Trillions of dollars in wealth

Here are the facts: (a) over 200,000 houses were built in Jamaica over the past two decades, (b) the average value per house is at least $10 million. Here’s what this means: the 200,000 houses at this $10 million dollar average value translate into at least $10 trillion in wealth. That’s a lot of money.

This $10 trillion in real estate wealth is not likely to lose value over the next 30 years; in fact it’s more likely (notwithstanding the current state of the economy) that the value will outpace the inflation rate during this period.

What this means is that when the last of these mortgages are paid off in the next 30 years, there will be tremendous wealth held by a group of Jamaicans that just a few generations ago were working 18-hour days as slaves. The significance of this is often ignored.

The sharp increase in real estate wealth in the past two decades is important for another reason. With the birth rate tumbling over the same period, the average family size is less than four persons per household. This means that there are fewer people in each family who are likely to lay claim to this new wealth.

This real estate wealth may not translate into cash, but it means is that there is now significant ability to access capital through the use of the real estate as collateral .

The discussion then, about economic crisis, job losses, the rising foreign exchange rate and the high price of oil while important, fails to notice one very important fact: there is now significant wealth in the hands of the average Jamaican.

For a people that have not known financial wealth in centuries, this is both a significant reality and a significant challenge. For one, it’s of crucial importance that this wealth be preserved during this current economic downturn with large-scale re-possessions to be avoided at all cost.

In addition, it is important to ensure that this wealth is passed to the other generation in an organized and structured manner through the use of proper wills, provisions being made for the payment of transfer taxes and due thought given to how the houses will be held (by individuals or through trust funds etc.)

Much has been said about the stock market with its billion of dollars in market value and approximately 50,000 investors. This is obviously commendable, but so too is the newly created real estate wealth with close to 200,000 families and more than $10 trillion in value. There needs to be a shift in the dialogue.