Kingston, Jamaica — 1 January 2010
Jamaica’s property market is emerging from the worst of its post-crisis contraction. Transaction volumes, which dropped sharply in 2009, are beginning to recover in some segments, though the recovery is uneven and fragile. Property prices in the most sought-after segments of the market did not fall as dramatically as some predicted at the height of global financial anxiety, but activity dried up in ways that left sellers waiting and developers cautious. The government’s reductions in stamp duty and transfer tax, which took effect at the start of this year, represent the clearest fiscal signal yet that the administration views a revived property market as a priority for the economic recovery it is working to engineer.
What Held Prices Up
Jamaica’s property market did not collapse in the way some observers feared in late 2008 and early 2009. Several structural factors underpinned prices through the downturn. Supply remained constrained. Jamaica’s housing deficit, which runs into the hundreds of thousands of units, means there is no excess inventory of the kind that drags prices down in over-built markets. The NHT continued lending through the period, providing a floor of institutional mortgage demand that insulated the affordable segment from the sharp tightening seen in commercial lending. And cultural attitudes toward property, which in Jamaica lean strongly toward holding rather than distressed selling, meant that sellers who could avoid selling did so, limiting the volume of discounted transactions that might have pulled reference prices lower.
The building societies, which have historically offered lower mortgage rates than commercial banks, continued to provide financing on terms that kept a segment of the market active through the worst of the slowdown. Victoria Mutual and Scotia Jamaica Building Society, the two main institutions in this space, maintained mortgage products that, while not as aggressively priced as they had been during the boom, remained accessible to qualifying borrowers. Mortgage rates at building societies, which had been in double digits for much of the decade, remained elevated but began a gradual descent that would continue through the following years.
Where the Market Went Soft
The segments that suffered most were those most dependent on discretionary spending and on confidence: higher-value homes in Kingston and the north coast, commercial developments, and joint-venture schemes that had been counting on buyers whose financial positions had deteriorated. Some developments that were under construction during 2008 found demand for their units weakening as economic conditions shifted. Developers who had committed to building in anticipation of sustained demand had to recalibrate their expectations, and some found completing their projects more difficult than anticipated as buyers hesitated and financing conditions tightened.
The Recovery Ahead
House prices rose by an estimated forty-one per cent between 2010 and 2015, a trajectory that in retrospect looks impressively robust but that in early 2010 was not yet guaranteed. The recovery that began in this period was built on a combination of improving sentiment, falling transaction costs, continued NHT lending, and the gradual resumption of developer confidence. It was also built on the structural reality that Jamaica needed far more housing than it had, and that whatever temporary slowdown the global crisis had imposed, the demand for homes did not go away. It was deferred. And deferred demand, in a market with constrained supply, eventually reasserts itself.
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