Jamaica Real Estate Roundup — Q4 2010: Christmas After the JDX, a Year of Adjustment Assessed, and the Property Market’s Guarded Recovery Hopes

• Post-JDX third quarter; IMF SBA fiscal disciplines continuing their adjustment work.
• Christmas diaspora season solid; property enquiries sustain through holiday period.
• Year of Tivoli Gardens operation and economic contraction draws to close.
• Kingston premium segment stable; middle market still awaiting rate relief.
• North Coast Christmas peak delivers resort community seasonal support.

The fourth quarter of 2010 brings to a close a year that will be remembered in Jamaica’s recent economic history as one of the most consequential and difficult in the modern era. The Jamaica Debt Exchange of February, the IMF Stand-By Arrangement that accompanied it, the Tivoli Gardens security operation of May that resolved the Dudus Coke extradition standoff but at enormous human and political cost, and the economic contraction that the global financial crisis’s Caribbean spillovers had produced together made 2010 a year in which the structural foundations of Jamaica’s economic future were being reset even as the present’s conditions were among the most challenging in a generation. The property market that entered Q4 2010 was one that had navigated all of this and was drawing a considered balance: more structural security than at any point since the crisis’s acute phase, but recovery conditions that were arriving more slowly than the optimists of the post-JDX period had projected.

The IMF Stand-By Arrangement’s third quarter of implementation found the fiscal disciplines tracking broadly in line with the programme’s design. The primary fiscal surplus targets were being maintained, the revenue measures were generating the collections the programme expected, and the structural reforms on which the longer-term sustainability of the fiscal framework depended were advancing through the implementation process. The domestic financial environment’s response to the JDX’s coupon compression was proceeding, with yields on government paper reflecting the restructured post-JDX environment and the direction of lending rates established even if their actual level had not yet reached the affordability threshold that the property market’s broadest recovery required.

Christmas Season: The Market’s Year-End Anchor

Against the backdrop of the year’s difficult economic and political landscape, the Christmas and New Year diaspora season performed its traditional function as the property market’s most important seasonal anchor with a resilience that was itself a reflection of the Jamaican diaspora’s deep and persistent connection to the island. The Jamaican-born residents of New York, Toronto, London, and Miami who arrived for the 2010 Christmas season were not deterred from their December visits by the year’s domestic turbulence, and the property market engagement that those visits generated was sustained at levels that the market’s agents and developers found encouraging relative to the crisis-affected Christmas seasons of 2008 and 2009.

The diaspora Christmas 2010 buyer was, on the whole, a more confident market participant than the equivalent of the preceding two years. The global economic environment’s acute crisis phase was clearly behind, the JDX and SBA framework’s presence provided a structural context for Jamaica’s fiscal management that had not existed in the pre-JDX period, and the currency advantage that overseas earnings provided against the Jamaican dollar was, if anything, widened by the accumulation of the exchange rate’s movement through the crisis period. The diaspora buyer who had been watching and waiting through the crisis years was beginning to re-engage with the market’s offerings, and the Christmas 2010 season was a more active one than its recent predecessors had been.

The Tivoli Gardens Year’s Property Market Legacy

The Tivoli Gardens security operation of May 2010 — the most significant security intervention in Kingston’s recent history — had generated questions through the year about the Kingston residential market’s trajectory and the degree to which the operation’s consequences for security perceptions, community dynamics, and political controversy would affect buyer confidence in the capital’s residential areas. The Q4 2010 assessment was that the operation’s direct property market effects had been more contained than the initial concerns had suggested, concentrated in the immediate vicinity of the operation and diminishing markedly as one moved into the established residential communities where the premium market’s buyers were focused. The operation’s longer political consequences — the controversy that would eventually contribute to Golding’s resignation the following year — were working their way through the political system independently of the property market’s dynamics.

Kingston and the North Coast: Year-End Picture

Kingston’s residential market’s Q4 2010 performance was characterised by the premium segment’s continued structural resilience and the middle market’s continued navigation of financing constraints that the domestic rate environment maintained despite the post-JDX direction of travel. The Christmas season’s diaspora energy provided the residential market with an active quarter’s final period, and the enquiry and transaction activity generated in December was filling the early 2011 pipeline with the deals that the new year’s first weeks would be seeing through to completion.

The North Coast’s Christmas peak season delivered the occupancy levels that the calendar reliably generates for the resort communities’ most important seasonal period. The international visitors who were filling Montego Bay and Ocho Rios’s resorts through the final weeks of 2010 were doing so in a global travel environment whose recovery from the crisis’s acute suppression was more advanced than a year earlier, and the resort sector’s Christmas 2010 experience was its most positive since the pre-crisis peak. The North Coast property market’s year-end activity reflected this improved seasonal energy, with the international buyer community’s engagement at a level that the preceding two crisis-affected Christmas seasons had not matched.

Year-End Assessment: Foundation Laid, Recovery Underway

The fourth quarter of 2010 closes with the Jamaica Roundup offering the year-end assessment that the fiscal foundation whose construction was 2010’s primary economic achievement — the JDX, the SBA, and the disciplines of the first year’s implementation — has positioned the property market for the recovery that 2011’s continued implementation should begin to deliver more visibly. The pace of the recovery’s delivery will be determined by the rate environment’s evolution, and that evolution will be determined by the fiscal framework’s ongoing implementation. The market has the foundation. The question is how quickly the structure that the foundation supports will rise. The year that is ending was the foundation’s construction year. The year that is beginning may be the first year of the recovery it makes possible.