Susan Gordon, Business Reporter

Earl Samuels, managing director of National Housing Trust. - File

Earl Samuels, head of the state housing agency whose policies are perceived as driving the broader real estate market, says benefits issued by the National Housing Trust (NHT) will likely increase this fiscal year but would be contained in line with movements in construction costs over the past year.

Samuels was reacting to published reports that the trust would be adding $2 million to the cap on mortgage loans.

"I don't know where they got that figure from," said the NHT boss.

"The jump from $3 million to $5 million is ridiculous and would represent a 60 per cent increase in construction cost and we haven't seen that even with the cement company crisis," he told the Financial Gleaner.

Samuels did not deny that an increase was under consideration, but said it was likely to be in the $1 million range, perhaps less - an approximate 33 per cent change

The real estate market and commentators keep watch on such shifts in policy by the dominant state housing agency, saying movements in the cap tend to change the psychology of the market.

Home prices tend to climb because of the perception by developers that buyers have access to a bigger cash pool to finance purchase.

But, Samuels rejects the notion, or at least the idea that NHT's actions trigger price increases.

Instead, he says the jump or movement of prices wasdue to housing demand exceeding supply.

In April 1, 2006, NHT increased its maximum loan limit to a single contributor from $1.5 million to $3 million.

Samuels said the NHT reviews its loans benefit type every year to ensure a fit with market conditions.

"We try to keep loan limits in line with construction cost and labour rates," he said.

Construction cost

The construction cost he said is based on NHT's cost to build a basic unit which is somewhere between $3,500 and $4,000 per square foot.

Those costs, he said, moved more than 10 per cent last year, but would not disclose a precise figure, saying NHT's recommendation was first to go to Government.

At the 10 per cent estimate, the loan cap would increase by $300,000 to $3.3 million.

But the market anticipates a bigger movement.

"I think if they increase it, they would increase it by more," said realtor Joyce McEachron of the real estate brokerage McEachron and Clarke.

"They would not just add on $500,000 they would more than likely up it to about $4 million per person," she said adding that in her estimation the price of construction has increased from $10,000 to $12,000 per square foot over the last year.

That equates to a 20 per cent increase in building costs.

The Developers' Association of Jamaica did not respond to requests for comment on their construction costs.

McEachron agrees with Samuels on what causes housing prices to shift.

"It's total rubbish that the NHT loan increase has upped the price of houses," she said.

"In my experience, it has nothing to do with it. A property's worth is based on the valuation report which is needed in mortgage transactions."

McEachron said the properties that were on the market for a set price were finding buyers because people could access more funds as a result of the NHT increase.

But, she added, there are still fewer properties on the market than the demand. Additionally, the increase in labour costs, the lag time for closing a sale, and the builder's need for a profit are the defining factors in real estate cost, the agent said.

susan.gordon@gleanerjm.com