It is a popularly held opinion, certainly in the United States which most view as the epicenter of the global economic earthquake, that when it comes to real estate we are seeing a buyers market. Headlines are basically begging persons to grab the opportunity to become first time home buyers. So what is happening in Jamaica which is a few hundred miles from the shores of South Florida?
Well unlike most economies which are shuddering in the wake of the economic downturn and sluggish if not comatose market, Jamaica’s interest rates are climbing not decreasing. Incredibly this is a deliberate move by the Jamaican central bank to make local instruments more attractive that foreign ones and so the lending institutions as is typical of any business owner facing price rises on products are planning to pass on the increases to the consumer, in this case the borrower.
The Bank of Jamaica’s rationale is that it is necessary to raise interest rates as there is low supply of available US currency relative to the demand. This high demand is causing the exchange rate to move at an alarming rate. Hence high interest rates are designed mop up the liquidity in the marketplace thus reducing pressure on the dollar.
But what about that first home buyer? Unlike the situation in the United States where the sub-prime mess led to a slew of foreclosures and empty homes for prospective buyers, the supply of affordable homes in Jamaica is not that great. What do I call affordable? Anything below $10,000,000.00 JMD. Hence it never really is a buyer’s market in that price range. Between $10 and $20 million I have observed some downward price adjustments but given the recent collapse of players in the alternative investment areas there is need for more time to effect some settling in the market. Many investors lost money and coupled with the economic distress flowing from US situation there is a sense of uncertainty and not much activity in the real estate market. Read the rest of this entry »
