Before the Storm: Jamaica’s Housing Market at the Start of the FINSAC Era, October 1996

Jamaica Homes Housing Affordability & Cost of Living Review — October 1996

• Jamaica’s domestic financial sector is under growing stress; several financial institutions are experiencing difficulty and the government is beginning to assess the scale of the problem
• A general election is due by early 1997; Patterson’s PNP is seeking a third consecutive mandate; housing policy features prominently in the political debate
• Commercial mortgage rates are elevated relative to income levels; building society lending, the primary formal housing finance route for working Jamaicans, is becoming more cautious
• NHT’s contributor-funded programme continues to provide the most affordable formal housing finance; contributor waitlists are long and scheme supply remains constrained relative to demand
• The economy has experienced growth through the early 1990s, creating housing demand; the supply response has been insufficient to meet the aspirations of working families
• The informal housing sector — self-build on family land, shared accommodation, informal settlements — continues to house the majority of Jamaicans who cannot access formal routes

October 1996 represents the opening page of a chapter in Jamaica’s housing market history that will prove to be one of the most consequential: the beginning of the FINSAC era. The crisis that will come to dominate Jamaica’s economic life through the late 1990s and into the early 2000s — the collapse of the domestic financial sector, the government bailout through the Financial Sector Adjustment Company, the extraordinary fiscal cost, the destroyed building societies and merchant banks that provided working-class Jamaica with mortgage access — is not yet visible in its full dimensions. But the early signs are there for those who know where to look.

Several domestic financial institutions are under stress. The aggressive expansion of the late 1980s and early 1990s — building societies and merchant banks that grew rapidly on the basis of connected lending, aggressive deposit mobilisation and assumptions about growth that are beginning to prove unfounded — is revealing its structural weaknesses. The Bank of Jamaica and the Ministry of Finance are receiving the reports; the contingency planning is beginning. The public does not yet know the scale of what is coming; the housing market does not yet reflect the full impact of what the financial sector crisis will eventually impose. But October 1996 is the threshold.

The Housing Market Before the Fall

Jamaica’s housing market in October 1996 is operating in conditions that, by the standards of what will follow, look almost favourable. Commercial mortgage lending from building societies is still occurring, at rates that are high by international standards but not the extraordinary crisis-era extremes of 1998-1999. NHT is functioning normally, delivering contributor mortgages and operating its scheme pipeline. Construction is active; developers are building; housing supply is moving, if not at the pace that demand requires. The Kingston real estate market has been active; property values have risen through the 1990s expansion; the upper-income market is performing.

The gap between formal market access and what working families need, however, remains a persistent challenge. Jamaica’s housing deficit — the number of households without adequate formal housing — is substantial. NHT provides the most affordable formal route, but its scheme pipeline is constrained; the waiting time for an eligible contributor to receive a scheme unit can extend for years. The informal sector — self-build on family land, occupation of informal settlements, extended family arrangements — is where most of Jamaica’s working population actually lives. This informal sector’s size and persistence is the most accurate measure of the formal market’s failure to serve Jamaica’s broader population.

On the Eve of Change

Jamaica’s general election is due by early 1997; the constitutionally required election period constrains when it can be called. Patterson’s PNP enters the campaign with the record of two consecutive election victories and the economic management of the 1990s expansion as its argument for a third mandate. Housing is a significant electoral issue: the condition of informal settlements, the adequacy of NHT, the aspirations of working-class Jamaicans for homeownership, all feature in the political discourse. The JLP under Seaga competes with its own housing promises.

What This Means

For aspiring homeowners in October 1996, the advice this review can offer is: engage with NHT now, maximise contribution consistency, and approach commercial mortgage products with clear-eyed understanding of your household’s financial capacity to sustain payments through changing rate environments. The financial sector stress that is building in the background of October 1996 suggests that the commercial mortgage market may become more difficult to access in the period ahead; the NHT route, while constrained by supply and eligibility, is structurally more resilient. For the construction sector, the political environment of an approaching election creates some demand optimism; government spending on housing and infrastructure typically rises pre-election. But the longer-term financial sector dynamics are cause for caution in assuming that developer credit will remain accessible at current terms.

The Outlook: Before the Storm Breaks

Jamaica’s housing market in October 1996 is in the last months before the storm. The FINSAC crisis is coming; the Asian financial crisis is a year away; the extraordinary difficulty of the late 1990s housing market environment is ahead. But in October 1996, Jamaica’s working families are still able to access building society savings accounts, still able to enquire about commercial mortgage products at rates that are elevated but not the extremes of 1998, still engaging with an NHT that — however constrained by supply — is functioning normally. The aspiration of homeownership, held by hundreds of thousands of Jamaican families across the island’s parishes, is visible and real in October 1996. That aspiration will be tested severely in the years to come. But it will survive, carried forward by the resilience of Jamaican families and the institutional durability of the National Housing Trust, until better conditions eventually arrive.

This review is produced for informational and journalistic purposes only and does not constitute financial, legal or investment advice.

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