Sort of, but not like in the US, say Realtors

By Julian Richardson Assistant business co-ordinator richardsonj@jamaicaobserver.com
Sunday, April 12, 2009

There are deals to be had in Jamaica’s residential real estate market, but Realtors say they are not as widespread nor as ‘eye-popping’ as in the US, where that country’s real-estate crash has made properties across many major cities astonishingly cheap.

The current economic implosion has made the real-estate boom that local sellers enjoyed from the early to mid 2000′s seem like a distant memory. Without a doubt, a picture of today’s sluggish market is painted across the parish of St Andrew. The exaggeratingly large amount of “For Sale” signs help tell the story of how the crisis has caused inventory build-up: Properties are being sold at alarmingly slow speed as consumer purchasing power have weakened under the difficult financial climate in which mortgage rates are up and individual earnings are down.

The upshot, says Andrew Issa, managing director of Coldwell Banker Jamaica, is that there are some good opportunities for those who have the cash to take advantage.

“It is a buyer’s market because, usually, whenever inventory begins to go past six months, the market switches from a seller’s market to a buyer’s market,” says Issa. “We don’t really have a lot of inventory but what we do have is taking longer to move.

“We feel that if buyers want to get a good deal, now is the time,” he tells Sunday Finance.

Don Glanville, president of Realtors Limited, elaborates on Issa’s assessment. According to Glanville, when the real estate market was strong, the disposable period – the time an owner enlists a property with a broker to the point when a purchase agreement is initiated – for properties on the market was from two to four months; but that’s not the case these days.

“At this time in 2009, the disposable period has doubled so that from the time you enlist the property to the time it is disposed of, you are talking anywhere from four to eight months, and in less than desired areas it takes even longer,” notes Glanville, who has been in the realty business for 38 years. “That’s so because there are less able, qualified, ready and willing purchasers in the market.” Glanville and Issa are in agreement that there is certainly room to negotiate good deals locally as sellers become increasingly anxious to offload properties, and this observation was supported by Earl Jarrett, general manager for Jamaica National Building Society (JNBS).

“Buyers are in a good position to negotiate because sellers are more prepared to be flexible with their negotiations,” says Jarrett.

However, the realtors say, the deals being offered in Jamaica are not as heavily discounted as those in the US, where the slump in the real estate market and accompanying recession has catalysed foreclosures – giving investors plenty of cheap properties to choose from.

According to the local experts, since 2007, there have been no substantial decline, but prices have remained steady in Jamaica.

“The market is relatively static and at best trending down; and because the Jamaican dollar is devaluing, the value has fallen,” notes Glanville.

This is a significant development when one considers how rapid real estate prices appreciated during the boom – pushing prices out of the reach of many Jamaicans. For instance, when Robert Cartade’s Long Mountain Country Club, adjacent to Beverly Hills in St Andrew, came to market in May 2001, the two and three-bedroom homes were sold at between J$4.8 million and J$5.45 million; today, you would pay upwards of J$15 million to own those units.

Glanville expects prices to drop by about five per cent over the next six months, but no more than that.
Why won’t Jamaican real estate prices rush south like those in the US?

“In Jamaica, we still have, to an extent, an issue of supply and demand for the quality products,” explains Glanville. “There is a greater demand for the quality products than the supply.”

In a true buyer’s market, low prices result from an excess of supply over demand. This is not the case in areas like St Andrew, Glanville says, because there is upwards pressure on the demand side of the equation. The realtor opines that crime has played a huge role in steering consumer demand to limited segments of the market.

“The desirable areas by the standard of most of the purchasers have shrunken considerably in the corporate area,” notes Glanville. “What has happened is that some of the areas where you will find properties for J$5 million to J$7 million are not as sought after as it was before mainly because of the level of violence in the country.

“Let’s take the eastern side of Vineyard Town for instance, that is over on third avenue and fourth avenue and those places,” continues Glanville. “Many years ago, those were properties if you had one for sale, it would move in a matter of two months. But today, those properties would take six months and longer because they are close to areas that are very violent.”

Also, even though Jamaica’s biggest mortgage handlers admit they are bracing for an increase in mortgage delinquency rates within the first half of this year, persons looking towards foreclosures as an opportunity to buy into undervalued Jamaican real estate, will have a harder time than in the US. This is because judicial foreclosures take much longer in Jamaica than in the North-American country.

“The Jamaican legal process is one where you have to wait 90 days (for non-performing loans to be booked); and then after 90 days, it goes to auction; and then after auction you have a private treaty; and if that doesn’t work, you go into foreclusure proceedings which can take up to a year to complete,” explains JNBS’ Jarrett.

Additionlly, Jamaican mortgage banks generally work hard to avoid foreclosures on properties; these efforts have increased during the recession.

“The institutions are working with the borrowers to try to avoid that (foreclosures), so there are a lot of renegotiations and rearranging of loans,” discloses Jarrett.

Glanville concludes that the local real estate market is currently going through a correction rather than a depression; a normalisation after the abnormal price gains experienced through most part of this decade.

“The law of gravity is in effect because our prices galloped between 2000 and 2007,” notes Glanville. “It became static in 2008 and the correction will go through to 2009…What goes up, must come down.”