Short-term rentals rising amid higher mortgage debt

Short-term rental listings are on the rise, reflecting new housing stock and a desire to earn foreign currency.

But rental rates are also still increasing due to the higher cost of mortgages and other debt.

“Hosts in Jamaica are using the extra income they earn from hosting to help cover mortgage payments, everyday essentials, and rising costs,” said global homeshare service Airbnb in response to the Financial Gleaner.

“According to a recent survey, almost 20 per cent of hosts in Jamaica said the extra income they’ve earned through hosting has helped them stay in their home; 40 per cent said they’ve used the extra income to pay for food and other items that have become more expensive,” Airbnb said.

The data gathering site AirDNA, which scrapes information from Airbnb and Vrbo, indicated that current listings to June increased 40 per cent in Kingston to 2,820 listings; 22 per cent in Port Antonio to 190 listings; 18 per cent in Ocho Rios to 790 listings; and 14 per cent in St Elizabeth at 390 listings.

Port Antonio data was available but not the wider parish of Portland. Also, while St Elizabeth was available, the parish’s travel oasis, Treasure Beach, was absent.

The rise in listings reflects the recent building boom. At the advent of the pandemic in 2020, the short-term market was virtually halted with the temporary cessation of travel and tourism. Later in 2020, construction companies started doubling down on building developments with a medium-term view that when completed, the economy would improve and recover to pre-pandemic levels.

Realtor Keody Thompson, from Jamaica Sotheby’s International, indicated that few new developments prohibit short-term rentals.

“That’s because most developers are driven by demand, and what’s driving purchases is a desire to invest in Airbnb,” said Thompson.

She added that recently, a complex changed its strata laws to restrict Airbnb and, as a result, some owners were selling out.

“Remember, these homeowners are based in the diaspora, or are locals that live in other properties. And they wanted an Airbnb business to earn extra income,” she explained.

In Kingston and Montego Bay, the two cities feature newly constructed minimalist condominiums; in Portland, there are sleek villas; while Treasure Beach features rustic A-frame cabins.

The current rise in travel bookings partly reflects recovery from the travel fallout from COVID-19.

“During the pandemic, when international borders were closed, it was locals who restarted the tourism economy and opened new destinations; we are happy to see the growth of this segment in the Caribbean”, said Airbnb’s Director of Public Policy and Communications for the Caribbean and Central America, Carlos Muñoz, in a release.

AirDNA data indicated that short-term renters are currently earning more from their properties than last year. On average, Kingston renters receive US$1,100 a month, Ocho Rios US$1,500, Port Antonio US$1 200, and St Elizabeth US$2,300.

Last month, however, renters in St Elizabeth made a windfall at US$3,200 due to the popular Calabash Literary Festival, which resumed for the first time since the onset of the pandemic.

In the BOJ Financial Stability Report 2022, the Bank of Jamaica raised concerns about the servicing of mortgage debt linked to short-term income flows.

“With tenanted properties becoming more dominant due to the rise of short-term rentals, the risk of capital loss will be of increasing concern; particularly where these exposures cannot be clearly identified,” the central bank said.

It has implications for the comprehensive management of risk in the mortgage segment, to the extent that borrowers are dependent on cash flow from rental income generated by these properties to support loan repayments, the BOJ said.

Property prices have spiked in 2022 relative to 2019, with the highest absolute prices in Kingston & St Andrew, but the fastest percentage rises in prices being in St James, Portland and Westmoreland, the central bank noted.

steven.jackson@gleanerjm.com