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Real Estate Players Jittery About Tax- Saturday 23, February 2013 -
Edmond Campbell, Senior Staff Reporter
AT LEAST two major players in the real estate market say the sharp increase in property tax, transfer tax and stamp duty will have a significant impact on the cost of housing, particularly in the middle and upper ends of the market.
However, there is a divergence of views in relation to the impact on low income houses.
Managing Director of CD Alexander Realty Limited Dr Ralph Thompson said the hike in property tax by about 155 per cent effective April 1, this year, and a subsequent increase next year, would greatly affect the middle and upper levels of the real estate market in another two to three years.
Dr Thompson, however, argued that the tax increases announced by Finance and Planning Minister Dr Peter Phillips last week, would have the effect of depressing real estate values for this year.
"It is definitely going to depress property values in 2013 and we can only hope that there will be stabilisation in 2014," the real estate guru told The Gleaner.
He reasoned that with the signing of the International Monetary Fund (IMF) deal the sliding Jamaican dollar might stabilise a bit, and with the exercise of fiscal discipline the real estate market might gradually begin to hold firm.
The Government has dipped into the NHT coffers to take out $11 billion per annum, over the next four years as part of measures to ink a deal with the IMF.
However, another veteran in the real estate market V.G. Clarke has questioned whether prospective homeowners would be able to absorb the pending increase in the cost of housing.
"There will have to be a redefinition of low-income houses," Clarke said.
"What is low income today in terms of value will not be low income when these things settle, it will have to be redefined," he added.
Assessing the real estate market at this time, Clarke said while it was not dead, there was an absence of buoyancy.
He explained that there was more activity in the area of low income housing while the upper end of the market was limping.
Rental costs are also expected to be impacted by the movement in property taxes.
Leyton Baker, acting director of the Rent Assessment Board said landlords would need the greenlight from his department to increase rates above 7.5 per cent in any given year.
However, he said increases could be approved above the maximum rate for the year if major repairs and additions have been done to the property. In addition, an increase in "rates and taxes" could also trigger higher rental costs.
Baker made it clear that the increases above the prescribed 7.5 per cent ceiling per annum would be considered by the Rent Board on a case-by-case basis.
The Rent Board official said he was not expecting any earth-shattering movement in rental costs based on the pending spike in property taxes.