ANDREW MALLALIEU, the CEO of Terra Caribbean, last week described the new reality of homeownership here, which, if he is right, fundamentally changes my understanding of the Barbadian Dream.
He was speaking at the launch of the tenth edition of The Red Book, whose “Pink Pages” have every year provided a reliable summary of the real estate market.
He painted a troubling scenario of the decline in homeownership by Barbadians. Why, he wondered, are there fewer local buyers
of land and property today when mortgage rates are at their lowest
in years, there is more land available than before, list prices are down by 17 per cent for domestic (as opposed to foreign purchased) property, and people are living longer?
Getting onto what he termed “the property ladder” is more difficult today, he said, adding that he suspected that the age of the first-time buyer was higher
than previously.
Mallalieu also believed that some parents who can do so are now helping their children buy that piece of land or starter home.
From the 1960s to the 1980s, it was cheaper to build your house than to buy an existing one, he said, but that is not the case today. When you have finished building, you will find that you have spent more on your home than you can sell it for.
The problem seems to be that, although domestic real estate prices have fallen a lot over the past few years they are still too high for Barbadians. As Mallalieu said in his Red Book article, looking back as far as 1966, “real income growth over the period has not kept pace with the increase in the land prices, and today it is harder for young middle income families to own their first home”.
Back in 1966, land was selling for about $1 per square foot, compared to today, when it is about $18. His summary is that “we believe that the low population growth and the stagnating growth in real incomes, coupled with the increase in supply of residential land, will continue to depress land prices”. But demand will remain flat for the next few years.
So the last thing he wants to see is more land coming onto the market. “Today there is more land with change of use to residential than we need for the coming economic expansion,” he wrote.
Mortgage loans
Mallalieu’s observations come from Terra’s in-depth research and record-keeping on all things real estate. But they are, as lawyers are won’t to say, fortified by the Central Bank of Barbados’ own record-keeping on mortgage loans to residents.
In January 2000, 17 years ago, mortgages at commercial banks for private dwellings totalled $239 million, but so fast was the growth of the market that they surpassed $1 billion by May 2007, just five years later.
Think that was something? Well, just five years after that, in April 2012, the Central Bank figures show, mortgage loans to residents zoomed past the $2 billion marker, hitting almost $2.2 billion.
Then things started to slow down.
We did get to the $2.4 billion marker, just barely, in February 2013, but since then loans have been more or less stuck in that vicinity. Down a bit, up a bit. As of October 2016, it was $2.43 billion, that is, a quarter of a billion dollars above the $2.4 billion marker.
In other words, only a quarter of a billion above our position three and a half years ago.
I’ve run out of space for today, so I will revert to this topic of what happened to the Barbadian dream of homeownership in a later column. Because if you want to jump-start the economy, the fastest thing you can do on the domestic front is revive that fading dream.
Patrick Hoyos is a journalist and publisher specialising in business.
Email: [email protected].
