The Sustainability of Jamaica’s Real Estate Market
Jamaica is revered and envied by all from all walks of life. When compared with countries globally, Jamaica offers easy investments with stable, continuous and safe returns. The 2014 Forbes Magazine Best Countries for Business Report has ranked Jamaica as the number one country in the Caribbean to do business. Property taxes in Jamaica are more affordable than countries across the Caribbean, North America, Europe and Africa.
While countries such as France, Italy, Singapore, South Africa and the United States of America have implemented other taxes such as capital gains tax, wealth tax and state tax, Jamaica has shown a reduction in transfer tax from seven to five per cent. We are currently experiencing a record low in interest rate of 9.29 per cent, and despite the global economic meltdown and the softening of property prices, we have seen an increase in the average median house price of $16.0 million, resulting in a high demand for affordable homes, and this trend continues to rise.
The National Housing Trust (NHT) must be commended for its initiative to bridge the gap for contributors combining mortgages with respective banks and building societies, their extremely low interest rates and creative ways identified to provide loan facilities to contributors. While we have these commendable factors of low interest rates and low taxes, affordability is still a major factor for the majority of Jamaicans. With the recent report on slowing of inflation over the last fiscal quarter, this will no doubt positively impact the property market. We are now seeing an increase in high net worth investors looking for lucrative real estate opportunities.
More Gov't incentives needed
While the Government continues do what it can to keep foreign investment flowing, by spending billions of dollars on highways and improving airport facilities, they need to initiate more incentives, possibly by way of granting investors residency permits. For example, the Botswana government has implemented the public private partnership (PPP) along with residency permit to encourage growth and development. They provide the land for the investors and share the profit; conversely, Zimbabwe embarked on the redistribution of land from qualified investors to locals. The reality speaks for itself; today, Botswana remains an African miracle of growth development and stability, and between 2002 and 2009, Zimbabwe's formal economy collapsed.
How to improve Jamaica's property market and increase revenue?
- Encourage high net worth investors to reside here by offering them residency.
- Introduce PPP; this is where the government provides the land and the investor provides the capital for investment, making it a win-win for all.
- Encourage the Urban Development Corporation to regain momentum and its thrust to transform urban centres and strategic rural towns while preserving the natural environment.
- Reduce bottlenecks in the approval process. The development-control system takes a tripartite approach in the management of the approval process, with NEPA being the central approval body and the KSAC being the metropolitan body for the city of Kingston and its environs. The parish councils should be responsible for the other 12 rural parishes. Each council should be autonomous in their approval of simple applications.
- Strategic partnership with Cuba, adding Jamaica as a central hub or destination group of islands for tourism as soon as the embargo has been lifted in that country. This will in turn boost our real estate market in both rentals and sales.
- Sustainability and the built environment: The regenerative capacity of especially Kingston and its metropolitan region is affected directly by greed of society without consideration for its people and the planet, hence the need for effective governance to balance out our triple bottom line (people, planet and profit) and become sustainable. Managing the built environment, already we are seeing the impact of such disaster. Right here in Jamaica, in Alligator Pond, south St Elizabeth, the sea has claimed a huge portion of the land due to a rise in sea levels. We have also seen a decline in crops, an extinction of species and extreme weather patterns.
The question is, how do we balance the main factors which in the long run are destined to create a wider hole in the ozone layer? We must take a close look at how the KSAC, NEPA and parish councils deal with meeting the needs of the present without compromising the ability of future generation to meet their own needs. A structured approach is required to create a more efficient system, which in the long run will have a more positive impact on the country's economic growth and sustainable development.
- Doreen Buchanan, JP, MRICS, MRAJ, MSc, is a realtor. Email feedback to firstname.lastname@example.org