Developers unwrap more plans in 2021 as portfolio diversification drives industry
DEVELOPMENTS which might have been put on hold in 2020 due to the spread of COVID-19 are now being brought forward for implementation.
Sandra Garrick, chief executive officer (CEO) of the Real Estate Board, indicates that as at June 30, 2021 registered new developments have climbed 17.2 per cent over 2020 and 19.75 per cent above 2019.
The number of development schemes registered from January 1, 2019 to June 30, 2019 was 52. For the similar period in 2020, 53 were registered. Comparably, the number of development schemes registered from January 1, 2021 to June 30, 2021 numbered 64. Garrick told the Jamaica Observer’ s Business
Observer, “We have seen further increase in the number of registered developments, as pointed out in the data. We compared the registration year to date for 2020 to 2021.”
Industry experts cite a postcovid momentum, but also portfolio diversification.
Andrew James, CEO of Andrew James Realty Limited, said the low barrier to entry in the industry and relatively high return on investments, compared to other investment classes, is fuelling the rise in construction activity.
“A lot of money is available, so even the investment houses are not just giving loans for development, but [they themselves] are now developers,” James said. observed.
One example is Real Properties Limited, subsidiary of PROVEN Investments Limited, which now has 12 developments in its pipeline.
Included are the César in Kingston with six villas and nine apartments. It is due for delivery in September 2021. Another development, VIA at Braemar, comprising 99 apartments (51 studios, 30 one-bedrooms, 18 two-bedrooms) is due for delivery in October 2021.
Mystic Ridge on Milford Road, St Ann, comprising 156 apartments (144 studios and 12 two-bedrooms) is due for delivery in September 2023.
Other developments are AVISTA at Bloomfield, in Mandeville, comprising 78 apartments (40 studios, 20 one-bedrooms and 18 two-bedrooms) and due for delivery in December 2022. Grove Park, a development in which PROVEN has a 52 per cent stake, in Kingston and comprising 76 apartments (48 one bedrooms and 28 two bedrooms), is due for delivery in December 2022.
In St Ann there is Pimento Grove in Cardiff Hall, in which the company has a 49 per cent stake and which comprises 85 villas, 73 town homes and 48 condominiums. This development is due in March 2024.
Other properties, slated for rent and lease, are located in Newport West in Kingston, Portmore Pines Plaza and a new commercial space in Mandeville is slated for completion in 2023.
General manager of the Jamaica Mortgage Bank, Courtney Wynter, at a recent industry conference, said the average return on investment (ROI) for real estate projects was 21 per cent, while the average return on equity (ROE) was over 80 per cent.
“Only the stock market can compete with this level of return,” he stated.
For fiscal 2020/2021, the Jamaica Mortgage Bank is expected to exceed the $3.5 billion in project deals it underwrote in 2019/2020.
The record year has been fuelled by heightened construction activity, regardless of the spread of the COVID-19 virus. Wynter also noted that there were now more female developers and that the average size of housing units had fallen from 1334 square feet to 937 square feet.
Meanwhile, the average cost of construction has moved from $8,400 per square foot to $15,200 per square foot.
The mortgage bank head said the average cost of apartments had remained flat due to the reduction in unit size. An average price per square foot moved from $18,700 to $26,700.
Global Property Guide, which made an assessment of growth in the Jamaican market this year, said that continued growth in the construction sector was fueled by a reduction in interest rates on all new loans by 1 per cent, effective April 1, 2020, and a reduction in interest rates on all existing National Housing Trust loans by 0.5 per cent, benefiting around 100,000 households.
The research source said also that overseas interest in Jamaica’s housing market has risen in recent years, with buyers targeting vacation homes located in and around Montego Bay, Ocho Rios, Negril and Port Antonio.
Howard Johnson Jr, CEO of Howard Johnson Realty Limited, said the POST-COVID momentum is underway. Referring to the Real Estate Board data he said; “These would mostly be for the already approved developments that were slated PRE-COVID that have either broken ground or are about to be completed. There was and still is a growing demand for real estate investment. Even with the pandemic, people are seeking opportunities. However, in recent times, there has been an impact on pricing due to shipping and material costs.”