Jamaica Real Estate Roundup — Q3 2010: Tivoli Gardens, a Summer Season Under the SBA, and the Property Market’s Post-Crisis Recalibration

• Tivoli Gardens May operation’s property market effects assessed five months on.
• IMF SBA second quarter; fiscal disciplines advancing, rate environment adjusting.
• Summer tourism season shows post-crisis recovery momentum building.
• Kingston security perceptions complex; premium residential market resilient.
• North Coast summer demand recovering; international buyer pipeline active.

The third quarter of 2010 is the Jamaican property market’s first summer season within the dual framework of the Jamaica Debt Exchange and the IMF Stand-By Arrangement, and the summer’s unfolding has been conducted against the additional backdrop of the Tivoli Gardens security operation of May — the most consequential domestic security event in recent Jamaican history — whose effects on Kingston’s property market dynamics and on Jamaica’s international image as a stable investment environment have been among the quarter’s primary areas of analytical attention. The summer’s tourism recovery and the property market’s post-crisis trajectory are, five months after the operation, providing evidence that the market’s resilience is more durable than the crisis period’s worst moments might have suggested, even as the full assessment of the quarter’s operating environment must acknowledge the complexity that the Tivoli operation has introduced into the security perception overlay that international buyers routinely apply in their Jamaica investment assessments.

The IMF Stand-By Arrangement’s Q3 2010 implementation has been proceeding with the measured progress that the programme’s fiscal disciplines require. The primary surplus targets are being maintained, the expenditure restraints are operating, and the revenue measures are generating the collections that the programme expects. The domestic financial environment’s response to the JDX’s February restructuring is working its way through the system, with government paper yields reflecting the new coupon structure and the direction of lending rates established toward the lower levels that the improved fiscal framework will eventually support. The pace remains deliberately measured — the fiscal adjustment’s depth requires time for its effects to compound — but the direction is not in question.

The Tivoli Gardens Operation: Property Market Assessment

The May 2010 security operation in Tivoli Gardens — the government’s response to the US extradition request for Christopher ‘Dudus’ Coke and the community resistance that the request had generated — produced a concentrated period of urban conflict in one of Kingston’s most historically complex garrison communities whose reverberations through Kingston’s property market have been carefully tracked through Q3 2010. The operation’s most direct property market effects were concentrated in the immediate vicinity of Tivoli Gardens and the adjacent communities in West Kingston, where the security environment’s disruption had a direct and immediate impact on residential activity and property values in the affected areas.

The premium residential market’s geographical insulation from the operation’s most directly affected areas meant that the Kingston market’s most active transaction layer was less directly impacted than international media coverage of the operation’s intensity might have suggested. The established residential communities in the hills above Kingston — Cherry Gardens, Norbrook, Jack’s Hill, and the communities that the premium market’s buyers target — maintained their property market activity through the operation’s immediate aftermath and into the summer with a continuity that the premium segment’s structural characteristics supported. The security operation’s legacy for the premium market has been primarily one of a temporary international media profile that raised Jamaica’s security perception profile without altering the structural supply and demand dynamics that underpin the premium segment’s values.

Summer Tourism: Recovery Building

The summer tourism season’s Q3 2010 performance provided the property market’s North Coast dimension with the most encouraging news of the quarter. Visitor arrivals for the summer months were recovering from the crisis-affected lows of 2009 with a momentum that the tourism authorities and private sector operators were cautiously describing as a return to growth after two difficult years. The North American summer family market — the core of the North Coast’s summer visitor base — was returning to Jamaica in improved numbers, attracted by the competitive pricing and resort quality that the sector had maintained through the crisis period’s most difficult conditions.

The North Coast property market’s Q3 2010 activity reflected the tourism sector’s improved summer performance. The international buyer pipeline — which the crisis period had thinned considerably from the pre-crisis peak’s levels — was showing renewed life as summer visitors converted their improved resort experiences into property market interest. The international buyer who had been watching from the sidelines through the crisis period was beginning to re-engage, drawn by the combination of the improved tourism experience, the property market’s prices that had adjusted through the crisis period, and the new fiscal framework’s provision of a more stable long-term economic context than had been available in the pre-JDX period.

Quarter Close: Complexity and Resilience

The third quarter of 2010 closes with Jamaica’s property market demonstrating a resilience that the year’s multiple challenges — the fiscal adjustment’s continuing constraint on domestic demand, the Tivoli Gardens operation’s security perception effects, and the global economy’s continued recovery from the financial crisis — have not been able to suppress entirely. The premium residential segment’s structural anchor, the North Coast’s improving tourism and international buyer dynamics, and the fiscal framework’s gradually improving direction together constitute a property market that is managing through a complex transition period with the resilience that the underlying structural fundamentals of the Jamaican property market support. The recovery’s pace is slower than the optimists had hoped, but its reality is becoming more visible with each quarter of the programme’s implementation.

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