Adrew Smith/Photography Editor
Front view of town houses being developed by New Heights Construction and Development at 1 Hill Road, Norbrook, St Andrew.

Dionne Rose, Business Reporter

The real-estate industry is expecting profit margins on property sales to improve with Government's reduction of the rates on stamp duty and transfer taxes, initiatives they expect will also bolster sales amid a damper caused by rising mortgage rates.

"I am happy to hear that it has been done, if not in whole, but in part," said Canute McFarlane, vice-president of the Realtors' Associa-tion of Jamaica. "It is a step in the right direction, it is going to have some positive effects on transfers," he said, shortly after Minister of Finance and the Public Service Audley Shaw explained to the nation on Thursday how the Government would finance the $489-billion Budget.

Transfer tax

Shaw announced that the transfer tax applicable to property transfers would be reduced from 7.5 per cent to 6.0 per cent.

He also announced that stamp duty on property transactions would be dropped from 5.5 per cent to 4.5 per cent.

Industry players have long lamented the high cost of buying and selling property in Jamaica, despite the boom of the market in recent years, which has seen property values rising an estimated 30-50 per cent in the last three years.

However, with the recent jump in mortgage rates - triggered by the Bank of Jamaica increasing interest rates to counter inflationary worries - real-estate professionals had forecast a slight slow-down in the market as the cost of acquiring property trended upwards.

Larger reduction

But, although McFarlane would have liked to have seen a much larger reduction in the rates, he said the move would not only increase the return on property sales for the seller, but it would also pull in more taxes into the government's coffers.

The finance minister, however, estimated that the government would end up losing $1.57 billion as a result of the tax reductions, but pointed out that it would bring faster closure to property transactions.

Realtor Valery Levy was equally pleased about the announcement. "I am totally and absolutely thrilled," she told Sunday Business. "It will make a big difference in the marketplace and we need it now."

Levy, who is the principal of the Kingston-based real-estate agency Valerie, Levy and Associates, commended the government for holding true to a promise that Shaw himself made shortly after assuming office in September 2007.

Very positive move

"I really have to commend the minister. He said it earlier on and at least he is starting to do something about it; a very positive move because it means it will net out to the seller," Levy said. "Sellers will be able to realise more of what they are selling their properties for," she noted.

McFarlane explained that under the present tax rate structure, only 79 per cent of the property value is recouped by the owner when a sale is made, as the remaining 21 per cent is paid out in fees and taxes.

The new rates will take effect May 1.

dionne.rose @gleanerjm.com