Jamaica Real Estate Roundup — Q4 2007: The New JLP Government’s First Christmas, Post-Dean Recovery, and a Boom-Season Property Market

• New JLP government (Bruce Golding) in its first quarter; political optimism supports confidence.
• Post-Hurricane Dean North Coast recovery more rapid than feared; season opens well.
• Christmas diaspora season delivers boom-period property market energy.
• US sub-prime crisis monitored with attention; Jamaica not yet directly impacted.
• Kingston premium residential market sustains exceptional boom-period performance.

The fourth quarter of 2007 is the Jamaica property market’s most seasonally important period operating within a new political context and a recovering post-hurricane environment, and the combination of the two is producing a property market dynamic that the optimistic reading of Q4 2007’s conditions fully supports. The JLP government elected on September 3 — with Bruce Golding’s narrow but decisive victory ending eighteen years of PNP government — has brought to the economic management of the island an approach whose market-friendly communication and pro-investment orientation has been received well by the business community and the international investment audience whose confidence in Jamaica’s economic trajectory shapes the property market’s international demand. The Christmas diaspora season that is providing the quarter’s most important property market demand input is doing so in an environment of political renewal and cautious economic optimism that the pre-crisis property boom’s momentum is sustaining at its most energetic level.

The US sub-prime mortgage market’s difficulties — which became visible in the second half of 2007 and have been generating credit market stress in the American financial system through the quarter — are being watched by the Jamaica property market’s most attentive participants with the care that the potential connections to the North American tourism and diaspora investment flows deserve. But the stress’s effect on the actual leisure travel and property investment decisions of the North American households whose Jamaica engagement the market depends on has not yet been visible in the Q4 2007 data in a manner that the boom period’s momentum is not still sufficient to absorb. The property market is, as Q4 2007 closes, still fundamentally in the boom, monitoring the external horizon with attention.

Post-Dean Recovery

Hurricane Dean’s August 2007 landfall on the Jamaican coast — the Category 4 storm whose passage across the island on August 19-20 produced significant damage to agricultural infrastructure, coastal properties, and community facilities in the parishes most directly in its path — had raised concerns through the post-storm period about the North Coast resort communities’ ability to open the 2007-08 winter season without the disruptions that storm damage and the infrastructure recovery it required might produce. The Q4 2007 assessment is that these concerns proved more manageable than the immediate post-storm period had suggested. The resort sector’s investment in post-storm restoration was effective, the infrastructure recovery was more rapid than the storm’s immediate impact had implied, and the North Coast’s winter season opening was proceeding with the operational readiness that the winter visitor’s experience expectations require.

The property market’s Q4 2007 assessment of Hurricane Dean’s longer-term legacy was one that balanced the storm’s demonstrated impact on Jamaica’s coastal and agricultural environments against the resilience of the island’s most significant property market assets. The premium coastal and hillside properties that form the North Coast’s most valuable market segment had, in the majority of cases, survived the storm with less structural damage than the most fearful post-Dean estimates had projected, reflecting the quality of construction and location decisions that the premium market’s development standards typically require. The insurance market’s response to the storm damage claims was, by Q4’s reporting, proceeding in the manner that the coverage arrangements the market’s developers and owners had put in place supported.

The New JLP Government’s First Quarter

The Bruce Golding government’s first full quarter in office has been characterised by the active engagement with Jamaica’s economic management challenges that the JLP’s election campaign had signalled as its governing priority. The new administration’s communications have emphasised the pro-investment, private sector-partnering approach that the property market’s development and investment community had been seeking from the island’s government, and the reception of those communications in the domestic and international business communities has been positive in a way that the consumer confidence effects that a property market most directly benefits from have reflected.

The JLP government’s first-quarter inheritance — the fiscal positions, debt levels, and structural economic challenges that the preceding eighteen years of PNP government had produced — is one that the property market’s participants understand will require sustained management in the years ahead. The new administration’s early signals suggest an approach to that management that is more market-oriented than its predecessor’s, and the property sector’s reaction to those signals has been constructively positive.

Christmas Season: Boom Energy Continues

The Christmas and New Year diaspora season’s Q4 2007 property market performance maintained the boom period’s characteristic energy — the high viewing volumes, the active pipeline of serious buyers, the transactions completing at prices that continued to extend the market’s recent appreciation — in a manner that the combined effect of political renewal and the post-Dean recovery’s faster-than-feared progress was sustaining. The diaspora buyer who arrived in December 2007 was encountering a North Coast market that had absorbed the hurricane and recovered with a speed that confirmed the resilience that the boom years had built into the island’s most important resort communities, and a Kingston premium market that was continuing to appreciate in a manner that the premium segment’s structural supply constraints supported.

Quarter Close: Boom Sustained, Horizon Watched

The fourth quarter of 2007 closes with Jamaica’s property market in the late stages of the extended boom period that the preceding years’ combination of political stability, tourism growth, diaspora engagement, and international investment appetite had sustained. The new JLP government’s pro-investment orientation, the post-Dean recovery’s demonstrated resilience, and the Christmas season’s boom-period energy have kept the market’s trajectory positive through Q4 2007. The US sub-prime crisis’s credit market implications are being watched with the attention they deserve by the market’s most informed participants. The boom is intact as the year closes; the question of how the external credit environment’s trajectory will affect the external demand sources that the boom depends on is the key variable that 2008 will begin to answer.

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