Marcella Scarlett, Business Reporter
Easton Douglas, chairman of the National Housing Trust (NHT), says there is not enough supply of housing in either the low- or middle-income categories to fill current demand.
The sellers of real estate agree with him, one of whom has called the lack of inventory a "housing crisis" driven by expensive land while wondering if the capital city should start building up instead of out.
NHT dominates the real estate market in houses built and mortgages issued. The state agency has a different view of the market's stratification than private sellers.
Douglas said the NHT has over 530,000 contributors with almost 60 per cent of its contributors earning between J$5,000 and J$10,000 per week.
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These he classified as low- income earners and puts a conservative starting price of J$1.5 million to $2 million for housing units for them; however, Douglas, a former minister of housing, says the NHT is not able to satisfy any demand in this price range.
Middle-income earners make up almost 30 per cent of the contributors with lower middle income described as earning J$10,000 to J$20,000 per week; the middle-middle income earns above J$20,000. Housing priced between $2 million to $12 million, said Douglas, are targeted at middle-income earners.
The other 10 per cent is either upper middle or high income with price tabs above $12 million.
"In terms of affordability, the 60 per cent of low income is in more demand than any other category but the supply is just not there. Only about 20-25 per cent of this category is being satisfied. Only about 40-45 per cent of middle-income homes are being satisfied," Douglas said.
NHT's middle-income band, he says, targets professional groups such as the police, teachers, nurse, regular civil servants, bank workers, and journalists, but Douglas also notes that few among the groups he named can afford to purchase.
"In each of these categories, you have different levels, like you would have a junior teacher or a senior teacher or a constable, or an inspector," he said.
Private realtors in their assessment of the market are less driven by income levels and more so by location and market trends.
"Location affects prices, so we can't really pin down any price range to call it middle-income or lower-income housing," says Lorraine Findlayson from Valerie Levy Realty.
A home priced anywhere between J$1 million and J$10 million would be low-income housing, she said, noting that for this category, persons can tap cheap NHT for loans.
"This is a factor to consider because this makes funding so accessible," said Levy.
In Kingston, the middle-income category would rest within the J$12 million to J$30 million band. Buyers in the category "would need to be earning a good salary", while high income homes are priced above J$40 million, but it also depends on the type of property, she added.
CEO of Coldwell Banker Jamaica Andrew Issa's pricing perspective was a bit more conservative.
He said prices for lower-middle income homes range between J$9 million and J$12 million, middle-middle income homes between J$12 million and J$16 million and upper middle as between J$16 million and J$24 million.
Above that you have the upper bracket and estate homes, he said.
"Let us take a standard two-bedroom town house for J$12 million - that would definitely be middle; but at the same time a one-bedroom apartment in a good neighbourhood for J$6 million is also
middle income," he added.
Both realtors also agree
that the demand for lower priced homes far supersede the supply because
few people are building homes for those prices.
"There
is a high demand for housing cheaper than J$6 million, but those units
are not coming to the market. I think the lower end of the market have
been neglected by private developers," said Issa.
"I
think it is fair to say that we have a housing crisis. What we are
seeing now is an increase in squatter settlements but developers might
not find it profitable to build lower priced homes," he
said.
As far as Kingston is concerned, Issa argued
that land price is too high and therefore the units available are
targeted for middle-middle and upper middle income
groups.
"People would be happy to buy lots for half
million or one million and then build on it but even those are not
available in Kingston. The question is, 'Is it time for Kingston to go
vertical?' There is so much and no more flat land in Kingston and so
much you can do with it," Issa said.
Attractively
priced
Levy recalled her experience selling one and
two-bedroom apartments in a newly constructed complex in Kingston
priced at J$10 million and J$14 million, respectively, which she said
"went like hot bread". These units, she said, were targeting
middle-income earners.
Douglas said that while persons
may not be able to afford "the home they desire" the NHT will be
developing "attractively priced" solutions that owners can later expand
as their situations improve.
The NHT has budgeted J$25
billion for housing this year.
"When you buy an
apartment it is not expandable; that is why we want to construct these
spaces. What this is showing is that if you can give somebody a start,
they can build on it to make them into middle-income or even
upper-income homes that they could not afford in the first
instance."
Additionally, Douglas said the NHT is
examining whether any programmes can be looked at to provide financing
to cover the cost of solar panels, which may cost J$1.3 million to J$1.5
million, as this could make financing more
affordable.
Recently, New Era Homes 2000 Ltd
advertised two-and- three-bedroom homes at Caymanas Estate in St
Catherine with starting prices of J$11.5 million and J$14.5 million,
respectively, which the developer said was targeting "middle-income
earners".
There is no clear agreement on who
constitutes a middle-income earner, but mortgage providers like Victoria
Mutual Building Society (VMBS) say they tend to assess qualification
based on whether the salary can cover the debt and living expenses of
the borrower.
Loan principle
VMBS
says it is guided by the principle that all loan obligations, including
monthly mortgage payments, should not exceed one-third of the borrower's
gross monthly income.
With a loan-to-value ratio or
cap on financing of a maximum 90 per cent of the property value, an
J$11.5 million real estate purchase by a first-time homeowner would need
to be earning about J$247,000 in gross monthly income or J$2.9 million
per year, says Horace Bryan, vice -president of centralised services at
VMBS.
Bryan's assessment assumes that the borrower
would tap his or her full NHT benefits of J$4.5 million at seven per
cent interest and VMBS financing of 9.39 per cent for a 25-year
mortgage.
A J$14.5 million property would attract a
monthly mortgage payment of J$105,500 and the mortgagor should be
earning J$316,500, or J$3.8 million per annum.
The
amounts quoted are free from any other debt consideration or monthly
commitment; therefore if an applicant has for example a car loan,
student loan or credit card debt, it would stand to reason that the
disposable income would be less and as such the monthly salary
requirement would be higher, Bryan
said.
marcella.scarlett@gleanerjm.com
