Tea Jamaica Real Estate Submarket

The general market for goods and services is made up of many submarkets. When left free to operate without private or government interference, each sub-market and the market as a whole should theoretically be regulated by the laws of supply and demand.

One of the submarkets of the general market for goods and services is the Jamaican real estate market. While the real estate market differs from other markets in several different ways, it acts very similarly to all markets with respect to changes in supply and demand, but with a slower response time. It has the appearance of being a single and simple entity when, in fact, the real estate market is made up of many complex submarkets. This would also include houses for rent in Jamaica. This would be known as the main category.

Real estate is a commodity just like wheat, gold, and sugar. Combining the other factors of production with the land we can produce wheat, gold and sugar or buildings.

Main submarkets of Jamaica Real Estate

Most authorities agree that the top five real estate submarkets in Jamaica are:

1. Residential houses for rent in Jamaica;

2. Commercial;

3. Industrial;

4. Agricultural;

5. Government and Special Purpose Properties

Each of these five categories is in turn divided into minor submarkets. For example, “residential” as a major sub-market can be divided into minor sub-markets as follows:

1. Urban;

2. Suburban; and

3. Rural

Each of the minor submarkets can be divided into single-family and multi-family, which could then be classified as owner-occupied and rental. The point is that what appears to be a large but simple real estate market is actually 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 was allowed to operate without interference or restriction, each person could use their property in any way that produced the best return. This could result in one person’s use of a Jamaican property causing a loss of value in someone else’s property. Obviously, we cannot allow the land to be used for whatever purpose the owner deems best for his private benefit.

For example, if you lived in a very fashionable residential subdivision and your neighbor bought two undeveloped lots adjoining your property to use as a pig farm or a paper mill with its offensive odors, the social costs to you and the rest of the subdivision would far exceed your neighbor’s private profit. Therefore, the real estate market cannot be allowed to operate free of all controls and restrictions.

Here are five main characteristics that affect ownership and sale that distinguish real estate from other markets.

1. The market is local in nature; the product is immovable.

2. It is slow to respond to changes in supply and demand.

3. There is a relative permanence of the improvements; the earth is durable and fixed in its location.

4. The market is not organized and has no central control; there is no standard product and no central information.

5. Government controls influence the market through zoning, building codes, taxes, and so on.

The local in nature: The real estate market is exceptionally local in nature compared to other markets. The reason, of course, is that the land and the improvements on it are immovable. For example, we cannot transport sugarcane land from Westmoreland to Kingston. If we were in the tomato market, we could transport our products to the place where the demand could be greatest. However, despite the demand for housing in Area A, we are unable to produce an apartment complex or single-family subdivisions on land located in Area B and move it to where the demand is greatest.

Slow response: The housing market is unusually slow to respond to changes in supply and demand. Very often, the number of houses (supply) in an area begins to lag behind demand, however, since the real estate design, land acquisition, site preparation and construction phases are so time consuming, when the demand responds, the market is flooded. The balance between supply and demand is thus destroyed because the supply of the townhouses exceeds the demand at that time.

Permanence of improvements: The characteristic called permanence of improvements is also closely related to the previous characteristics. The typical bungalow-style dwelling unit has a long economic life compared to other amenities. Once we have built an office block, we are stuck 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 the markets.

Decentralized nature – Another characteristic of the real estate market is the lack of a single central exchange to deal with real estate throughout the island. If you want to buy 100 shares in General Motors, California, the product will be the same as General Motors, Florida. However, if one wishes to purchase 100 hectares of waterfront property in Westmoreland, Jamaica, the product will be different in many ways from that of the oceanfront property in Portland. This draws attention to the two main reasons why there is no central real estate exchange.

First, the product cannot be standardized. No two tracts of land are the same. Even two lots next to each other on a street have different geographic locations on this land. This concept is known as heterogeneity or non-homogeneity.

Second, no central data bank or source of information reports all real estate in Jamaica. In addition, care must be taken when using information about properties in one area to evaluate properties in another. If you want to know about real estate anywhere, it is best to go to that particular place and look for local information.

Government controls: The fifth and final of the main characteristics of the real estate market, government controls, plays an extraordinarily important role compared to other markets. Most people are familiar with the direct controls, such as zoning and building codes, that govern the construction and use of the property.

Governments also exercise indirect controls, such as central government monetary policies. For example, if the government reduces the general money supply to slow the rate of inflation, the higher rates for mortgage bans in turn push many potential buyers out of the real estate market in Jamaica. This has a great impact on the drafting of a rental agreement in Jamaica.

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