Dear Editor,
I read with interest an unsigned article in the media that argues home ownership in Guyana is a pipe-dream. The missive took on a retaliatory tone against Minister Susan Rodrigues (Housing and Water) who provided an update on the Young Professional homes being built at LBI. The complainant also stated that many projects that were announced have not been completed. While the letter in question does express some legitimate concerns, it could have been more cautious with its general claims. Consider the points below.
For the sake of clarity let us begin with a specific point made by the complainant. They argue that a house in Kingston sells for about $95,000,000 (GY ninety-five million), and given the wage level in Guyana, no worker could afford to buy a house in that lovely part of Georgetown. To add a populist slant to the claim, the letter writer wants to know “how on earth can a teacher afford that?” Well, it is absurd for a teacher to want to buy a house for GY $95 million. If fact, I bet no teacher in their right mind would be thinking that they may want to buy a house for that price. Unlike the letter writer, most consumers are quite rational when it comes to buying a house. People must afford what they want to buy.
No bank should provide a mortgage to a teacher to buy a house for GY $95 million, unless the teacher has another source of income to comfortably meet the monthly payments. Buy what you can afford. President Ali’s administration has committed to housing to the tune of 50,000 through a combination of house lots, Young Professional Homes, and other targeted categories. The investments are huge and will yield real value for people all across this country. It costs GY $3 million to develop a house lot. The government aggressively subsidizes these house lots, and further, it also has strong levelling mechanisms in the housing policy. High income lots are sold for as high a GY $2.3 million; low income lots are subsidized by up to 90% of the real cost.
Let us look at affordability. Two teachers making GY $80, 000 each can afford a house for GY $9,000,000. From their combined income of GY $180,000, they will pay $ GY $41,000 in monthly mortgage, or about 25% of their salary. This assumes a rate of 3.75%. A single person can get a government house (where available) for GY $5.5 million and will pay GY $25,000, monthly mortgage. That is a much higher portion of the monthly income, but single buyer home purchasers are always at a disadvantage. A higher income couple making GY $250,000 each, can build a home for GY $20 million, and pay GY $116,000 monthly mortgage, amortized over 30 years. This assumes an interest rate of 5.75%.
The letter writer does have a solid point about rent escalation. Most of the spectacular rents we see, however, are geared towards foreign workers usually connected to oil and gas. Minister Croal and Minister Rodrigues have both made it clear that the accelerated housing push on board now will bring greater balance to the housing market. It must also be said that tens of thousands of Guyanese who had little savings and no long-term wealth, can now hold their heads high because of rapid asset appreciation. Many ordinary people have become quite wealthy, at least on account of property values. The challenge is for the banking system to facilitate that wealth into agile liquidity.
The concerns of the anonymous would have been more effective had he or she been more guided by the dynamics of the housing market, rather than by attempts to score cheap political points.
Sincerely,
Dr. Randolph Persaud