Pension funds go property shopping with cash
Others avoid mortgage line
Published:Wednesday | December 6, 2023 | 12:05 AMAvia Collinder/Business Writer
Pension funds and investment houses have been buying more real estate as long-term investment strategy.
They are among more buyers who purchase for cash, avoiding mortgage arrangements, as realtors report an uptick in cash sales or half-cash in 2023, citing an under-performing stock market and higher borrowing rates.
The Bank of Jamaica’s (BOJ) pension fund secured land this year in the ‘golden triangle’, a pricey area of Kingston for an undisclosed price.
The central bank commented on its purchases.
“BOJ’s decision to purchase the property represents a part of the strategy of the management of the pension fund to diversify the investment portfolio of the fund. Greater diversification into real estate was something long contemplated by the trustees of BOJ’s pension fund and is a responsible and prudent move to make, given the long-term nature of pension fund liabilities and the conventional wisdom associated with holding real estate investments in long-term asset portfolios.”
The National Insurance Fund, the government-owned pension fund which also shops with cash, said that while no transactions were concluded year-to-date for the new fiscal year, its portfolio in real estate is growing.
A response on November 30 said, “There were no concluded acquisitions or sales in real estate [since April 2023].”
However, it was noted, as at March 31, 2022, the value invested in investment properties was $20.35 billion.
As at March 31, 2023, the value invested in investment properties was $20.53 billion.
Private pension funds have also been investing more in real estate up to June 2023.
The Financial Services Commission (FSC) reported that as at June 30, 2023, across the pension investment portfolio, the asset classes that experienced the largest rise in value were ‘other investments’ and real estate, which recorded increases of 14.99 per cent and 9.18 per cent, respectively.
The increase in the value of real estate holdings was as a result of property acquisitions during the period.
The FSC commented, “Coupled with the 23.43 per cent annual growth in the value of real estate investments, real estate continues to be a viable investment option for greater diversification and more stable income for pension plans.”
Investment firms are also increasing their portfolio size in real estate.
Barita Investments said that at August 2023, its real estate fund grew to $4.4 billion, with returns of 233 per cent for the 12 months ending August.
Other cash buyers are said to be investors who see property as a better bet than current returns from the stock market, among them investment companies.
Andrew James, CEO of A.S. James and Associates Limited, reported, “The investment firms bought land for cash. [In] New Kingston and its environs, and along the north coast.”
Paul Morrison, realtor with Keller Williams Jamaica, said that among the cash buyers who he had interacted with this year were Jamaicans living abroad who bought properties for their children who are living in the island.
Locally, he said, more Jamaicans were increasing the cash portion of purchases as interest rates for mortgages rise.
The Business Gleaner reached out to the National Land Agency, the Tax Office and investment houses for additional data, but none was forthcoming.