a new development in New Kingston with 100% financing. I do understand that you must work or live in the area to get the benefit. And beyond that, you must speak to a realtor to get guidance on making the most of your budget in real estate. You must be creative, speak to the right people and have an open mind.”