Election Fifteen Days Out: Both Parties Compete for Jamaica’s Housing Vote — December 1997

Publication Date: December 3, 1997 | Coverage Period: November 3–December 2, 1997 | Category: Monthly Review

Month in Brief

• Jamaica’s general election is scheduled for December 18, 1997 — fifteen days from the date of this publication. The campaign has entered its final and most intense phase, with both the People’s National Party under Prime Minister P.J. Patterson and the Jamaica Labour Party under Edward Seaga competing vigorously for every constituency.
• Housing policy has emerged as a significant campaign battleground: both parties have made commitments on NHT reform, social housing delivery and the management of the FINSAC crisis, whose shadow falls over every economic policy promise either side makes.
• The Asian financial crisis continued to evolve through November, with South Korea — the region’s fourth-largest economy — moving toward an IMF emergency programme that will be the largest in the Fund’s history to date. The global financial architecture has been tested as never before in the post-Bretton Woods era.
• Jamaica’s Bank of Jamaica maintained extraordinary interest rates through November; the election campaign has introduced a political dimension to monetary policy management that will complicate the Bank’s communications over the coming weeks.
• The residential property market remained deeply frozen through November; the approaching election has added a further dimension of political uncertainty that has suppressed any residual commercial appetite.
• Construction sector activity remained minimal; both parties’ housing promises will be assessed against a post-election reality of depleted fiscal capacity and a FINSAC workout that has years yet to run.

The Election and Housing: Both Parties’ Promises Assessed

With Jamaica’s general election fifteen days away as we go to press, this edition of Jamaica Homes Monthly devotes its central analytical attention to the housing policy commitments of the two principal contenders. This is not an endorsement of either party; it is an examination, as dispassionate as we can make it, of what both are offering and what either could plausibly deliver given the economic constraints they would inherit on taking office on December 18 — or shortly after.

The People’s National Party, which has governed Jamaica since 1989 under Michael Manley and, since 1992, P.J. Patterson, goes to the electorate as the party that created FINSAC and as the party managing its painful resolution. This is both a liability and, the PNP argues, an asset: a liability because the economic pain of the FINSAC period has been severe and widely felt; an asset because the alternative — allowing the financial sector crisis to run without intervention — would, the government contends, have been far worse.

On housing, the PNP campaign has emphasised the NHT’s record: the loans disbursed, the units completed, the scheme developments delivered across multiple parishes. Patterson has spoken of commitments to increase NHT loan limits — recognising, at least implicitly, that the current limits are increasingly inadequate relative to construction costs — and to accelerate the social housing delivery pipeline. The PNP’s housing message is one of continuity and managed improvement: more of what the NHT has been doing, better funded and more efficiently delivered.

The Jamaica Labour Party, led by Edward Seaga — Jamaica’s longest-serving political leader and former Prime Minister from 1980 to 1989 — has attacked the FINSAC management as incompetent and has promised a different approach to financial sector resolution, arguing that the pace of the workout should be accelerated and that the extraordinary interest rates imposed during the FINSAC period have unnecessarily prolonged Jamaica’s economic agony. On housing specifically, the JLP has proposed expanded NHT contribution matching, enhanced incentives for private sector construction, and what amounts to a supply-side stimulus for the housing market: if you reduce the cost of construction finance and simplify planning approvals, more houses will be built.

Both parties’ housing promises must be assessed against a single, immovable constraint: the state of Jamaica’s public finances. FINSAC has consumed and will continue to consume an enormous share of the fiscal resources that either government would have available. The financial sector bailout — necessary as it was — has created contingent liabilities and actual expenditures that will shape Jamaica’s fiscal position for the better part of a decade. There is, in that context, limited room for significant additional housing expenditure by any incoming government, regardless of what the campaign promises might suggest.

Housing Market

Jamaica’s residential property market in November 1997 was, if anything, further suppressed than in the preceding months. The approaching election has introduced a new source of uncertainty that reinforces the existing structural barriers to market activity. Prospective buyers — those with any capacity to act — are choosing to wait for the election outcome before committing capital. Developers are similarly cautious about any new project commitments in the pre-election period. The result is a market even more quiescent than it has been throughout the FINSAC period.

This pre-election pause is a rational response to genuine uncertainty. The outcome on December 18 may not, in practice, dramatically change the structural conditions facing Jamaica’s property market — FINSAC will continue under any government, and commercial interest rates will not fall overnight regardless of the election result. But the symbolism of a new mandate, or the continuity of an existing one, matters for confidence, and confidence is the most important scarce resource in Jamaica’s property market at this moment.

Transaction volumes across the November period were minimal in the commercial market. Kingston’s established residential areas registered a handful of deals. The outer parishes, as always, were anchored by NHT activity; St Catherine and Clarendon saw completion of units in existing schemes.

