However Jamaica is still far from a sellers’ market, and high-end properties have not done so well.
Low mortgage rates combined with competition among leading mortgage providers have spurred real estate sector performance, according to Carlene Sinclair, President of the Realtors Association of Jamaica and a Property Solutions Limited broker. Sinclair also noted a trend of “downsizing” among buyers from larger homes to town houses, which allow communal living among consumers, for shared maintenance costs.
Demand is strongest for apartments, with developers seeking to maximize land space and buyers’ affordability, according to Cumming.
Analysis of Jamaica Residential Property Market »
A 3-bedroom apartment in Kingston and St Andrews would cost around US$240,000.
A 3-bedroom house in Kingston and St Andrews would cost around US$330,000.
Gross rental yields remain very strong, especially on apartments, with 2 bedroom apartments reaching yields of around 10%. This would seem to suggest that Jamaica’s residential property market is firmly-based.
Capital Gains: There are no capital gains taxes in Jamaica.
Inheritance: Transfers of property as inheritance taxes is taxed at 7.5%.
Residents: Resident are taxed on their worldwide income at a flat rate of 25%.
The seller pays the real estate agent’s commission of 3% to 5%, which is subject to 16.50% General Consumption Tax (GCT). The transfer tax of 5% the property value is usually paid by the seller.
Rents: Rents and rent increases for all commercial and residential premises are set and regulated by the Rent Assessment Board. The standard rent is prescribed by the Minister and is currently set at 7.5% of the property’s assessed value.
Tenant Security: Lease agreements can either be short-term or long-term. A landlord cannot evict a tenant without a court order. It takes a minimum of 105 days to evict a tenant.
In reality, Jamaica’s economic recovery in 2013 was anaemic, and though unemployment dropped from 16.3% in April 2013 to 13.6% in April 2014, GDP growth was only 0.5%. In June 2014, the annual inflation rate was still high at around 8%, slightly down on the previous year. Jamaica’s debt-to-GDP ratio was reduced to around 139% in 2013 from 147% in 2012.
But the high debt ratio continues to be a cause of concern to the government. The World Bank has tagged Jamaica as “one of the most indebted middle income nations in the world.
Jamaica has a very poor performance in recent years. GDP rose by an average of only 1.5% from 1999 to 2007, followed by a GDP contraction by 0.8% in 2008, when it was the only Caribbean country aside from the Bahamas to experience recession. GDP fell further by 3.4% in 2009, followed by a 1.4% decline in 2010. After weak growth of 1.4% in 2011, the economy slipping again into recession in 2012, contracting by around 0.5%.
Yet better times may be coming. During the first quarter of 2014, Jamaica’s GDP rose by 1.6% from the same quarter of the previous year, according to the Statistical Institute of Jamaica (STATIN). This year the IMF expects 1.3% growth.
Jamaica’s improving economy was also reflected on the recent credit rating upgrades last February from Fitch: from ‘CCC’ to ‘B-‘ for long term issuer default rating for foreign and local currency; from ‘B-‘ to ‘B’ for country ceiling; from ‘CCC’ to ‘B-‘ for senior unsecured foreign and local currency bonds.
Months before, Standard & Poor’s (S&P) also raised Jamaica’s foreign currency sovereign credit rating in September 2013 from ‘CCC+’ to ‘B-‘.
In June 2014, the Executive Board of the IMF agreed to disburse US$ 70.9 million to Jamaica after passing its latest review. Through the extended agreement under the IMF’s Extended Fund Facility agreed in May 2013, the country has already received an amount of US$ 414 million since the agreement.
“Jamaica’s programme implementation under the Extended Fund Facility has been commendable. The achievement of a primary surplus in a short time is impressive. Essential social spending has been safeguarded and steps are being taken to strengthen the social safety net. Continued support by the international community remains crucial as Jamaica is undertaking this difficult adjustment,” according to IMF deputy managing director and acting chair Naoyuki Shinohara.
The 2010 agreement, heavily directed towards deficit reduction, allowed Jamaica to receive financial support as long as it met IMF conditions. But the US$1.27 billion standby agreement lapsed in May 2012, having stalled in early 2011 due to Jamaica’s inability to meet IMF performance targets.
Prior to the agreement, the Jamaican government had devised a plan to restructure its public debt known as the Jamaican Debt Exchange (JDX), encouraging residents holding certain debt instruments to exchange them for new longer-dated instruments. The JDX produced good results early on, providing remarkable decline in market interest rates as well as interest payments. The country even earned upgrades in credit ratings from Standard & Poor’s and Moody’s in early 2010.
However, the successful debt exchange in 2010 was not accompanied by fiscal consolidation, according to the IMF.
Prime Minister Portia Simpson Miller, who assumed office in January 5, 2012, has pledged job creation and growth, even while implementing austerity measures and tighter partnerships with its international partners, such as the IMF.