martingeorge4law@hotmail.com

Just rent a tent

There has been a tremendous escalation of prices in the real estate market in Trinidad over the last 12 months or so and by all predictions of scribes and pundits, and given the outlook for the economy, it is set to continue on this upward trend for a while again.

Now this is all well and good and is great news for property owners, but for those in the market looking for a property to purchase, it can be quite a nightmare, unless of course you are one of those well-heeled buyers, for whom price is no object and who do not need to face the banks or mortgage companies for financing to purchase the property.

If, however, you are among the majority of normal folk who are out there just barely managing to pay the bills and get by, and you’re now thinking of acquiring a home, it seems that you may be faced with the prospect of hoping to win the Lotto, signing up for NHA’s low-cost housing lottery, or you may just have to rent a tent.

A cursory perusal of the real estate classifieds, in which the Guardian appears to have the widest and most extensive listings, it shows some interesting trends for the asking prices of residential properties such as:

Three-bedroom townhouse in Maraval area $3 million

Fort George five-bedroom $5.2 million

Federation Park house $9 million

Park Avenue Westmoorings US$2.3 million (almost TT$14 million)

Woodbrook house $3 million

Trincity townhouse $1million

And it goes on and on.

Trickle down effect

Now for those who have ready disposable cash in such amounts, these prices may be like chickfeed and obviously, this would not be the range that the ordinary man would be looking at to try to buy a home.

The problem, however, is that it has often been shown that positive buoyancy in real estate prices at the higher end of the market usually has a trickle down effect, in that property owners at the lower end of the market usually sniff out the upward swing and start increasing their prices too, and this is exactly what is happening in T&T right now.

Take for example Trincity which started off life as a development intended to be affordable for the lower middle-income earners, and has over the years, grown and developed, increasing prices along the way and spawning in the process, developments such as Millennium, which is being touted by some as the Westmoorings of the East, or Eastmoorings, where land alone can run you in excess of $1.3 million.

You would then have to put your house on it, which could easily run you into another $1.5 million.

So how do you afford this if you have to go to the bank or other financing institution for a loan?

If you’re lucky and could get away with a ten per cent down payment on the land, then you have to put up $130,000.00 and seek financing for $1.17 million.

Depending on the term of years you’re looking at and the interest rate you get, you could be looking at anything between $10,000 to $14,000 per month, as repayment over a term of maybe 12 to 15 years.

To qualify for this loan, you may need to show a combined income of about $40,000 to $45,000 per month.

So great, you may be able to afford this and could pay your mortgage, but this is just the land alone! You now have to find the money for the construction of the house. You either do this from savings, if you have $1.5 million put aside somewhere just doing nothing, or you may have to go looking for a loan again.

Now bear in mind you’re already carrying a mortgage payment of $10,000 to $14,000 on the land alone, which land is not generating any income for you and you now have to show that you could afford the additional payments for the financing to build the house.

Let’s assume you also have $150,000 put aside as a ten per cent start, in respect of the financing for building and you only have to look for $1.35 million. Over a 12-to-15-year term, you may be looking at $12,000 to $16,000 per month as your repayment.

Now to qualify to be able to carry both of these payments for land and house you may need to show a combined income of maybe about $75,000 to $90,000 per month.

Now all of this is just to demonstrate the simple point, that for the vast majority of the population, many of these upper middle class properties, are still not within reach of realistic affordability.

So when you rule out all these properties, it leaves you to relentless bargain house hunting, in the hope that you will get lucky or it leaves you to the NHA lotteries or you may really have to invest your money in some income earning endeavour while you just rent a tent.