Everything Changed: Jamaica’s Housing Market in the Shadow of September 11 — October 2001

Publication Date: 3 October 2001 | Coverage Period: 3 September–2 October 2001 | Category: Monthly Review

Month in Brief

• On 11 September 2001, coordinated terrorist attacks on the United States — hijacked aircraft flown into the World Trade Center in New York, the Pentagon in Washington, and a field in Pennsylvania — kill nearly three thousand people in the worst terrorist atrocity in recorded history: the world, including Jamaica, will never be quite the same again.
• US airspace is closed for three days following the attacks; transatlantic and Caribbean aviation is severely disrupted; Jamaica’s north coast hotels empty within 72 hours as guests check out and international arrivals collapse to near zero.
• American President George W Bush declares a War on Terror; the United States government identifies al-Qaeda and the Taliban regime in Afghanistan as responsible and signals imminent military retaliation.
• The Jamaica Stock Exchange falls sharply in the days following September 11; property transactions across the island effectively cease as buyers and sellers alike freeze in the face of what feels, in the immediate aftermath, like the unravelling of the world order.
• The Bank of Jamaica issues a statement maintaining its rate stance and expressing confidence in Jamaica’s financial system, as the government seeks to prevent domestic panic compounding an external catastrophe.
• Prime Minister PJ Patterson expresses solidarity with the United States and confirms that Jamaica is closely monitoring the evolving situation; the Jamaica Tourist Board cancels its September promotional schedule and begins emergency crisis communications.

Housing Market Overview

This edition of the Jamaica Homes Monthly Housing Review is being written on 3 October 2001, twenty-two days after the attacks that consumed the world’s attention on the eleventh of September. We are still in the acute phase of the shock. We are writing at a moment when no one — not in Jamaica, not in the United States, not anywhere in the world — can say with any confidence what comes next, how long this crisis will last, or what the world that emerges from it will look like. What we can do is describe what the September 11 attacks have done to Jamaica’s housing market in the three weeks since they occurred. The answer is simple and devastating: everything has stopped.

Property transactions in Jamaica across the final three weeks of September registered, as best we can determine from practitioners across the island, at something close to zero. Not the slow quiet of a market taking a seasonal pause, not the measured caution of buyers waiting for prices to soften — but an absolute suspension. Estate agents report that their phones stopped ringing within 24 hours of the attacks and have not meaningfully recovered since. Mortgage applications at the NHT and at commercial lenders dropped off a cliff in the days after September 11 and have not recovered. Developers with projects in active marketing have pulled back their advertising. Vendors have taken their properties off the market rather than testing it in conditions where no price makes sense because no one knows what anything is worth in a world that may have fundamentally changed.

The shock to Jamaica’s housing market is not, primarily, a credit shock or a domestic economic shock. Jamaica’s banks did not fail. The NHT did not collapse. Interest rates did not suddenly spike to new heights. What happened is something harder to quantify but more comprehensive in its effect: a total, sudden loss of confidence. The buyers, developers, investors and lenders who constitute the property market’s active participants have simply stopped, because the world in which they were operating has, in a matter of hours, become unrecognisable.

On the north coast, the situation is more immediately and materially severe. The hotels — the Sandals and SuperClubs all-inclusives that are the backbone of Montego Bay’s and Ocho Rios’s economy, and the smaller boutique properties from Negril to Port Antonio — emptied as the attacks unfolded. Guests checked out. Arrivals that should have landed did not. The transatlantic routes that bring the Americans and Europeans who fill Jamaica’s resort hotels were either cancelled or flying to half-empty aircraft for the few days after the FAA reopened US airspace. By September 20, north coast hotel occupancy was estimated by industry sources at between 15 and 25 per cent. For a sector that needs occupancy above 60 per cent to cover its fixed costs, these numbers represent a crisis of existential proportions.

The property implications of a sustained north coast hotel collapse are severe and extend well beyond the hotels themselves. The resort corridors of St James, Trelawny and St Ann represent some of Jamaica’s most significant real estate values, with hotel properties, adjacent residential developments and vacation home communities all valued partly on the assumption of a functioning, growing tourism economy. That assumption has been shattered, and the market is only beginning to understand what the recalibration will mean for values in these areas.

