Let's take a look back at 2018
As we tick down to the last days of 2018, we take a look back at this year in the real estate industry.
This industry has seen spates of profitable periods over the last decade, but has steadily declined from 2016 to today. It is undeniable that while 2017 was a tremor, 2018 was an all-out earthquake, and we’re still feeling the aftershocks.
With shifts and changes in the macro environment in the past calendar year, the ripple effects cannot be ignored. While we’re hopeful of an upturn in the market in 2019 due to oil exploration and likely reinjection of government spending, we thought we’d analyze the considerable and critical external elements and how they affected the Real Estate industry in 2018:
- Mortgage Rates - Between late last year and this year, banks and financial institutions have become more accommodating in response to the contracted residential market, offering record low interest rates, 100% financing for mortgages and special deals to incentivize the public to buy.
- Property Tax - While the reinstated Property Tax has been controversial and polarizing, the scare factor has had the largest negative impact on buyer confidence. The change in actual Property Tax payments may be nominal for most, but the reality is that it is an additional cost that adds to the uncertainty for most prospective buyers, especially in a tenuous market.
- Stamp Duty Rebates - Effective January 1st 2019, the threshold for 0% rate on Stamp Duty has increased from $850,000 to $1.5m for first time homeowners, making it more attractive for them to make that initial big step to buy.
- Crime - It’s a fact; crime is rampant and more widespread throughout the country and safety is a higher priority. In the past, where buyers would normally sign on the dotted line for a property in a relatively safe area, there’s more anxiety and fear as crime is hitting closer to home.
- Acts of God - We have no control over natural disasters and consequently, the aftermath of them. But this past year is one that will be registered in history; a terrifying 6.8 magnitude earthquake rocking Trinidad in August and record rainfall and flash flooding that left destruction and despair for thousands in its wake and millions in damages in October. Tenants and buyers alike fled from high-rise buildings and low-lying residential areas, while prospective purchasers erred on the side of caution, doubt and hesitation at the sight of a crack or closeness to a river.
- Real Estate Regulation - It’s been a long road to regulation and legislation of this industry, and the Government of Trinidad and Tobago seems to be making all of the right moves towards achieving this goal. Now on the cusp of legal change, the Real Estate industry is hopeful, now more than ever, for a launch of the Act in 2019.
- Retrenchments in Public Sector - Over the last six months, we’ve seen job cuts in the public sector and this has added to the general feeling of uncertainty in the economy. Moreover, the higher the unemployment rate, the lower the circulation of money in the system, hence a contracted Real Estate market.
“How’s Real Estate these days?”: the common question asked of our staffers and agents.
In summary, in 2018 we’ve witnessed a contraction throughout the real estate market. The Commercial Sale market is near stagnant and most private entities are cutting back expenditure or at the very least holding their positions. Consequently, Commercial Rentals have also suffered, with office rentals at record low rates.
On the residential side, the investment market is stagnant, with owner-occupiers within the $1m to $3m range sustaining the majority of this industry these days. With most ex-patriates out of the market as far back as 2015, residential rentals have also taken a nosedive by volume.
Despite the many restrictions on demand across the market, we’re hopeful of a brighter 2019.