Prime Minister Dr Keith Rowley says many state enterprises are failing in achieving their mandates and some are in need of serious governance reform.
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The REAL advantage
In the search for a home, one of the first points of contact for many people—even before financing—is a real estate agent or agency. While several buyers, sellers and, more recently, developers are opting to bypass real estate agents and deal directly with customers, a real estate agent still remains an important go-between for those who are looking for homes.
In the local context, the real estate agent acts usually on the behalf of a seller looking for a buyer of property. To a lesser extent, they also help buyers find places to live (see Table on Duties of a Real Estate Agent).
The Association of Real Estate Agents (AREA), which was incorporated in 1990, “has evolved into an organisation which is leading the real estate industry and its related fields,” this according to its Web site. By the association’s estimate, membership represents about 25 per cent of agents and agencies in T&T, with the rest of the industry remaining largely unregulated.
In a recent interview, the president of the Association of Real Estate Agents (AREA) Mark Edghill, executive secretary, Mary Jardine and long time member, Mark Farrell discussed the current state of the real estate market from the perspective of the agents.
One defining characteristic of the country’s real estate market, in recent years, is that sellers have the advantage. Afra Raymond says in “Property Matters”—a compilation of a series of articles penned for the Business Guardian—that prevailing economic conditions of high liquidity and low interest rates have created an environment where purchasing property is seen as a preferred mode of investment and where returns are sure, as the value of property continues to increase.
AREA confirmed this trend of a seller’s market where vendors are able to ask for and, for the most part, get what they want. Meanwhile, because of low interest rates, buyers are able to acquire loans at preferential rates. Because property acquisition is taken with a view to investment, the AREA president says most sellers do not need to offload properties right away.
In essence, the buyer and the seller are feeding off of each other, creating in a cycle that pushes prices up. This Raymond has termed the “property bubble.” According to Raymond, the “bubble” locks out all those not contained within. These are usually younger people and those of middle income who cannot compete in a market with prices set under these conditions.
AREA is aware of a general perception by the public that real estate agents are somehow colluding with other market stakeholders to keep prices high but says this perception is erroneous. As Edghill explained, agents receive commission on the sale of their properties, but this does not mean they will encourage high prices in hopes of receiving higher percentages.
From his own experience, Edghill says vendors are advised to sell at a certain price, but tend to believe they can get more for their properties.
“Agents always get blamed. But the agents follow instructions because that is their job. They are supposed to provide information to the vendors based on what is going on in the market, based on the demand and based on the values in the area, how long ago it sold, the condition of the property. They are to use that to guide what kind of price they can expect if they want it to sell. The lower the price, the faster we will turn it over. Why would we want to push the price up? It would take longer to make marginally more, so it’s not really practical to do that.”
Jardine acknowledges the need for middle income, middle-class housing and, as agents, they have been advocating the creation of more of these.
The 2011 Central Statistical Office Report has called central Trinidad a “growth pole” and predicted that people looking for housing will begin to view central Trinidad as an attractive location. AREA admits this is partially true. Edghill said: “People will want to find housing where amenities are available, employment is available. Chaguanas is a developing area ...the cineplex, Price Plaza and Pricesmart. People obviously want to be nearby or close to those types of areas.”
He added that international energy companies were also looking for locations their south and central-based employees can get to easily. This, in turn, will fuel future demand for properties in central Trinidad, as the companies increasingly begin to base operations there.
The need for middle class, middle-income housing is so acute that AREA says people have been going anywhere they can afford property. The consensus of the AREA members interviewed by the Sunday BG is that the search has pushed potential homeowners into areas defined as “rural.” But AREA also believes the Government remains a critical partner in helping people reach their goal of acquiring a home.
Government action necessary
AREA said it has served in an advisory capacity to successive governments on real estate matters. Edghill recalls one of the association’s more recent projects: working with the Ministry of Legal Affairs Consumer Division on its public rent consultation in 2012. He said even though there were recommendations coming out of the consultation, no action appears to have been taken.
Edghill said they have also proposed the idea that government focus on middle class, middle-income homeowners as opposed to low-income housing. This way, government can earn a profit from lands for housing by selling to the middle-income earner, as opposed to using taxpayers money to subsidise low-income. The profits generated can then be used to build homes for low-income families.
So far, this is yet another idea AREA has seen no action on and Edghill said it has become typical for the government to talk about plans for sustainable development in the housing market, but not to act on them. “This would encourage tertiary educated, middle-income graduates to stay in the country instead of looking for opportunities outside because they cannot afford to buy a home based on their current income.”
Calls to create and implement legislation designed to give greater protection to real estate agents, sellers and buyers have also gone largely unheeded, according to the association. Edghill admits that as much as 75 per cent of the people who deal in real estate fall outside of AREA’s umbrella. And usually, when there are complaints from home buyers, they often come from agents in this bracket. “There is no legislation mandating that people are qualified for or have to be licensed to become real estate agents.
“We have many who get into real estate for a day or two and cause problems. A lot of unethical practices take place.” But the situation extends to the macro-level. There is no legal requirement for properties to be registered so this makes it difficult to follow transactions over time. Edghill complains it is difficult to get a true sense of the market because of this lack of historical data.