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It's a renter's market: Big property discounts boost business for agents

Published:Sunday | January 3, 2010 | 12:00 AM

Avia Collinder, Business Reporter

The real estate market remains in the doldrums but local real estate agents are reporting that rental business volumes increased by as much as 40 per cent in 2009, even as many property owners had to slash rental charges in the latter half of the year.

Rental income for many owners is now insufficient to meet mortgage costs on their properties.

For Century 21 Heave-Ho Properties, which has offices in Kingston and Montego Bay, rentals were 11 per cent of total income in 2008 but increased to 21 per cent so far this year.

Deborah Cumming, managing director of Century 21 notes that property-owning clients who were previously interested in mainly US-dollar rentals are now aggressively going after Jamaican renters.

"There was a situation where people bought properties for investment from Olint money,hoping to get expatriate (mainly) USD rentals, but this has been much harder to come by," she told the Sunday Business.

"They are now pricing in Jamaican dollars and are trying to attract the Jamaican tenant. I have seen discounts as high as up to 50 per cent. It is bringing results too in terms of volume."

Cumming said that real estate companies have also become more active in pushing rentals. Her company did 40 per cent more business, in volume, in 2009.

"For us, property sales are down so there is a lot more emphasis being placed on rentals. The agents are working a lot more rentals now than they did previously. Turnover was higher. We were doing 15 rentals monthly, which is up from 2008 by around 40 per cent."

The business boom for agents has also been driven by significant movement in the rental market, whereas renters unable to afford high prices have moved to access cheaper quoted properties.

According to Cumming, apartments are renting best with some rentals as low as $30,000.

"These are prices which we have never seen, as usually they would not come to us. Now that has changed."

Meanwhile, Don Glanville, president of Kingston-based Realtors International, said that properties like The Pines in the Millsborough area of St Andrew, and similar town-house complexes, which once rented easily for US$2,500, have fallen to just above US$2,000.

"In 2007, the best high-end rentals peaked at US$4,000. My understanding is that they are lucky to get $2,500 today," he said.

While prices have fallen for top- end properties, the situation is not the same for lower-end rentals.

According to Glanville, prices have not budged in areas such as Havendale, Pembroke Hall and Meadowbrook, where half of a house still rents for the upper limit of J$25,000 to J$30,000 monthly. This situation is spurred in large measure by the still high rental demand for those properties.

Glanville is of the view that at the lower end of the market owners do not view property as an investment but are merely seeking to meet their financial needs.

high-end properties renting at a slower rate

Century 21's Cumming agreed that high-end properties are now renting at a slower rate, even though rent has been significantly discounted.

"I could house three families now if they are looking for something at US$5,000. And, I have one town house, previously priced at US$2,700 and discounted to US$2,000, but I still have difficulty renting it," she said.

"In Manor Park, there is also one which usually rented at US$3,500 and is now at US$2,500, but it's still empty."

As a result of the market changes, the realtor said, high-end renters were expecting and getting more for their dollar.

But some realtors, while supporting the notion that returns from Ponzi schemes previously boosted the market, are lamenting the paucity of data to measure the performance of the property-rental market.

"The fallout in the unregulated financial schemes and vagaries in the job market left many residential lessees unable to afford the rent that they were paying," suggested Edwin Wint, president of the Real Estate Association and head of La Maison Property Services Limited in Kingston.

Wint notes, however, that there is a little empirical evidence to gauge change in size in the rental market across the country.

In the capital, he said, the Kingston 8 area experienced about a 30 per cent increase in available rentals due to new construction and voids, "primarily from change in preferred location from Kingston 8 to Kingston 6".

Kingston 6, he surmised, experienced about a five to 10 per cent increase in supply, due in part to new construction.

Rental charges have been going downward in Kingston 8, he said, but only to a lesser extent in Kingston 6, given the high demand for accommodation there.

Traffic congestion in Kingston 8 and the relocation of many expatriates and diplomats from there to Kingston 6 were some of the apparent reasons he suggested for the current scenario.

For 2010, Wint is projecting that demand for residential lettings in the Kingston 6 and 10 areas, as well as in Montego Bay, will do well.