Fourteen days. Hurricane Dean made landfall on Jamaica’s south coast on the nineteenth of August, leaving 1,582 homes uninhabitable and 3,127 more heavily damaged. The election scheduled for the twenty-seventh was pushed back by the storm. On the third of September, the Jamaica Labour Party won thirty-two seats to the People’s National Party’s twenty-eight, ending the longest unbroken stretch of single-party government in Caribbean history. A property market that had been waiting for the election to resolve is now waiting instead to understand what both of these events, arriving together, mean for the island’s future.
Highlights
- Dean makes landfall August 19-20; 1,582 homes destroyed, 3,127 heavily damaged
- Three people killed; 248 roads affected across southern and eastern parishes
- Agricultural damage totalling US$310 million including 80-100% of banana crop
- JLP wins September 3 election 32-28; Bruce Golding sworn in as Prime Minister
- End of 18 years PNP rule; property market watches for policy continuity signals
- Title divide repeats: insured titled households rebuilding; untitled stock without recourse
The storm arrived from the south on a track that meteorologists had been watching for three days. Its passage over Jamaica was rapid — the centre moved across the southern parishes in under twelve hours — but the damage it compressed into that window was, across Clarendon, St. Catherine, Kingston, and St. Thomas, the most concentrated the island had experienced since Ivan in 2004. A man died when his roof collapsed in Clarendon. A fourteen-year-old girl in St. Thomas died when rocks struck her home. A third person was killed by flying debris. Over a thousand and a half roofs were stripped from the structures beneath them. Two hundred and forty-eight roads were affected, with the most severe blockages in the northeast and across St. Catherine — the same corridor that the Highway 2000 had made central to the property market’s growth story over the previous four years.
The agricultural sector absorbed a blow that will take years to quantify fully. Eighty to one hundred percent of the banana crop was lost. Forty percent of sugarcane was destroyed. Three-quarters of the young coffee trees under three years of age — the seedlings planted to replace the crop losses of Ivan and the 2005 storms — were gone. Banana production in particular will not return to pre-storm levels for at least a year, and the communities whose incomes derive from the banana industry face a recovery period measured in seasons rather than weeks. The insured damage was initially reported at US$1.5 billion, a number that collapsed to a more defensible US$310 million on analysis, but the agricultural and rural housing losses that fall outside the insurance system are not fully captured in either figure.
The title divide that every Jamaica hurricane now reveals has appeared again in Dean’s aftermath with the same clarity it showed after Ivan, Dennis and Emily. Two-thirds of homes in the southeastern parishes sustained significant damage, but the households with the fastest recovery paths — those who are already opening repair quotes and engaging contractors — are predominantly the ones who held title before the storm struck. A titled house can be secured against a mortgage for a repair loan. An insured titled house can file a claim. An untitled property — and in the parishes where Dean’s damage was concentrated, the untitled stock is substantial — has none of these options. Its residents will patch what they can afford to patch, leave what they cannot, and wait for the next season’s economic circumstances to determine what is possible. The recovery rate across different segments of the housing stock will diverge, as it has diverged after every major storm, in precise correlation with the title register.
The election that Dean’s landfall pushed back by one week produced an outcome that Jamaica’s property market will need time to assess fully. Bruce Golding’s JLP won with a margin of four seats — narrow enough that the recounts of several constituencies kept the final result uncertain for days after polling day. The new Prime Minister is a sophisticated economic thinker, trained as an economist, with a record in opposition of engaging seriously with the fiscal constraints that Jamaica’s debt profile imposes. His party’s campaign commitments include a set of economic policy positions that do not, on their face, depart dramatically from the framework that has supported the property recovery of the past five years. The market’s most immediate interest is in three questions: whether the incoming government will maintain the primary surplus, what it will do with the transfer tax and stamp duty conversation that has been deferred for the entire duration of the boom, and whether the Golding administration will have any greater appetite for NHT reform than its predecessor.
For the moment, the market is asking these questions without pressing for answers. The JLP has been in opposition for eighteen years, and the machinery of government requires time to learn before it can be directed. September is also, in any post-storm year, a month when the property market defers to the recovery agenda: the surveyor, the adjuster, and the repair contractor are busier than the estate agent, and the first draft of the new government’s economic character will be written in its approach to Dean’s reconstruction, not in property policy announcements.
The global financial environment, which was already showing the stress of the subprime crisis before Dean arrived, has deteriorated further through the quarter. The seizure of credit markets that followed the Bear Stearns collapse has spread to interbank lending markets in Europe and the United States, with the British mortgage lender Northern Rock becoming the most visible symptom of a liquidity crisis that is no longer a problem in a specific asset class but a problem in the financial system’s plumbing. Jamaica’s borrowing costs in external markets will rise in this environment. The BOJ’s ability to ease domestic rates further is constrained by an exchange rate that responds to global risk appetite as much as to domestic monetary conditions.
What This Means
Jamaica’s property market enters the final quarter of 2007 carrying more simultaneous uncertainty than at any point since the period immediately after FINSAC: storm damage that has displaced over 1,500 families and will suppress construction capacity for months; a new government that needs time to declare its economic character; and a global financial system in a liquidity crisis whose full consequences for Caribbean remittance flows and the cost of Jamaica’s external debt are not yet visible. None of these is individually catastrophic for a property market with the structural advantages that Jamaica has built since 2001 — the NLA’s titling momentum, the NHT’s lending capacity, the improved processing infrastructure. But the combination, in a quarter where the market needed clarity, is the opposite of what it got. The next six to eighteen months will reveal whether the Golding government’s economic instincts match the discipline that the recovery required, and whether Jamaica’s exposure to a weakening global economy can be managed with the primary surplus intact.
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