An increase in foreign direct investment as well as government policy has seen a steady upturn in the Jamaican economy with increased prospects for incremental growth in the Gross Domestic Product (GDP).As consumer confidence continues to improve, there has been an increased interest for both residential and commercial developments with demand being pivoted by both local and expat consumption .With its extensive coastlines and tropical climate, this Caribbean paradise remains one of the most sought after destinations for real estate investment. In local currency terms, housing prices rose by around 41% during the period 2010-2015and is expected to keep rising. Jamaica still has some of the most sought after and affordable beach front houses. Prices range from US$1,300 per sq. m to US$1,500 per sq. m, while in Barbados, beach front properties range from US$6,700 per sq. m, and unlike many other Caribbean destinations, Jamaica has no restrictions on foreign property ownership.
Notwithstanding the attractiveness of the market, here are several important factors to consider before investing inyour slice of tropical paradise.
Estimate Your Finances
The first step in your attempt to invest in Jamaican real estate requires making a realistic estimate about finances. Having cash for the entire value of the property is not always necessary. You can purchase real estate by acquiring a mortgage through a Jamaican mortgage lender and secured by the home. If you have foreign currency income, you can borrow in USD’s or in JMD’s. There are merits to borrowing in either currency. The fact that JMD interest rates are higher than USD’s doesn’t mean that it is costlier if you take into account the fact that over time the JMD may devalue against other hard currencies and therefore in the long term less hard currency will be required to meet your local currency mortgage payment. Engage a mortgage lender who can advise on both.
Engage Knowledgeable and Experienced Professionals
Find property in close proximity to economic and prime development activities. Study the market thoroughly before you attempt to invest any money. The adage location, location, location can never be overstated. If you reside outside of Jamaica and are not in touch with the trends in the market purchasingwith limited market knowledge couldbe a difficult and risky undertaking therefore it is important to identify a knowledgeablereal estate attorney & reputable real estate agent with a strong track record.
A qualified Real Estate Attorney should have knowledge of the range of developments taking place across the island, the reputation and experience of certain developers as well as the buildup or shortage of inventory in key areas that will ultimately affect property values.
LOCATION, LOCATION, LOCATION……
The key indicator of any good property investment is ensuring that the community or area has certain minimal infrastructure.
- Kingston – Center of main economic activity, headquarters for most large local companies and multinationals, International Airport and major sea port, Shopping and Dining facilities and Government agencies. Property values tend to hold or rise in this locality.
- Catherine – Has become the main community for providing housing for persons that work in Kingston. Access to modern highways leading into both the North and South coast of the island – Spanish Town to May Pen High Way – Kingston to Ocho Rios Highway corridor creates access and mobility to amenities.
- James – Second City and the north coast capital that is set to lead Jamaica’s economic recovery through the expansion of tourism and hotel room capacity. A number of new hotels are in the development pipeline, which will result in the upturn of related economic activity that push increased demand for housing for the tourism worker and other commercial operators and related stakeholders in the industry. Completion of the North South Highway and significantly reduced travel time from Kingston to Montego Bay will make St James a more attractive and in demand destination for housing. Montego Bay’s international airport has been ranked as one of the best in the region.
- Ocho Rios -Emerging location, given the recent opening of the North Coast Highway. Not as strong initial demand as Montego Bay given that infrastructure and non-tourism related economy is not as developed, but nonetheless maintains an attractiveness as a center point between Kingston, Montego Bay and Portland and its access to the coastline.
Understand Changing Demographics and Lifestyle Trends
It is very easy to miss the changing demographics and lifestyle trends when not living or being close to a particular market. A number of factors have emerged over the past 10-15 years that are changing and will affect the value of real estate in Jamaica.
Conglomeration of the economy – the economic contraction of the past several years has resulted in the inability of small players to survive and be successful at doing business in Jamaica. To survive companies must be able to purchase on a large scale to achieve margin as well as sell on a large scale. As an example, a few large groups control the retail and supermarket industry. Insurance, Banking, Telecommunications, Security are other examples. The real estate industry has not escaped this dynamic and so the small contractor is no longer prevalent. Consequently, a developer/contactor in the current economic environment, must have very strong a capital base and access to lower cost bank financing to undertake a successful development.
Additionally, as land resources become less available in Jamaica, developers are forced to acquire several thousand acres of land to secure inventory for future build out. This requires enterpriseswith significant financial resources. Given this phenomena it is imperative that any purchase into a development be preceded by due diligence on the developer. This should not be a difficult or extensive task as the number of large developers are few. Enquiries with the Real Estate Board of Jamaica which regulates the industry should also help.
Metropolitan Lifestyle – As land becomes less available, especially in Kingston, the gated concept has become more widespread. This phenomena has resulted in valuations rising in these communities given the shift in demand for these communities.
Notwithstanding its island status, the Jamaican real estate industry has its own peculiarities which vary depending on many of the forgoing issues discussed. Any foray into the market should be approached on a due diligence basis