Realtors prod NHT on land
Local realtors are suggesting that National Housing Trust (NHT) take a new look at its policy for land, saying a solid increase in the loan amount would put the state agency's contributors in a position to buy property on the market as another route to home ownership.
Two weeks ago, NHT announced an increase in loan limits for real estate purchase from $4.5 million to $5.5 million per contributor, which will be applicable to new homes coming on the market. The policy is meant to ease the struggle faced by contributors in financing home purchases.
The allowable limit for land loans is less than a quarter of the home purchase cap.
"It would have impacted on a wider cross section of potential homeowners if there was an increase on the land loans as well," said Edwin Wint, president of the Realtors Association of Jamaica (RAJ), and chairman and CEO of La Maison Property Services Limited.
While empathising with the objective of the NHT to "boost economic activity" and create jobs immediately, Wint said increased land access would have been "more far reaching" had the benefits been opened up to a wider cross-section of prospective home buyers/builders.
"There are those persons who want to be able to buy land and then build on own land as opposed to those who want to buy a finished unit. So those who want to access lands would benefit and those who want to buy houses would benefit," he said.
The NHT announced on November 11 that new borrowers will get $5.5 million to purchase houses in "new developments", with an accompanying one per cent reduction in interest rate.
The housing agency, in response to a Sunday Business request for clarification, defined new developments as "any scheme of six or more houses, for which a practical completion certificate was issued by the developer after September 1, 2015".
The new policy therefore limits the scope of improved benefits to purchases within these parameters.
Contributors, however, continue to get $1.5 million to purchase land in a market with islandwide listings averaging $1.7 million to $3 million for lots.
Pressed on why land was left out of the new policy, the NHT indicated that that route to home ownership was slower than purchasing residential units built by others, and said the slower pace of construction would not achieve its targets of boosting economic activity in the short term.
The $1 million or 22 per cent hike in loan limits to purchase houses in new developments is seen as a quicker route to that goal.
"The policy amendment is intended to boost the construction of housing units so as to increase the housing stock in the short term and generate national economic activity," said NHT via email. It also signaled that no change to the land loan policy will happen before 2017, if at all.
While the purchase of land "may ultimately result in house construction, the pace of construction is often slower and unpredictable", the housing agency said.
Realtors concede that the state agency has a valid point, but said it still was not sufficient reason to discount a segment of the market, who want to develop their dream homes at their own pace and from their own designs.
Additionally, real estate brokers are themselves confused by the Trust's new language on the qualifying criteria for the new benefits.
"They need to be a lot clearer," said Deborah Cumming, the president and CEO of Century 21 Jamaica. "What is the new development? Why are they not increasing it for land, and why is it is only new developments?" she asked.
On the face of it, Cumming said, the NHT's plan "sounds great but when you dig down into it, you are like, there is no benefit to me here".
"Everybody pays in, so why shouldn't everybody benefit?"
Former president of the RAJ and managing director of Property Solutions Limited, Carlene Sinclair, feels the increase will end up benefitting large developers but not the regular contributors to the NHT whose salaries don't qualify them for big loans.
"It really is for the developers who have built these large schemes. The regular buyers will not benefit from the $5.5 increase," said Sinclair. "Their salaries are not qualifying them to take on a $5.5 million loan anyways."
Jamaica's housing market has been consistently hobbled by lack of 'effective demand' under which persons who want to buy homes can tap into financing programmes they can afford to effect their real estate purchase.
NHT itself has acknowledged that most of its contributors cannot afford to take up its offers, which is the cheapest financing around.
"That's why NHT has so much money because nobody can qualify for it. It's just not making any sense," said Cumming. They need to find a way for people to access the money so that they can buy the land and build their homes. But what they (contributors) are getting makes no sense," she said.
Cumming said NHT's explanation for the new loan cap is that the in the last four years since the housing policy was last reviewed, the local currency had depreciated substantially, and that increase was meant to cover the rising cost of home purchase.
But, land costs have also gone up, she said, and as such the loan policy "needs to be more aligned".
Up to April of this year, the NHT revealed that more than 250 of its houses and serviced lots have been placed back in the pool of available homes for sale as contributors had either exited the transaction or their salaries could not carry the mortgage.
The NHT's policy is that mortgage payments should not exceed 33.3 per cent of the applicant's gross income.
President of the Incorporated Masterbuilders Association of Jamaica, Carvel Stewart, has been pointing out since 2014 that there was lower take up of NHT homes, and has called for a revision of qualifying criteria as too many prospective homeowners are being left out of the loop.
The NHT said it will review its policy again in 2017, "to determine, among other matters, if the recent offers can be extended to all loan types and all income groups".