The Jamaica real estate submarket
The general market for goods and service is made up of many submarkets. When left free to operate without private or governmental interference, each submarket and the general market as a whole should theoretically regulate itself by the laws of supply and demand.
One of the submarkets of the general market for goods and service is the Jamaica real estate market. While the real estate market differs in a number of distinctive ways from other markets, it acts much like all markets with respect to changes in supply and demand, but with a slower response time. It has the appearance of being a single, simple entity when in fact the real estate market is itself composed of many complex sub markets. This would include Jamaica homes for rent as well. This would be known as a parent category.
Real estate is a commodity just as wheat, gold and sugar. By combining the other factors of production with land we can produce wheat, gold and sugar or buildings.
Major sub markets of Jamaica Real Estate
Most authorities agree that the five major submarkets of Jamaican real estate are:
1. Residential homes for rent in Jamaica;
2. Commercial;
3. Industrial;
4. Agricultural;
5. Governmental and special – purpose properties
Each of these five categories is further divided into minor submarkets. For example, “residential” as a major submarket can itself be divided into minor submarkets as follows:
1. Urban;
2. Suburban; and
3. Rural
Each of the minor submarkets can be divided further into single-family and multifamily, which could then each be classified as owner-occupied and rental. The point is what appears to be one big, but simple real estate market is in reality, a complex structure of many individual submarkets, each of which contributes to the overall market.
The characteristics of the real estate market
If the real estate market were allowed to operate without any interference or restraint whatsoever, each person could use his or her property in any way that would produce the greatest return. This could result in one person’s use of Jamaican property causing a loss in value to another person’s property. Obviously, we cannot permit land to be used for whatever purpose the owner thinks best for his or her private gain.
For example, if you lived in a very fashionable up-market residential subdivision and your neighbor bought two undeveloped lots adjoining your property for use as a pig farm or for a paper mill with its offensive odors, the social costs to you and the rest of the subdivision would far outweigh the private gain to your neighbor. Therefore, the real estate market cannot be permitted to operate free of all controls and restraints.
Listed below are five primary characteristics affecting ownership and sale that set real estate apart from other markets.
1. The market is local in nature; the product is immoveable.
2. It is slow to respond to change in supply and demand.
3. There is relative permanence of improvements; land is durable and fixed in location.
4. The market is not organized and is without central control; there is no standard product and no central information.
5. Governmental controls influence the market through zoning, building codes, taxes, etc
Local in Nature – The market for real estate is uncommonly local in nature compared with other markets. The reason, of course, is that land and the improvements thereon are immoveable. For example, we cannot transport sugar cane lands from Westmoreland to Kingston. If we were in the market for tomatoes we could haul our produce to the place where demand might be greatest. However, despite the demand for housing in Area A, we cannot produce an apartment complex or single-family subdivisions on land located in Area B and take it to where there is greater demand.
Slow Response – The property market is unusually slow to respond to changes in supply and demand. Very often the number of houses (supply) in an area begins to fall behind the demand, however, since the design, land acquisition, site preparation and construction phases of real estate are so time consuming by the time demand responds the market becomes flooded. The equilibrium between supply and demand is thus destroyed because the supply of the town houses exceeds the demand at the time.
Permanence of improvements – The characteristic referred to as permanence of improvements is also closely related to the above characteristics. The typical bungalow-housing unit has a long economic life compared to other commodities. Once we have built a block of offices we are stuck with it when perhaps we could have invested our time and money in a hotel. Therefore, the permanence of the improvements created eliminates many alternatives available to markets.
Decentralized nature – Another characteristic of the real estate market is the lack of a single, central exchange for dealing with the real estate island wide. If one wishes to buy 100 shares in General Motors, California, the product will be the same as General Motors, Florida. However, if one wishes to buy 100 hectares of beachfront property in Westmoreland, Jamaica the product will be different in many respects from beachfront property in Portland. This focuses the attention on the two main reasons why there is not a central exchange for real estate.
First, the product cannot be standardized. No two tracts of land are the same. Even two lots side by side on a street have different geographical locations on this earth. This concept is referred to as heterogeneity or non-homogeneity.
Second, no central data bank or information source tells about all real property in Jamaica. Also, one needs to be careful when using information about properties in one area to assess properties in another. If one wants to know about real property in any location, it is best to go to that particular place and seek local information.
Governmental Controls – The fifth and last of the primary characteristics of the real estate market, governmental controls, plays an inordinately important role when compared to other markets. Most people are familiar with direct controls such as zoning and building codes which govern construction and use of property.
Governments also exercise indirect controls, such as the monetary policies of Central Government. For example, if Government reduces the overall money supply to slow the inflation rate, higher rates for mortgage bans turn, drives many potential buyers out of the real estate market in Jamaica. This does impact heavily on the drafting of a rent agreement in Jamaica.