Government Policy and the NHT

In the pre-election environment, policy announcements from the incumbent government must be read with some awareness that electoral considerations and genuine policy intent are not always distinguishable. The Patterson administration has, through November, continued to reference the NHT’s achievements and to signal its intentions for the NHT’s next phase. We take these signals seriously while noting that their implementation is contingent on the election result and, if the PNP is returned, on the fiscal room available in a post-election budget.

The NHT itself operates at a remove from electoral politics — it is a statutory body, not a ministerial department — and its operations through November continued in the normal pattern: receiving contributions, processing applications, disbursing loans to qualifying contributors. Whatever happens on December 18, the NHT will continue this function. Its loan limits and rate structure may change under a new government’s direction; its basic operating model will not.

Construction Sector

The construction sector in November was characterised by pre-election caution. Contractors with work in progress continued; those contemplating new starts deferred. The industry’s association bodies have been vocal, through the campaign period, about the structural conditions suppressing private residential construction — the absence of affordable construction finance, the difficulty of selling completed units at prices that cover costs plus a viable margin, and the planning and approvals environment that adds time and cost to every project. Both parties have acknowledged these concerns in their platforms; neither has yet articulated a mechanism for addressing them that does not ultimately depend on the resolution of the FINSAC crisis and the normalisation of interest rates.

Investment Climate: South Korea and the Asian Escalation

November 1997’s international investment story is dominated by South Korea’s dramatic arrival at the IMF. The Republic of Korea — the world’s eleventh-largest economy, a country of 46 million people that had transformed itself from poverty to industrial powerhouse in a generation — has been forced to seek emergency assistance from the International Monetary Fund on a scale that dwarfs anything the Fund has previously undertaken.

The Korean crisis has a particular character that distinguishes it from the Southeast Asian cases: it is primarily a corporate and banking sector crisis rather than a simple currency crisis. Korean conglomerates — the chaebol — had borrowed heavily in short-term foreign currency loans to fund long-term industrial investments; when the regional currency contagion began to bite, those loans became unsustainable. The Bank of Korea’s foreign exchange reserves, which had been presented as adequate, proved insufficient to cover the short-term external debt that was falling due. The won has collapsed.

For Jamaica, the Korean crisis adds a further chapter to an international story that has been consistently negative for emerging market economies since July. Aluminium demand, commodity prices, capital flows: all of the external variables that matter for Jamaica are moving in unhelpful directions. The Bank of Jamaica’s task of defending the Jamaican dollar and managing the FINSAC recovery is made materially harder by each successive chapter of the Asian crisis.

Diaspora

The diaspora community’s attention in November has been divided between the approaching Jamaica election and the continuing international financial turbulence. For those in the United Kingdom, the election carries particular emotional resonance: many maintain close family ties in Jamaica, follow Jamaican political developments through community media, and have views — sometimes strong ones — about the relative merits of the PNP and JLP administrations.

On property investment, the diaspora mood in November is one of watching and waiting. The election outcome matters: not because it will dramatically change the structural conditions immediately — FINSAC is not a partisan problem and will not be dissolved by a change of government — but because it sets the political context for the next several years of Jamaica’s economic management. The diaspora investor with a long time horizon cares about that context.

We will, in our January edition, report fully on the election result and its implications for Jamaica’s housing and property sector. That edition will also carry our assessment of both parties’ first post-election signals on the housing agenda.

Affordability

The affordability situation in Jamaica’s housing market as this pre-election edition goes to press is unchanged: commercial mortgage rates remain above 35 per cent, NHT limits remain at J$1.2–1.5 million, and the construction cost of a basic residential unit in suburban Kingston remains J$2.5–3.5 million or above. The election will not change these numbers on December 18. What it may change — over a period of months and years, if conditions permit — is the policy trajectory that determines when and how those numbers begin to improve.

Both parties’ housing platforms acknowledge the affordability crisis. Neither has offered a mechanism for addressing it that does not ultimately depend on FINSAC resolution and interest rate normalisation. The honest answer — rarely offered in campaign contexts — is that housing affordability for ordinary Jamaican households will not meaningfully improve until the extraordinary conditions of the FINSAC period are resolved. That resolution will take time regardless of who wins on December 18.

Looking Ahead

Jamaica votes on December 18. By the time our January edition reaches readers, the result will be known, a new government will be forming, and the post-election period of Jamaica’s housing and economic policy will have begun. We will provide comprehensive coverage: the result, the winning party’s first housing signals, the immediate market reaction, and our assessment of what the election means for the FINSAC recovery trajectory.

For now — fifteen days out — we observe only that Jamaica’s property investors, domestic and diaspora, are watching with close attention. The stakes — housing affordability, economic recovery, the resolution of the FINSAC inheritance — are high. We will be here to report on what the vote brings.