As I watched the Budget Debate from the Small Business Association of Jamaica (SBAJ), it was a sigh of relief when I heard the Minister of Finance, Hon. Audley Shaw, announce that consistent with the direction the GOJ promised before coming in to power, the Transfer Tax will be further reduced to 4% and the Stamp Duty Tax to 3% (shared equally between vendor and purchaser) effective January 1, 2010.

This is a momentous move amidst what is happening in the economy. This however is still not where I would like it to be but I believe if they consistently reduce these taxes then the market recovery period will be sooner than later. This announcement I believe will result in a slight reduction in prices as sellers no longer have to overstate the price in order to pay these taxes and net their ideal amount. In addition, the deposit that needs to be paid in order to get the transaction started can be reduced to 10%, meaning that buyers have to find less out of pocket expenses for closing costs.

Consistent with other markets where persons “flip” homes, these taxes still are not equitable enough to both sides of a transaction to encourage this lucrative phenomenon. The taxes you face as a purchaser would be 1.5% and after you would have renovated the home, you then have to fork out 5.5% for the sellers cost. Consistent with what my good friend Andrew Issa suggested, the total on each transaction is 7% now and should be shared equally at 3.5% and be simplified as one (1) tax. This would result in even more activity in the market as persons buy and recover the same amount when selling. We have eliminated this possibility from our Industry.

On the flip side of this positive announcement, I have heard much about interest rates. How will the sellers benefit from this reduction if buyers can’t afford mortgages because of the same high interest rates? Just about a week ago the Jamaica Gleaner had an article that stated that 80% of the NHT contributors could not afford the mortgages on current salaries. Again I ask, how will the reduction of transfer tax and stamp duty truly stimulate the market? For me, if there is an announcements shortly that speaks to the affordability of mortgages and these taxes remain as is, then I am confident that this economy will blossom from the contribution from the Industry I love the most, REAL ESTATE.

Although these reductions won’t take effect until January, I know there will still be some positive effects in the market leading up to the new year.

“May God richly bless you all, and may God bless Jamaica”

DISCLAIMER – These views are the sole opinion of Howard Johnson Jr, broker for Howard Johnson Realty.

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