Election Is Tomorrow: Jamaica Watches America on the Eve of Decision — November 1996

Publication Date: November 3, 1996 | Coverage Period: October 3–November 2, 1996 | Category: Monthly Review

Month in Brief

• The United States presidential election falls tomorrow, November 5 — just outside this edition’s coverage window but dominating the attention of Jamaica’s substantial North American diaspora and the remittance flows they sustain.
• The death of rapper Tupac Shakur on September 13, following a shooting in Las Vegas, has reverberated through Jamaica’s popular culture with particular force, reflecting deep cross-Caribbean connections to African-American music and youth identity.
• The Bank of Jamaica holds benchmark lending rates in the 38–42 per cent range through October; commercial mortgage credit remains effectively inaccessible for households below the upper income quartile.
• The Jamaica dollar continues its managed depreciation, trading near J$34–36 per US dollar; developers importing construction materials face compounding cost pressures.
• Scheme housing applications to the National Housing Trust exceeded available units in October for the eighth consecutive month, underscoring the structural gap between supply and affordable demand.
• Commercial real estate in Kingston’s New Kingston district shows early signs of price adjustment, with a small number of office suites changing hands at discounts to 1994 peak valuations.

Housing Market

October’s housing market continued the pattern that has defined much of 1996: strong latent demand at the affordable end, constrained supply, and near-paralysis at the top of the market. In the Corporate Area, residential transactions above J$5 million were sparse. Vendors in that segment who listed in the first half of the year have largely withdrawn properties rather than accept the 15–25 per cent discounts that buyers are demanding, creating a standoff that depresses both volumes and price discovery.

The western parishes tell a somewhat different story. Montego Bay’s residential market, always partly sustained by tourism-sector incomes and diaspora interest, saw a modest uptick in enquiries through October. Agents attribute this in part to pre-election uncertainty in the United States: some diaspora members appear to be making contingency plans, considering whether a change in Washington’s immigration posture might accelerate their timeline for a Jamaican property purchase. The election is tomorrow; the answer will arrive before the next edition of this publication.

In the affordable segment, NHT scheme housing in Portmore and Spanish Town continued to absorb demand. Gregory Park phase completions proceeded on schedule, with new units allocated primarily to long-standing contributors in the lower-income bands. Wait times for NHT approvals stretched to eight and ten months in some parishes, reflecting the backlog that has accumulated as commercial alternatives have effectively vanished.

Government Policy

The Patterson government has signalled no imminent change to housing finance policy, though pressure from the Jamaica Real Estate Board and the Private Sector Organisation of Jamaica for some form of commercial mortgage relief intensified through October. The Ministry of Finance’s position — that monetary policy must remain tight to defend the exchange rate and suppress inflation — effectively constrains any fiscal intervention that might relieve the mortgage market.

The Urban Development Corporation has announced a review of its landholdings in the Corporate Area with a view to releasing plots for affordable housing development. Whether this review produces actionable land releases before year-end is doubtful; the UDC’s institutional processes are not noted for speed. Nevertheless, the announcement signals that the government is aware that the supply-side constraint is as significant as the financing constraint in explaining the housing affordability crisis.

Construction Sector

Construction activity in October was dominated by public-sector and NHT-commissioned works. Private residential construction for the open market remained subdued. Several developers who had been holding land in anticipation of a rate environment more conducive to pre-sales acknowledged in conversations with this publication that they are extending their holding timelines into 1997.

The construction materials supply chain showed no major disruptions through October, though the weakening Jamaica dollar continues to erode the landed cost advantage of domestically sourced alternatives to imported steel. Portland cement from domestic producers remains competitively priced, and roofing materials from regional suppliers have held broadly stable. The principal cost pressure remains labour, where wage inflation in the construction trades is running ahead of the general price level.

Investment Outlook

October produced the first credible signs that distressed commercial property in New Kingston is moving. Two transactions were confirmed to this publication on condition of anonymity: one involving a ground-floor retail unit acquired at a reported J$1.8 million below the vendor’s original asking price, and another involving a half-floor office suite where the buyer — a professional services firm expanding its footprint — negotiated a lease-to-own arrangement that reflects the illiquidity premium now embedded in commercial prices.

These transactions, while modest in absolute terms, suggest that the bid-ask gap in commercial real estate is beginning to narrow. The question is whether this represents the beginning of genuine price discovery or merely isolated cases of vendor desperation. The answer will depend largely on what the financial system does over the next two quarters: if more institutions move to realise collateral on non-performing loans, supply will increase and genuine distressed pricing will become widespread.

Diaspora Dimension

With the US presidential election tomorrow, Jamaica’s diaspora communities in New York, South Florida, and Connecticut are navigating a moment of political uncertainty that has practical implications for housing decisions. The incumbent Clinton and challenger Dole present distinct postures on immigration enforcement, and while neither has proposed measures specifically targeting Caribbean migrants, the broader tone of the immigration debate has heightened awareness of policy risk within diaspora communities.

This political uncertainty is, paradoxically, a mild positive for Jamaican property enquiries. Families who have spent a decade building lives in the United States and are now less confident about long-term stability there are thinking, perhaps for the first time in years, about what a Jamaican property acquisition might mean as a contingency. The enquiries do not yet translate into transactions in most cases, but agents in Montego Bay and upscale Kingston report a meaningful uptick in calls from the diaspora over the October period.

The shock of Tupac Shakur’s death in September — shot in Las Vegas on September 7 and dead six days later — has added an emotional undercurrent to October’s diaspora conversations that is difficult to quantify but impossible to ignore. Shakur represented something of a cultural bridge between African-American urban experience and the Caribbean communities whose musical traditions he frequently referenced. His loss has been felt in Jamaica not merely as a celebrity death but as a marker of the violence that shadows life in the urban American environments where many Jamaican migrants have built their futures.

Affordability

October’s affordability data reinforced the picture that has emerged throughout 1996. The NHT’s internally published figures show that the average approved loan for a first-time contributor borrower stood at J$1.4 million through the third quarter, a figure that covers an entry-level unit in outer Portmore but leaves the buyer with limited margin for the ancillary costs — legal fees, stamp duty, survey — that typically add 10 to 15 per cent to the transaction cost of a residential purchase.

For households outside the NHT system — self-employed workers, informal sector participants, recent labour market entrants who have not yet accumulated sufficient contribution history — the situation is considerably more acute. Commercial lenders’ minimum income requirements, combined with rates that make even modest loans arithmetically unserviceable on median incomes, have effectively locked the bottom two quintiles of the income distribution out of formal homeownership. Rent in Kingston’s lower-middle residential areas has risen in nominal terms as demand for rental accommodation from would-be buyers who cannot access mortgage credit has increased.

Looking Ahead

The next edition of this publication will carry the result of tomorrow’s US presidential election and assess its implications for Jamaica’s diaspora housing market. Beyond that single variable, the macro environment for housing finance is expected to remain largely unchanged through November: Bank of Jamaica rates are unlikely to move materially before the end of the year, and the financial system stress that has characterised 1996 shows no sign of rapid resolution. The opportunity set for patient, liquid investors in distressed commercial property will, if anything, widen. For the median Jamaican family seeking a first home, the NHT remains the only viable path, and the Trust’s capacity — while substantial — is finite.