Dionne Rose, Business Reporter
Scott and Levy
The number of projects approved for construction by Jamaica's Real Estate Board plummeted by 57 per cent for the first nine months this year, when compared to the same period in 2007.
The cause? No one is sure.
But for the smart mouths on the cocktail circuit and inside the bars - almost anywhere people congregate - it is just another sympton of the meltdown of the unregulated financial organisations (UFOs) that used to guarantee clients interests rates of upwards of 10 per cent a month.
"I bought a car, paid university fees and was planning on a new, larger home," said a woman, walking briskly around the track at New Kingston's Emancipation Park. "Those plans have been shelved, gone."
"I had some money with David Smith - Olint," she responded. "I hope I can get it back. We were planning to build."
Snippets of conversations like this notwithstanding, no one is clear about the real impact of the collapse of the schemes on the real-estate market.
Depending on who you talk to, the claim is from minimal or none, to significiant.
"It is commonly known in the marketplace that there has been some effect on the deposit flows from purchasers," said Reynold Scott, president of the Developers' Association and principal of Geon Group, which builds high-end homes. "But ... I am unable to say the extent to which these flows have affected developers."
For his own firm, said Scott, only a handful of purchasers would have been forced to pull out of options or delayed payment, affecting no more than five per cent of cash flow.
The truth is, however, in the absence of an industrywide survey, anything else would be either gut feeling or anecdotal information, Scott explained.
One bit of hard data, though, is that between January and September, the Real Estate Board gave the green light to 32 developments. Over the same period last year, it said yes to 47.
These 32 approvals, which could be done in a day if all the requisite supporting documents are submitted along with the application, accounted for 500 units, compared with 1,790 units from the 47 projects approved over the same period in 2007.
Whatever else may be happening or may have happened in the real-estate market, William Tavares- Finson, managing director of the realtors and auction house D.C. Tavares and Finson, is in no doubt that the drying up of cash from the UFOs has impacted the industry negatively.
After all, David Smith's Olint, which said it traded foreign exchange, was estimated to be upwards of US$800 million in capital and interest under management. Other schemes, such as Worldwise Partners and Mae Daisy, had hundred of millions of dollars more. So, too, did CashPlus Ltd, which said it was involved in real estate and other businesses, rather than currency trading.
All the schemes fought being regulated by the Financial Services Commission, which warned that they might be Ponzis.
A set of newly constructed townhouses in an upsacle area of Ironshore, Montego Bay, that are on the market for US$400,000.- contributed
"From the standpoint of sales, quite a few companies have experienced cancellations of sales already in progress, and also a reduction in the levels of active clients seeking new properties to purchase," said Tavares-Finson.
It would, however, take some time to see what effects this might have had on the overall value of properties, he said.
Anya Levy, real-estate agent in the family business of Valerie Levy and Associates, differs.
She, up to now, has seen no effect, several months on from faltering to final collapse.
"It (the real-estate market) has not been affected in the way that people out there are projecting," Levy said.
According to Levy, if there had been a big pull-back from deals on projects already under way, you would have expected to see a surplus on the market.
"We just don't have the inventory," she said. "If we had lots of units in surplus, I would say (the market) could be affected. But we don't."
Among the possible reasons why this is not the case, Levy argued, is that people will find ways to close a real-estate deal "once they know it is a good investment".