Government Policy

Prime Minister Patterson moved quickly after September 11 to position Jamaica in the context of the global crisis. His public statements expressing solidarity with the United States, condemnation of the attacks, and confidence in Jamaica’s security and tourism infrastructure were appropriate and necessary. The government’s immediate policy priority has not been housing — it could not be, given the scale of what has happened — but crisis management for the tourism sector that is the economy’s most vulnerable pressure point.

The Jamaica Tourist Board has suspended its normal promotional activities and entered emergency crisis communications mode, working with travel agents and airline partners to assess the scale of booking cancellations and to identify what, if anything, can be done to stabilise the winter season that should be Jamaica’s most lucrative revenue quarter. The news from that exercise is not good: cancellation rates for October, November and December bookings are running at levels that, if sustained, will produce a winter season that generates perhaps 40–50 per cent of a normal year’s revenue at best.

On housing policy, the Patterson government’s pre-September programme — the NHT pipeline, the subdivision approvals, the informal sector expansion proposals — has been placed in a kind of suspended animation. None of it has been formally cancelled; the government is careful to maintain the appearances of policy continuity. But the fiscal pressures that the tourism collapse is creating will make new capital commitments in the housing sector very difficult in the near term. The budget that was being assembled before September 11 will need to be substantially rewritten in the light of what has happened, and housing will have to compete with crisis support for the tourism sector for any discretionary fiscal resources that remain.

Construction Sector

Construction activity on Jamaica’s north coast stopped within days of September 11. The hotel refurbishment projects, the resort expansion works, the ancillary commercial buildings going up around the new all-inclusive developments — all of it paused as the operators who commission such work went into crisis mode. There are reports of workers being stood down at sites in Montego Bay and Ocho Rios before the end of the week of the attacks. Whether these will be temporary pauses or the beginning of extended suspensions is not yet clear; but the construction sector’s dependence on tourism-related work means that it is among the first to feel the consequences of what has happened.

In Kingston and the rest of the island, construction activity has slowed but not stopped. NHT scheme construction continues; self-build projects continue at whatever pace household resources allow; government infrastructure works continue. The construction sector’s response to September 11 outside the tourism parishes has been more of a freeze than a halt — a pause for breath and recalibration rather than a decision to stop. That may change if the shock proves as lasting as it currently appears it might.

Materials supply chains have been disrupted by the aviation and shipping disruptions that followed the attacks, but Jamaica’s construction sector is not heavily dependent on air freight, and the interruption to marine shipping has been brief. Cement and steel availability is expected to normalise quickly; the disruption to construction from supply-side factors is likely to be minor compared to the demand-side collapse represented by the cessation of hotel and resort development commissioning.

Investment Climate

The investment climate on 3 October 2001 is unlike anything this publication has previously been required to describe. The global financial system has absorbed a shock without precedent in the modern era: not the bankruptcy of a bank, not the collapse of a currency, not a geopolitical crisis in a peripheral economy, but a direct attack on the financial and military heart of the world’s dominant superpower. Markets that had been tracking an orderly if challenging US economic slowdown since March were suddenly confronted with an event category for which no model exists and whose consequences cannot be calculated.

Wall Street, which had been closed since the attacks, reopened on 17 September to its worst week since the 1930s. The Dow Jones Industrial Average fell more than 7 per cent on the first day of trading. Airline stocks collapsed; insurance companies faced catastrophic claims; travel and hospitality companies across the United States and the Caribbean entered crisis mode. The effects on Jamaica’s financial markets, while less dramatic in absolute terms — Jamaica’s equity market is small and thinly traded — have been proportionally severe, with the Jamaica Stock Exchange falling sharply on the first full trading days after the attacks.

Foreign direct investment into Jamaica’s resort and property sector, which had been building with encouraging momentum through 2000 and the first half of 2001, has stopped. Investment committees at the hotels, development companies and real estate funds that had been assessing Jamaica opportunities have deferred all decisions pending clarity about the environment that no one is yet in a position to provide. The pipeline of resort development that represented Jamaica’s most concrete prospect of medium-term economic growth has, in three weeks, been reduced to a collection of suspended files and deferred calls.

