The role of real estate in economic recovery

It is a well known fact that the real estate industry of most countries is a general indication of the direction of the economy. Just look at the effect of the crash of the US mortgage market and it's effect on their economy, and by extension, the global economy. Locally, it seems we're also definitely feeling the effects.

The Global Property Guide recently did a pretty fair analysis of the state of the Jamaican real estate market. In addition to the factors mentioned, we've in fact already seen that local mortgage rates have shown recent increases, making it more difficult for borrowers to access loans, and hence more difficult for developers and home owners to dispose of properties. The real estate industry has been targeted by the Government in it's attempts to stimulate the economy, with two recent reductions of transfer tax and stamp duties, the next of which is expected to take place in January of 2010 (Deborah Cumming thinks this delay is dangererous, although veteran realtor Andrew Issa thinks this will happen sooner). The Jamaica Mortgage Bank will soon issue a bond to help developers fund projects, and the Minster of Water and Housing Dr Horace Chang has urged the construction industry to use local materials to help keep costs down.

One thing is certain at this time: in light of the economic conditions, sellers certainly seem more willing to negotiate, and potential investors are urged to keep their eyes on the market as there definitely are good properties available at reasonable prices.

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Change in BOJ liquidity requirements drives up lending rates

An increase in the BOJ liquidity requirements has caused Jamaica's leading banks (NCB, Scotiabank, First Caribbean, First Global) to increase lending rates by as much as 2.5 percentage points. In combination with the effects of the sliding dollar, businesses say this move has created an increasingly difficult operating environment in which credit is not only hard to find, but those who are able to qualify for loans face much harsher terms.

The NHT has said that there is no cause for concern, however with this latest increase in rates, along with a general cost of living increase due to local currency depreciation, we are not sure how mortgage holders will respond. America is reeling from their sub-prime mortgage crash which was driven largely by payment defaults due to rate increases on adjustable rate mortgages. We had our own financial sector fallout in the 1990's. Are we going to see another Finsac soon?

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Scotiabank to venture into real estate development

Scotia Group Jamaica plans to transform the 12-acre St. Andrew property they acquired last year at 1A Olivier Road into residential housing. The project is to be financed through the pension fund. This is one of the more significant real estate investments by a pension fund in recent years. 

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