Mortgage volumes are on the decline according to the Planning Institute of Jamaica. Meanwhile, the Developers Association is citing an overhang in construction units that are unsold on the market. Housing completions by the National Housing Trust, NHT, also fell in the third quarter.
Dayton Wood, president of the Jamaica Developers Association, says that an overhang or build-up of new units for sale may be causing a slowdown of implementation of plans for construction of new units. So, too, has the Jamaica Mortgage Bank, which finances construction activity.
“There are quite a few units going on the market. Maybe prices may have to come down a bit. When the demand was hot, prices went up. There is that much more on the market now, so it is going to take a while [to offload],” Wood said in an interview with the Financial Gleaner.
Low-cost developer Housing Agency of Jamaica, HAJ, is still selling units from its Rhyne Park, St James, development, but those units start at $19.2 million. Another HAJ complex, Hellshire View in St Catherine, features units starting at $17.2 million, while the units at Sandown Palms, also in St Catherine, start at $26 million.
No response was forthcoming from the HAJ on whether all the inventory had been sold.
However, the prices for those developments appear to be well within the current sweet spot for the market.
Lenworth Kelly, president of the Incorporated Master Builders Association of Jamaica, IMAJ, said property sales are still high in some segments.
“Anything less than $30 million in Kingston and St Andrew is going to go, but these are not available in Kingston. They will be gobbled up because the pressure is in the lower income bracket,” he said.
As for residences priced in the $40 million to $50 million, those are usually taken up by persons looking to invest or purchasing from overseas.
“That is not a massive side of the market. The real demand is under $30 million. Those are sold before they are built,” Kelly said.
“There is a tapering off in the higher end, but this is a small segment of the market. If prices go down, the units will go. There is softening in segments of the market,” he added.
The softness in the real estate market tracks with a general downturn in the wider construction sector.
Developers have cited supply chain constraints and labour problems as factors affecting the industry.
Those factors were cited again last week by CEO of Proven Properties Limited Aisha Campbell.
In 2021, the company broke ground on a development called Avista at Bloomfield, comprising both residences and commercial space called Bloomfield Park.
The commercial phase of the Manchester-based project is yet to begin while construction of the residential element, which was due for completion in November, is still ongoing. Its 78 residential units have a starting price of US$114,600.
Campbell said the residential phase of the development has been “impacted by both supply chain and labour constraints brought on by the COVID-19 pandemic, which inevitably led to a significant part of the delays experienced”.
“We are, however, happy to update that construction is now complete, and the units will be handed over in the first quarter of 2024. Additionally, we are currently seeking approval for the commercial phase of this development, which should break ground in 2024,” she said.
Another high-priced development under way in Runaway Bay, St Ann, by Proven and project partner Skilldex Development Limited, called Baharia, still has 83 units unsold of 206 condos, villas, and town houses encompassed in the development. Prices start at US$436,000 per unit.
Another development by Proven in St Ann, called Sol Harbour, is due for delivery in 2025. Sol comprises 152 residential units.
“Our apartment inventory at the end of 2022 included apartment units on sale at Sol Harbour Development in St Ann and also units on sale at Avista at Bloomfield in Mandeville. Throughout the course of this year, we sold all inventory on the market for Sol Harbour, and at the end of 2023, we only have some units left to be sold at Avista,” said the Proven Properties CEO.
“With the completion of the Avista development, we have seen a significant uptick in sales and anticipate that this development will also be sold out by the second quarter of 2024,” she added.
The Planning Institute of Jamaica reports that for the July-September 2023 quarter, construction GDP was flat. But there was a real decline of 3.1 per cent in the sale of construction-related goods. The outturn for the industry was attributed to an estimated contraction in the building construction component due to a 66 per cent downturn in housing starts by the NHT.
NHT Managing Director Martin Miller is yet to follow through on the promise for an explanation of the downturn transmitted through the agency’s communication department.
The PIOJ meanwhile indicated that the total value and volume of mortgages also declined by 45.4 per cent and 12.6 per cent, respectively.
“We have started to see some indication of a softening of the housing sector. For the first time in a number of years, we are seeing a slight year over year falloff in the Mortgage Indemnity Insurance applications,” said Jamaica Mortgage Bank CEO Courtney Wynter. “We are seeing that the PIOJ has reported about six quarters of negative growth in the construction sector,” he added.
Wynter said end-user mortgages have increased by more than 25 per cent, coupled with increasing house prices.
“Given these conditions, the bank anticipates some softening in the higher end of the market, resulting in some increase in inventory,” he said.
“With that said, there is still a significant demand for housing within the low to middle segment of the market, which we expect to continue in the medium term. We also anticipate that mortgage rates will continue to climb before retreating depending on the moves of the central bank,” the mortgage banker added.
Marvin Campbell, CEO of West Indies Home Construction Limited , WIHCON, says prospective home buyers have been watching the interest rates to ensure that they can cover financing costs.
“They are waiting and watching,” he said.
However, Campbell said that for WIHCON, demand for homes between $15 million and $35 million remains robust.
“We are still pushing ahead,” despite financing costs, he added.
Wood of the developers association said that although regularity is returning to the market post-COVID, the cost of shipping still remains prohibitive, aligning with views expressed by Campbell regarding disruptions in materials, transportation, and labour.
Most construction projects are in the parish of St Andrew.
Financiers of construction and retail real estate mortgage providers have increased interest rates as a response to the central bank policy rate increases in 2022, said Wynter.
“We have seen construction interest rate increases of up to four percentage points,” he said.
However, he noted that developers have simply passed on the cost to buyers.
Since the pandemic, Jamaica Mortgage Bank has seen a 17 per cent to 25 per cent increase in residential real estate prices, “driven by interest rate increases as well as escalating cost of aggregates and finishes in the construction sector”.
“In addition, many financiers, in a move to reduce the elevated risk in the sector, especially on the residential side, have tightened terms,” Wynter said.
President of the Realtors Association of Jamaica Newton Johnson agrees that there is a slowdown in sales but said it was merely seasonal.
“There is a build-up in inventory. Things have slowed down, but it is not that they have stopped [buying]. People are enquiring now, but there is not a lot of commitment. In the last quarter of the year, traditionally, there is a lot of window shopping. Most of the legal firms go off, so you cannot get anything concrete done anyway,” he said.
Kelly from the IMAJ said there are a couple of indicators that point to a downturn, among them the reduced sale of cement and steel.
“They have had a drop in local sales from Cemex. This is likely to be housing,” said Kelly. “We also met with Statin in early December, and, yes, there is a decline,” he asserted. Cemex is the ultimate parent company for Kingston-based Caribbean Cement Company.
However, the building contractor spokesman also indicated that the sector didn’t consider the current situation to be particularly worrying.
“When you are doing projects, you can get a lull in the preparation phase. It might not be a sustained contraction. There are also some segments which need large areas of land which need preparation. Important also is the activity of the National Housing Trust. They have the cash. There are contractors and developers who operate in that space. The NHT may have completed schemes waiting for handover,” Kelly said.