JDX nudges big investors towards real estate
Published:Friday | January 14, 2011 | 12:00 AM
With interest income for investors still challenged in the aftermath of the Government's Jamaica Debt Exchange (JDX) initiative, pension funds and other institutional investors are now turning to the real estate market for investment opportunity.
The entities are getting in on the ground floor of new developments to cash in on early price and discount advantages, said Howard Johnson, president of the Realtors' Association of Jamaica and chief executive officer of Howard John Realty.
"They gain equity by buying at the promotional exchange rates at which properties in development are being offered, and they also get discounts from buying several units and from buying at pre-construction prices," Johnson said, explaining the advantages of the investment strategy.
This approach is said to be securing for the investors, savings of up to 17 per cent, and in doing so, allowing them to significantly beat post-construction prices.
The National Insurance Fund (NIF) is among the institutions seeking to grow the real-estate component of their asset portfolios.
NIF senior director for investments, Audrey Deer-Williams, said that in December the board had closed on two additional properties.
Deer-Williams is looking to the upper-income market for the bulk of real-estate returns for the fund from which 28,524 Jamaicans are paid pension benefits.
The J$60-billion NIF, at August 2010 had
Deer-Williams did not disclose the size of the new investment outlay in property, but the Fund is facing a more than J$1-billion shortfall on interest income - post JDX.
The JDX shaved approximately J$40 billion off the Govern-ment's debt by calling in some J$702 billion on locally held securities and replacing them with new bonds at lower rates and longer tenors.
The NIF estimated that its interest earnings from Government bonds would fall from J$4 billion to an estimated J$2.8 billion per year, as a result.
"We are very selective in the location and types of properties we invest in [and] we usually target areas that are in high demand," said Deer-Williams.
Johnson, whose organisation represents 450 licensed real estate practitioners, said realtors are in talks with several big investors but deals are yet to be inked in large numbers.
"The big companies are showing interest, but there is nothing happening yet," he said.
Johnson said many of the institutional purchasers were looking at commercial lots and investment opportunities in new developments.
"It is still a buyer's market," he said of the real estate environment.
Not even a recently publishedhousing survey showing that nearly two-thirds of
Immediate past president of the realtors' association and head of
"Demand for investment-grade residential property is increasing with institutional investors entering the market and increasing their portfolio holdings in real estate given the low interest rates or returns on cash investment," said Wint.
"Importantly, the prevailing lower interest-rate regime since
The continued increase in home ownership, he said, has been influenced by a number of factors including the Government's land titling programme, especially in rural Jamaica.
He said data for 2009 into 2010 are expected to show the same trend, with the National Housing Trust having increased housing benefits.
"It appears that more investors-developers have entered the market for providing more affordable housing solutions - $6-million to $10-million range - to satisfy the increase in demand in this market segment," Wint said.