August 11, 2007

The Jamaica Real Estate Bubble

Over the last 20 years Jamaica has realized a real estate bubble burst and this has left the real estate market in shambles. Understanding why there was and still is an unwinding in the Jamaica real estate market is the ease in which demand is being met by supply. Over the last few years the increase in access to mortgage loans has been the catalyst to an ever increasing demand as most renters move to property ownership. This has left an upside and downside to the market. In most urban areas and areas where tourism in Jamaica flourishes, property is over priced as an average two bedroom townhouse can run into ranges of up to USD$250,000. However properties such as this one in most rural locations the prices swim in a measly USD$30,000 – USD$50,000 band. Though this phenomenon is common in most developed and developing countries the disparity in Jamaica real estate is almost astounding. However the bubble has blown as supply begins to wear down demand. Too many urban approvals have led to over building and this invariably will lead to a drive to force prices down as real estate investors become more conscious of prices and begin to wait out for best deals. This can lead to several problems as many attempt to manipulate the urban property prices. The collusion between, developers, brokers and lending institutions has prevented natural market forces to prevail and prices are almost fixed as these band of individuals attempt to carve out earnings of the back of the working population. However this practice is not without an end in sight. High property prices are a sure signal of eventual economic melt down as this is in no check and balance. Strangely enough the first show and tell sign is in Jamaican property prices and will eventually lead to an extreme drop in prices once again as was in the 1970’s. Though the catalyst then was political disturbance Jamaican real estate was the first asset to suffer coming off an all time high, to plummet to ridiculously low prices. It was not until the mid 1980’s that Jamaican property started to recover. Though the stringent lending principles of the mortgage facilities have never waned and possibly have kept the Jamaica real estate market buoyed to this time.

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