Can middle-income earners afford homes in T&T?
Challenges and opportunities:
Can people with an average income between $6,000 and $10,000 buy a home in Trinidad and Tobago?
Given the high cost of living and houses on the market costing over $1m, one single mother of two fears her dream of owning a home is moving farther away. And according to one economist, acquiring a home is becoming increasingly difficult for the middle class.
However, one organisation argues that it is not all doom and gloom because while you may not be able to purchase your dream home there are other viable options.
Similarly, Trinidad and Tobago Mortgage Bank (TTMB) assures that their products also cater to people who fall in the lower income bracket.
Last week, Express Business explored the varying perspectives pertaining to the affordability of homes for the average citizen in Trinidad and Tobago.
But what is the process like for those in search of a home?
For 39-year-old Hadiya Edmund, a mother of two, the dream of owning house seems almost unreachable, she told Express Business.
“When you look at all the avenues, home ownership is something like a dream now, it’s further and further away and the sad part is as a single mom you want to leave something for your kids, because imagine by the time my children are ready to buy a home imagine the prices then,” she shared.
Edmund who is in the marketing field, earns just above $10,000, and has been actively searching for home for her family.
However, she noted that while saving and cutting back on everything and basically putting life on hold, qualifying for a decent house is challenging and frustrating.
She stressed, “I don’t know if it’s practical because you saving so much…to make sure you have a viable down payment and you have your legal fees, but you not living life. So, for two years life just passing me straight….and the dream just going further and further away no matter how much you try.”
She said her journey has been met with many disappointments, not just the high cost of houses but what she deems as insane private development in terms of size of the house.
She said for someone earning from $6,000 to $13,000 a house is “almost unaffordable”.
And while she admits that with financial institutions like TTMB, where 100% financing is offered, “you have to have no loans, no debts, no hire purchase, you can’t have anything or else you wouldn’t qualify.
“Let’s say you get 100% financing between $700,000 and million dollars, the only thing available to you is a two-bedroom apartment or a very small condo, which the bedroom size is 9X9; that smaller than a jail cell and of course because it is a condo it has no room for growth, no room for expansion and you’re not even buying land and you paying close to a million dollars for it, nobody can’t live there, to grow a family,” Edmund lamented.
She added that some places do not allow for pets and a kitchen garden so you have to spend a lot of money and live uncomfortably. She also pointed out other factors that increase expenses, like homeowner fees, in addition to paying one’s mortgage.
But Edmund believes that apart from the high cost of houses in private developments, the cost does not equate to the decency of the actual house.
Another option, she pointed out, is houses called fixer-uppers, some at the value of $1.2 million, “and it’s not liveable so you can’t live in it while you renovate it”.
Edmund highlighted that some fixer-uppers on the market are in terrible condition but even more challenging is the amount of additional fees a potential homeowner has to incur.
According to Edmund, the advice to buy land and build presents its own challenges and being a renter “everybody says buy land and build, so I spoke to some contractors. That is a year-and-a-half process with Town and Country, then you have to get your zonal regulations, you have to get all these approvals before you could even build. But as a renter having to pay your mortgage while still paying a rent while you build is challenging, she said.
“I want it really badly but I don’t even know if its practical.”
The middle-class dilemma
Pointing to two housing categories, economist Dr Marlene Attzs sought to distinguish the private home ownership and the Housing Development Corporation (HDC).
“So, if you are looking at the private market, you’re looking at private developments, you’re looking at upwards of millions of dollars and a million will be at the lower end of the scale for a starting home. If you looking at $10,000, I think most of the banks are looking at debt service ratio of nothing more than 45% so debts, not your liming money, credit cards etc and your other loan commitments must not be more that 45% of your salary and you’re looking at mortgage rate that range between 4.5%, 5.5% and my understanding is that some banks are now offering 100% financing. With 100% financing of course you pay the higher mortgage rate 5.5% and I also understand that some banks are pushing up until the age of 35 so you can get a 30-year mortgage or beyond once your mortgage ends before you reach the age of 75,” Dr Attzs explained.
Dr Attzs also added another element to the argument, saying “given what is happening in terms of safety and security in the country many persons are looking at gated communities where you have security, security presence. And those prices of course supply and demand, if more people are demanding those, there will be higher prices associated with those kinds of communities.
“Now on a $10,000 salary, even if you have two persons earning $10,000 thereabout, it is likely to be challenging for you to meet the mortgage payment plus transportation whether you have a car and almost everybody in Trinidad has a car and also living expenses so you’re seeing that it really is going to be a challenge for persons who want to actually purchase a property and that is in the private market,” Dr Attzs stated.
Touching on HDC, Dr Attzs said, “I know the challenges that many people face is that you spend years on the applicant list waiting for your turn and those specifications, they really cater to the lower income household and I think those houses could be like $700,000 for the HDC houses and the Trinidad and Tobago Mortgage Bank (TTMB) will offer you slightly lower rates, I think from the commercial banks. So, there are two options available… the cost on the HDC side is the waiting time as I understand in terms of being able to procure a home. Again it is supply and demand. It is what the HDC has as part of its stock. I think even in the last budget there was mention of additional homes being built in different parts of the country to satisfy that growing demand for housing.”
