Booming tourism buoys Jamaica's housing market
Lalaine C. Delmendo | October 04, 2019
“We anticipate that we'll be seeing many more tourists in our capital city and many more real estate investors,” said Andrew Issa of Coldwell Banker Jamaica Realty.
Vacation homes located in Montego Bay area, Ocho Rios, and Negril are attracting foreign homebuyers. Port Antonio is also slowly gaining popularity after an airport expansion in the area, according to Nicola Delapenha of Coldwell Banker Jamaica. Vacation homes are priced from US$ 800,000 to US$10 million, according to Seventh Heaven Properties managing director Walter Zephirin.
Foreign investors dominate the high-end market, while young Jamaican professionals who are first-time homebuyers fuel demand for mid-income bracket properties. The recent reduction of mortgage interest rates and increased loan limits in some banks is boosting housing demand this year.
“In the residential market, you have first-time homebuyers who now qualify to buy based on their NHT mortgage points and low-interest rate mortgage instruments being offered,” Issa noted.
Demand for homes costing J$25 million (US$ 185,600) and below showed strong growth in recent years, while houses worth above J$40 million (US$297,000) had the least growth. There was an increase in demand for townhouses, apartments, and for properties in gated communities.
“I predicted 2019 will be a very strong year for real estate as demand continues to be driven by stable, strengthening economy with low mortgage rates. Jamaica has been back on the international list as a country in which to invest from early 2018,” said Issa. “While crime did slow the momentum, it appears that Jamaica's economic indicators are within the parameters for foreign investors.”
There are no restrictions on foreign ownership of property in Jamaica.
Jamaica - prices stable, yields high
Prices of apartments and houses have continued stable in Kingston and St Andrews during 2010, continuing the trend of 2009. The exception is a decline in the prices of the largest houses, which fell sharply between 2008 and 2009.
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.
Income taxes are high in Jamaica
Rental Income: Nonresidents earnings rental income are taxed at a flat rate of 25%. Property taxes, maintenance costs, interest payments, and depreciation are deductible from taxable income.
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%.
Buying costs are high in Jamaica
Round-trip transaction costs are between 16.49% and 22.32%. The buyer and the seller are separately liable for their own legal fees. But both are jointly liable for the Stamp Duty of 4%.
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.
Jamaican pro-landlord luxury market
Jamaican law is pro-tenant, but in practice high-end rental agreements often ignore the law and practice is pro-landlord.
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.
Is Jamaica now on a more hopeful path?Despite these positives, the Jamaican economy has performed very poorly for a long time, and the country is still on International Monetary Fund (IMF) life support because of its high debt levels.
Jamaica is estimated to have grown by 1.4% in 2018, after miniscule growth of 0.7% in 2017, 1.5% in 2016 and 0.9% in 2015, according to the International Monetary Fund (IMF).
Longer-term, the numbers are even worse. Jamaica grew by only 1.3% annually from 1998 to 2007. There was a GDP contraction by 0.8% in 2008, when it was the only Caribbean country aside from the Bahamas to experience recession. GDP fell by 3.4% in 2009, followed by a 1.4% decline in 2010. After weak growth of 1.4% in 2011, the economy slipped again into recession in 2012, contracting by around 0.5%.
The economy is projected to grow by around 1.7% this year and by another 1.9% in 2020, based on IMF estimates.
Things may be changing. There's been a sea-change in attitudes over the past few years, and in September 2019, Jamaica completed the final review of its three-year US$1.6 billion precautionary stand-by arrangement (SBA) with the IMF, which will expire on November 8, 2019.
“Budget discipline combined with a reorientation of the fiscal system, including the shift from direct to indirect taxes pioneered by this government, has helped put public debt on a sustained downward path,” said the IMF.
While government gross debt was still high at 99.4% of GDP in 2018, it was already a significant improvement from 138.7% of GDP in 2013.
Upon approval of the review an additional US$220 million will be made available, bringing Jamaica's total accessible credit to about US$1.63 billion.
The country's inflation rate slowed to 2.4% last year, from an annual average of 10.7% from 2001 to 2014.
Unemployment stood at 7.8% in April 2019, down from 13.7% in April 2016, according to STATIN.
In September 2019, Standard & Poor’s Global Ratings raised Jamaica’s long-term foreign and local currency sovereign credit ratings to ‘B+’ from ‘B’, with a stable outlook. Moody’s and Fitch had both upgraded Jamaica’s credit ratings earlier.