COVID halts real estate momentum
But property transaction values resilient
Construction, which is captured as a goods-producing sector in the counting of national output, was a star in the real economy last year. But real estate, which is classified as a service, was unable to match it. Although the number of real estate...
Construction, which is captured as a goods-producing sector in the counting of national output, was a star in the real economy last year. But real estate, which is classified as a service, was unable to match it.
Although the number of real estate transactions continued to grow last year, the value of the business done between January and December 2020, was lower by nearly $1 billion.
Comparatively, in the year before the pandemic, the value of transactions rose by $24 billion. Still, the rise in the number of deals last year, although slight, has some championing the real estate market as resilient to the crisis.
The data, which was provided by the National Land Agency, NLA, only relates to property transfers denominated in Jamaican dollars.
Five years ago, in 2016, the value of property transactions recorded by the NLA was estimated at $79 billion. The transactions have climbed steadily since, peaking at $127.6 billion in 2019, but COVID-19 has partially disrupted their trajectory.
Last year, the value of property transfers fell to $126.7 billion, but the number of transactions continued rising to a new high of 10,401, up from 10,366 in 2019. The data implies that property values were relatively flat but slightly cheaper, on average, last year.
There is no discernible monthly pattern in the data, but NLA Commissioner of Valuations Eric Allen said that, around August to September, there tends to be a lull because of back-to-school priorities. That lull, however, is sometimes disrupted by government agencies or a large property investor, such as a hotel chain, doing large transactions, he said.
In reference to the seasonal behaviour or cyclicality of the market, Allen said: “It’s very hard to pinpoint, except Christmas, Budget time in April and back-to-school. While we can’t be definitive … the second half of the year is interesting.”
Andrew James, the managing director at A.S. James & Associates and chairman of the Real Estate Board, asserts that there is a cyclical pattern to the market, but notes that it is impacted by the turnaround time to finalise real estate transactions.
Properties sold in December, for example, are normally settled in March, mostly because of the bureaucracy, he said.
“The real problem for us is what happens at the Stamp Office. Things take too long to come out of that place. Many are of the view that, if transactions were taking a shorter time, then there would be more money in the economy,” he said.
The Stamp Office is the receiving agency for property sales agreements and, if necessary, does investigations through site visits and other checks to ascertain accurate values. The amount of stamp duty and other charges payable is based on the sale price recorded on the sales document.
James says, as a valuator, he finds that there are sometimes discrepancies between the property value recorded on the title and the value listed on the Multi Listing Platform (MLS) used by registered realtors. He says, in doing valuations, he uses the amounts recorded on the title, but also compares it with the listed price and actual sale price captured on the MLS platform.
“You may have instances where a property is registered on the title as being sold for $30 million but, when you check on the MLS, it is listed as being sold for $40 million,” he said.
James added that he will be using his tenure as chairman of the Real Estate Board to reconcile the numbers in a way that can more accurately reflect the real total value of properties sold.
He added that the market should continue relying on the NLA data in assessing value, while asserting that the figures to date show that the real estate market has remained COVID-proof.