Noting that several elements are involved when it comes to housing but the bottom line, she said, “is that it is increasingly difficult for persons to acquire a home simply because the kinds of homes that a person may wish to acquire, those that are provided with some sense of security, those that are located in central locations tend to be a little outside of the reach in the average income, so to speak.
“We find persons moving to a less urbanised area simply because, in those less urbanised areas… they moving into those areas simply because they can get homes at more affordable prices, they could have access to land space, where you could combine your home with having little bit of space for some serenity.”
Dr Attzs believes a key point to note is whether or not housing markets in Trinidad and Tobago are in fact catering for the average, middle class earners. “I think with middle-class salaries it is becoming increasingly difficult for who are in the so-called middle to be able to actually afford homes and then you’re looking at persons who are individuals, women and or men who are on their own and they wish to purchase a home and it is becoming very difficult for single income earners to be able invest in properties,” the economist emphasised.
She said further, people are stuck in the rental space “where you paying essentially, in some cases, you are paying what is equivalent of a mortgage for renters’ space, you paying two, three, $4,000 dollars for a rental space and that comes with some risks, when you lay on top those issues, property tax and the fact that you are renting, your rent is going to increase”.
Explaining that with property tax the landlord who incurs this cost may pass it on to their tenants, and to compound matters the pending increase in electricity rates, renters are faced with higher rents.
According to the economist, the cost of living is generally increasing and salaries are not quite increasing at same rate, though she acknowledged that this can be attributed to larger issues such as productivity and what is affordable in terms of a salary increase.
However, Dr Attzs maintained that for those people who are considered middle class “it’s very difficult and certainly for a person at the lower end of the spectrum. So, a person earning minimum wage or near to minimum wage they are certainly going to be challenged in terms of the prospect of earning a home because their salaries are simply not at a level that is going to allow them to be home owners”.
Touching on the point home-ownership for single parents, Dr Attzs suggest institutions should work on bridging the gaps that exist for single mothers or fathers who may not tick all the boxes in qualifying for a home, saying that opportunities should be made for those types of persons.
Dr Attzs noted that owning a home is a long-term investment and one that would appreciate over time as opposed to vehicle that will depreciate over time.
Financial literacy needed
Also endorsing this view was Joseanne Wayow-Hemlee founder of Home Ownership TT, an organisation that trains and educates potential homeowners about various possibilities that exist to purchase property despite the challenges of cost. Wayow-Hemlee also agreed that the salary range of $6,000 to $10,000 cannot acquire a home costing over a million but emphasised there are attainable options within people’s means. Though she acknowledged it may not be the dream home envisioned, she advised that option includes condo (apartment) which can eventually turn into an investment property in the long run owning to the fact that houses increase in value over time.
Furthermore, she said other options include purchasing land, and or fixer-uppers that may fall below a million dollars that people can quality for. She said patience and proper education are required in the home-ownership process.
Wayow-Hemlee said: “We are here to try to guide you along the way that you will know what the certain steps are and who you need to connected with to be able to achieve (a home) at a salary range like that.”
Financial literacy, she said, is key along with other information that can help you make informed decisions.
Wayow-Hemlee said her personal journey in purchasing a home influenced her in starting this initiative to help others to avoid some of the challenge she met in the process.
Home Ownership TT typically hosts expos bringing various entities to provide information to potential homeowners.
TTMB: We’re here to help
In response to questions from Express Business, chairman of TTMB Patrick Ferreira said the bank “offers mortgages for the purchase of property, construction and repairs, land loans, and equity financing. Specifically designed for persons earning no more than $14,000 per month (which includes the category of income earner between $6,000 to $10,000) is the Government Affordable Housing Financing Programme which TTMB administers on behalf of GORTT”.
According to Ferreira, the programme is designed for first-time homeowners and requires no down payment where the property value does not exceed $1,000,000; other benefits of the programme are the inclusion of a sum not exceeding $20,000 for the purchase of appliances. These facilities are offered at reduced transaction costs.
Asked about TTMB’s support for first-time homeowners, Ferreira pointed out that the Affordable Housing Financing Regime offers reduced interest rates which increases the amount that the average income earner can qualify for.
He added: “The programme also requires a down payment of 0% for the 2% interest rate and 5% for the 5% interest rate. This is less than the customary 10% down payment usually required. This opportunity of home ownership extends into the future as owning a home is part of wealth creation as the property over time increases in value and provides the prospect to utilise the home to access financing for other major milestones such as the education of children.”
Commenting on the launch of TTMB in March 2024, Ferreira said “We are comfortably navigating the transition, and the initiatives which are underway will be to the benefit of our stakeholders and customers. In time the resulting synergies of the merger will be realised including obtaining funding at lower rates and passing this on to our customers.”
BY: MELISSA MAYNARD
Can middle-income earners afford homes in T&T?
