Tue | Dec 6, 2016

New home mortgages rise as dollar declines

Published:Wednesday | September 10, 2014 | 12:00 AM
Carlene Sinclair
Earl Samuels, assistant general manager of Jamaica National Building Society.
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Local real estate experts are noting a rise in new residential construction as the local currency weakens against the United States dollar, but say there is a pass-through effect on the size of mortgages sought by prospective homebuyers.

The observation is in sync with data produced at mid-year by the Planning Institute of Jamaica which indicates that on average borrowers are seeking larger loans for home purchases.

Top mortgage seller Jamaica National Building Society (JNBS) says its experience mirrors the planning agency's analysis.

"An assessment of our loan portfolio shows that mortgages have increased in Jamaican dollar value, although the actual number of loans has remained essentially flat over the last three years," said Earl Samuels, JNBS' assistant general mana-ger for Group Finance and Mortgage Operations.

Samuels attributed the increase in the movement to the value of the Jamaican currency.

"We have seen where new house prices denominated in Jamaican currency have risen, relative to the depreciation of the Jamaican dollar against the US dollar and other currencies. During the past two years, the Jamaican currency has lost more than 25 per cent of its value against the US dollar; and, at the same time, the cost of the imported inputs required in housing construction has increased," he said.

Jamaica National is the largest private provider of mortgages, with a residential mortgage portfolio of about $48 billion as at March 2014. In total, the building societies sector had $94 billion in mortgages on their books for the period.

PRICE MOVEMENT

Samuels cited Coolshade Patio Homes at Richmond in St Ann, whose units were being sold for US$195,000 when they came on the market about four years ago. "They have remained at the same price in US dollars; however, in Jamaican dollar terms, the price has moved from $14.6 million to more than $20 million," he said.

Carlene Sinclair, president of the Real Estate Association of Jamaica (RAJ), said that for older homes, the effect of devaluation was not as great and, in fact, some owners were switching price back from US dollar pricing to Jamaican dollars.

"We checked our MLS [Online Multiple Listing Service] data and find that not many new developments are currently listed in US dollars. We have found that a few months ago more units intended for the domestic market were listed in the US currency, but with the rapid movements in the exchange rate, during that time, the USD-listed prices were not an attractive feature in moving the units," said Sinclair.

"Most developers are listening and are now pricing in JMD in order to sell the units, considering the time value of money."

Some new developments retain US dollar pricing, but those are mainly targeted at Jamaicans in the diaspora and expatriates, the realtor said.

"On the other hand, there are some new developments designed for luxury living in the north coast tourist belt that are listed in US currency. These are not necessarily on the MLS but may be listed exclusively with individual realtors," the RAJ president said.

RAJ's multiple listing system is automatically fed into Realtor.com International. Jamaica was the second most searched country on Realtor.com's website in the month of June, while Italy was the most searched outside of the United States, said Sinclair.

"This is a phenomenal achievement for the real estate industry in Jamaica. We have found that the diaspora are some of our most loyal customers, as each wants to own a piece of Jamaica's real estate to come home to," she said.

avia.collinder@gleanerjm.com