Golding Steps Down, Holness Steps Up: A Political Transition That Signals an Election Within Months Creates Measured Uncertainty in a Property Market That Was Beginning, at Last, to Feel Like Itself Again

Bruce Golding announces his resignation as Prime Minister on 26 September 2011, making way for Andrew Holness at forty-three Jamaica’s youngest ever Prime Minister — a transition that immediately raises the probability of a near-term election and introduces, into a property market showing genuine recovery momentum, the familiar pause that precedes a Jamaican vote.

Highlights

• Bruce Golding resigns 26 September; Andrew Holness sworn as Prime Minister shortly after
• Election expected within months as Holness signals intention to seek his own mandate
• GDP positive through mid-year, tracking toward 1.3 per cent for the full year
• Commercial bank mortgage rates hold below ten per cent despite pre-election uncertainty
• Tourism arrivals up for third consecutive quarter; north coast hotels report strong bookings
• Property developers pause new project launches awaiting election result and policy signals

Bruce Golding had served as Jamaica’s Prime Minister since September 2007, steering the island through the oil price shock of 2008, the global financial crisis, and the painful years of recession and restructuring that followed. His resignation on 26 September 2011 — anticipated in political circles since early in the year, when the controversy surrounding the extradition of Christopher ‘Dudus’ Coke had damaged the JLP’s standing and, some argued, his own — brought Andrew Holness to the position of Prime Minister at the age of thirty-eight. Holness was a graduate of the University of the West Indies, a former education minister, and the first Jamaican prime minister born after independence. He was also, as events would quickly show, the prime minister who would call the election that ended the JLP’s hold on government after less than a single term in office.

For Jamaica’s property market, the change of prime minister was a signal of election timing rather than a fundamental shift in policy direction. Both the JLP and the PNP had, over the previous five years, managed the economy within frameworks that were broadly acceptable to the IMF and the international creditors whose confidence Jamaica needed to maintain its financing. The specific policies that mattered most to the property market — the pace of interest rate adjustment, the path of fiscal consolidation, the exchange rate management framework, the NHT’s operational parameters — were not areas of sharp differentiation between the parties. What the transition did produce was the characteristic pre-election pause: developers who had been considering new project launches waited; buyers who were not pressed to transact immediately waited; investors assessing commercial property acquisitions waited. The market did not freeze, as it had in 2008. It simply breathed more shallowly for a quarter.

The economic fundamentals through the quarter remained solid by the standards of what the previous three years had delivered. GDP was tracking positive for the full year. Tourism — which had benefited from a combination of increased airlift to the island and the improving US consumer confidence that the American economic expansion was generating — was recording its third consecutive quarter of year-on-year stopover arrival growth. North coast hotels, which had been discounting aggressively in 2009 and 2010, were reporting stronger advance bookings for the upcoming winter season at room rates that were closer to their 2007 levels. This recovery in tourism revenue was important not only as a direct contributor to GDP but as a signal that the overseas buyers — Jamaican diaspora members and international investors — who follow tourism confidence as a proxy for destination desirability were once again engaged with Jamaica’s north coast resort property market.

The IMF Stand-By Arrangement’s final reviews were proceeding without incident. Jamaica was meeting its programme targets, and the relationship between the government and the Fund was sufficiently constructive that both sides were already discussing the terms of the successor programme that would be needed when the SBA expired. The specific character of that successor arrangement — whether it would be another Stand-By, or a longer-horizon Extended Fund Facility, or something else — would depend on negotiations that both an election and a change of government would complicate. The property market’s medium-term interest rate path depended on Jamaica maintaining the fiscal discipline that the IMF framework required, and any disruption to that framework would have direct mortgage rate implications.

In the residential market’s upper tier, the one segment that had shown the least recovery since 2010’s stabilisation, the political transition created specific hesitation. Properties priced above J$60 million — the houses in Cherry Gardens, Beverly Hills, Norbrook, and the gated communities of the hills above Kingston that had been the signature assets of the pre-crisis boom — required buyers with significant financial resources and a confident view of Jamaica’s medium-term direction. Election uncertainty, however manageable from a macroeconomic perspective, was not the backdrop against which such buyers typically committed. The segment that had been the last to show recovery signs would be the segment that remained on hold longest through the political transition.

What This Means

The third quarter of 2011 closes with the property market in a holding pattern rather than a reversal. The structural improvements — lower rates, improving remittances, recovering tourism, active NHT — remain in place. The political transition will produce an election, and that election will produce a new government, and the new government’s priorities and relationship with the IMF will shape the property market’s next phase. The scenario that most market participants regard as base case is a smooth transition, a PNP victory, and continuity of the fiscal framework — because Portia Simpson-Miller’s PNP has governed within IMF programmes before and has signalled no intention to abandon the approach. The scenario that would produce a more disruptive outcome — a contested election result, a fiscal policy break, or an exchange rate crisis — is not the base case but is worth monitoring. The election is coming. The market is waiting. The recovery is paused but not reversed.

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