The Portmore Causeway — five kilometres of dual carriageway across Kingston Harbour that will give the island’s largest dormitory municipality its second direct link to the capital — is weeks from opening. The announcement has been made, the ribbon is being made ready, and the property market in western Portmore, which has been anticipating this moment for nearly three years, has done something interesting: it has already arrived in a future the new road has not yet delivered.
Highlights
- Portmore Causeway (5km Kingston-Portmore crossing) due to open July 2006
- Western Portmore residential prices up 12-15% in anticipation of reduced commute times
- Simpson-Miller Budget maintains primary surplus; no new property tax relief announced
- NHT raises loan ceilings to partially close gap with surging market values
- Commercial bank mortgage rates begin modest easing toward 15-16% range
- North coast hotel construction drives secondary residential investment in St. James and Hanover
The mechanism is familiar to anyone who has watched the Highway 2000 story unfold since 2001. Infrastructure that reduces commuting time does not wait for its ribbon-cutting to change property values; it changes them from the moment the opening date becomes credible, and the credibility compounds as the opening draws nearer. In the western sections of Portmore — the communities that sit beyond the reach of a reasonable morning journey on the existing causeway and that have therefore traded at a persistent discount to their equivalents in eastern Portmore and the highway corridor — that credibility has been building since at least the end of 2004, when the Highway 2000’s Kingston section opened and demonstrated that major road infrastructure in Jamaica does, in fact, open on something like its announced schedule.
The Portmore Causeway is a different project in character from the Highway 2000. It is shorter — five kilometres against the highway’s thirty-four — and operates not as a tolled concession but as a public infrastructure addition to an existing corridor. What it shares with the Highway 2000 is transformative potential measured in commuting minutes. The existing causeway, at peak morning hours, regularly takes forty-five minutes or more to traverse — a daily cost extracted from every Portmore resident who works in Kingston and has no alternative. The new crossing, running from Marcus Garvey Drive to Dyke Road and Dawkins Drive, will carry a second stream of traffic across the harbour and, in doing so, remove the worst of the morning penalty that western Portmore has historically paid for its location.
The first Budget of the Simpson-Miller administration, presented to Parliament in May, has been absorbed by the property sector with a relief that professional caution prevents anyone from stating too directly. The incoming Prime Minister maintained the primary surplus target, preserved the fiscal framework inherited from P.J. Patterson, and made no announcements that would signal a departure from the debt management approach that has supported the economic recovery of the past four years. The transfer-tax conversation remained deferred — the decision not to cut is a fiscal decision as consequential, in its absence, as a decision to reduce would be in its presence. But the market had priced in the possibility of fiscal loosening, and the confirmation that the new PM is governing within the inherited discipline rather than against it has been received as a positive signal by the professionals who had been waiting to see which Portia would govern.
The NHT has moved, at last, to close part of the gap between its loan ceilings and the current market. Ceiling adjustments announced in the quarter — the first meaningful upward revision in several years — reflect an institutional acknowledgment that the property values against which the Trust’s mortgages are advancing have moved substantially since the last revision. For NHT contributors whose qualifying amount has been static against a market that has appreciated 20 to 25 percent since 2003, the adjustment is welcome even if it does not fully bridge the gap. The Trust remains the most important source of mortgage finance for the wage-earning middle class, and the ceiling revision will enable some transactions that were previously too far above the NHT’s reach to be feasible.
In the commercial bank sector, something is finally beginning to move. Lending rates that averaged 17 percent at the end of 2005 have edged toward 15 to 16 percent in the June quarter, reflecting a combination of improved deposit liquidity, moderate improvements in the fiscal position, and the Bank of Jamaica’s slow but discernible progress against the inflation rate that has kept monetary conditions tight for five years. The movement is cautious and partial — no bank is rushing to loosen credit conditions in an environment where the exchange rate still bears watching — but the direction is consistent, and if it continues through the second half of the year, it will begin to open mortgage finance to a stratum of Jamaican households that has been priced out of the commercial lending market since the recovery began.
On the north coast, the hotel construction pipeline that has been filling since 2003 is beginning to deliver. Several major properties in the Montego Bay-Tryall belt and the Trelawny-Falmouth corridor are either open or in final construction, and the secondary residential market — the villas, serviced apartments, and gated residential schemes that follow resort infrastructure — is responding. Land values in St. James outside the established resort zones have moved materially in the past eighteen months. In Hanover, where the combination of long coastline and relatively low historical development density has attracted attention from regional investors, transactions are occurring at prices that no comparable parcel sold for five years ago.
What the market is managing, as it moves through the second half of 2006, is the familiar problem of an asset class whose price appreciation has outrun the income growth that would allow a wider population to participate. The property boom that began in earnest in 2004 has now run long enough to have created a new cohort of owners who have seen their equity multiply significantly and a corresponding cohort of non-owners for whom the same appreciation has made entry more difficult with every passing year. The political salience of this divide — visible in the way housing affordability has featured in the new administration’s rhetoric even where it has not yet appeared in its budget — suggests that the policy conversation will eventually produce an intervention. The question is whether that intervention comes from the supply side, through planning reform and land release, or from the cost side, through transfer tax reductions that the fiscal position has not, until now, permitted.
What This Means
The Portmore Causeway opening will, when it arrives in July, be the most significant single infrastructure event for the Kingston metropolitan property market since Highway 2000’s Kingston section opened eighteen months ago. But unlike that earlier event — which surprised the market with the speed of its impact — the causeway’s property effects have been largely priced in already, which means the opening will be an affirmation of existing values rather than a sharp new catalyst. The next sustained move in the market will depend less on new infrastructure and more on the direction of commercial lending rates over the following six to twelve months: if the slow easing visible in the June quarter continues through the second half of 2006, the market will broaden in terms of who can participate; if rates stall or reverse because of exchange rate pressure or fiscal slippage, the pool of qualified buyers will remain as narrow as it has been throughout the recovery.
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