Mon | Nov 19, 2018

Short-term rental not likely to affect real estate financing

Published:Tuesday | October 16, 2018 | 12:00 AM
Carlton Earl Samuels, chief development financing officer, JN Group.

Chief of development financing for The Jamaica National Group Carlton Earl Samuels says the growing local interest in the short-term rental accommodation market is not likely to change the approach that financial institutions, such as JN Bank, take to funding real-estate properties.

Responding to issues raised about the impact of Airbnb on the real-estate market in Jamaica at the recent Realtors' Association of Jamaica Symposium 2018 in Kingston, Samuels said financial institutions that provide mortgages, including JN Bank, are likely to continue to finance purchases based on the income stream of the borrower.

"Unless the borrower has some history, or track record that underscores the income from the investment, the lender is likely to discount the projected income and rely on the borrower's fixed income stream to determine if they can afford the loan," he advised.

"Therefore, if you're just entering the market, your projected income is likely to be discounted by your certain income stream, such as your salary from employment or the income from the business, if you're a business owner," Samuels underscored.

The size of the short-term rental market in Jamaica has grown rapidly in the past two years, catalysed by Airbnb, a home-sharing facility that allows persons to book accommodations online in community settings in several countries around the world. According to media reports, Jamaicans earned in excess of US$9.7 million, or more than J$1 billion, as Airbnb hosts in 2017, representing a year-on-year growth rate of approximately 49 per cent. Stakeholders anticipate a further increase in growth as more Jamaican property owners seek to convert their real-estate assets into short-term rental accommodations.