For domestic institutional investors, the BOJ’s high-rate policy has, paradoxically, provided a refuge. Government paper, yielding in the context of rates above 17 per cent, looks more attractive than ever in a risk-off environment. This is exactly the wrong signal for property investment, which competes with these instruments for institutional capital. The flight to safety has made Jamaica’s already overpriced bond market even more crowded, and real estate further from institutional favour.

Diaspora Activity

The Jamaican diaspora in New York is in crisis. New York was the epicentre of what happened on September 11 — the city that lost nearly 2,700 people in the collapse of the World Trade Center towers, that spent the weeks since in a state of collective grief and fear that those of us watching from Kingston can barely imagine. Jamaica’s community in New York is large, deeply rooted, and concentrated in exactly the boroughs — Brooklyn, the Bronx, Queens — where the psychological impact of the attacks has been most acute. Many Jamaicans in New York knew someone who died; many more work in the industries — hospitality, transport, building services — that have been most severely disrupted by the shutdown of lower Manhattan and the collapse of New York’s tourism and entertainment economy.

The diaspora community in Washington DC is also directly affected: the Pentagon attack struck at the military-capital complex in which significant numbers of Jamaican-Americans are employed in support and administrative roles. The trauma there is of a different character from New York but no less real.

What this means for Jamaica’s property market and self-build sector is that the diaspora’s short-term capacity and psychological orientation toward Jamaican investment has been severely disrupted. Remittances may hold — the diaspora’s commitment to family support in Jamaica runs very deep — but the discretionary property investments, the plans for retirement homes and second properties, the conversations about buying land or funding the next phase of construction — these have been displaced by the immediate imperatives of survival, grief and adaptation. This is entirely understandable and entirely painful.

Affordability

In a month in which the world has been upended, the affordability dynamics of Jamaica’s housing market are structurally unchanged but contextually transformed. BOJ rates above 17 per cent, commercial lending at 22–26 per cent, NHT at 0–5 per cent — these numbers are the same as they were on 10 September. But the income environment in which households navigate these rates has changed dramatically for those employed in tourism, aviation and the sectors that depend on them. The rate structure is the same; the ability to service debt within that structure is, for many thousands of households, now in question in ways it was not a month ago.

The NHT’s continued operation through this crisis is a structural anchor. For contributing workers who have not lost employment, the path to NHT-assisted homeownership remains open and unchanged. The Trust is not suspended; its rates are not being changed; its pipeline of approved applications continues to be processed. In a moment of extraordinary disruption, this institutional continuity is genuinely valuable and should be explicitly acknowledged.

Looking Ahead

We are writing this on 3 October 2001, and we do not know what happens next. No one does. The United States is preparing a military response to the attacks; what form it takes, how long it lasts, and what consequences it has for the global environment will be among the most important variables shaping Jamaica’s economic trajectory for the foreseeable future. The question of whether September 11 represents a temporary shock — devastating but recoverable, like a hurricane season’s damage — or a permanent restructuring of the global order is one that economists and strategists are debating and cannot yet answer.

What we can say is this: Jamaica’s property market has the structural resilience to survive this shock. The NHT pipeline continues. The fundamentals of population growth and housing demand have not changed. The island’s natural advantages — its beauty, its climate, its accessibility from North America and Europe — have not been destroyed by what happened in New York and Washington. When confidence returns — and at some point, confidence will return — the foundations for a market recovery will still be present.

But we will not minimise what the next months represent for Jamaica. The winter tourism season — the island’s most important revenue quarter — is in severe jeopardy. The north coast economy is in freefall. The diaspora communities that fund so much of Jamaica’s self-build housing sector are traumatised and distracted. The investment pipeline that was beginning to deliver genuine momentum has stopped. Jamaica is entering the hardest period in its recent economic history, and the housing market will reflect every dimension of that difficulty. We will report honestly on what unfolds, month by month, as the island navigates the aftermath of a September that changed everything.