Portia Simpson-Miller leads the People’s National Party to a 42-21 seat landslide on 29 December 2011, ending four years of JLP government — a decisive victory that reduces political uncertainty, signals continuity of the IMF fiscal framework, and allows Jamaica’s property market to end the year on a stronger footing than it has occupied at any point since 2007.
Highlights
- PNP wins general election on 29 December with 42-21 seat majority; Portia Simpson-Miller becomes PM
- Full-year 2011 GDP growth of 1.3 per cent confirmed — first expansion since 2007
- New PM immediately signals commitment to maintaining IMF fiscal framework
- Property transaction volumes close 2011 approximately 25 per cent below the 2006 peak but 35 per cent above the 2009 trough
- National Debt Exchange (NDX) negotiations understood to be among incoming government’s early priorities
- Commercial bank lending rates end year near 9.5 to 10.5 per cent — lowest since the 2007 cycle peak
Three days before the end of 2011, Jamaica went to the polls and delivered its clearest verdict in a generation. The People’s National Party, led by Portia Simpson-Miller in her second tenure as party leader, won forty-two of sixty-three seats in the House of Representatives — a margin of twenty-one that gave the new government the kind of parliamentary majority that made governing straightforward, at least in arithmetic terms. Andrew Holness became, as predicted, one of Jamaica’s shortest-serving prime ministers. Simpson-Miller was sworn in as the island’s leader for the second time, with a mandate clear enough that the usual post-election uncertainty about policy direction was substantially compressed.
For the property market, the election result mattered less for its specific policy implications than for what it resolved: uncertainty. The preceding quarter had been a holding pattern, with buyers and developers waiting for the political landscape to clarify before committing to transactions or projects. The clarity arrived on 29 December, and with it the conditions for resumed decision-making. The incoming PNP government’s early signals — commitment to the IMF framework, willingness to engage in a National Debt Exchange negotiation, continued emphasis on fiscal primary surplus targets — were exactly what the market’s institutional participants needed to hear to resume the approval pipelines and project launches that had been paused through Q3 and Q4.
The full-year 2011 economic data confirmed what had been visible quarter by quarter: Jamaica had returned to growth. GDP expanded by 1.3 per cent over 2010, the first positive annual reading since 2007. The expansion was modest, unevenly distributed across sectors, and dependent on a set of external conditions — a recovering US economy, improving commodity prices, a cooperative IMF — that could not be taken as permanent. But it was real, and it provided the statistical foundation that would allow the incoming Simpson-Miller government to construct a Budget around positive assumptions for the first time in four years.
The property market’s year-end position was materially improved from where it had been at any point since 2007. Transaction volumes were approximately twenty-five per cent below the 2006 peak but thirty-five per cent above the 2009 trough — a recovery that was real but incomplete. Commercial bank lending rates had declined to the nine to eleven per cent range, the lowest since the rate cycle had reversed in 2007. NHT mortgage approvals were tracking at or near post-crisis highs. Remittances were approaching US$2 billion annually. Tourism was recovering. The exchange rate had remained in a relatively narrow band. These were the conditions of a market that was healing, not merely stabilising.
The one significant remaining challenge was the successor to the IMF Stand-By Arrangement, which had been Jamaica’s fiscal anchor since February 2010. The SBA had provided the credibility that stabilised the exchange rate and enabled the JDX’s interest rate compression. Without a successor programme, or without a demonstrably credible domestic fiscal framework that could substitute for the IMF anchor, there was a meaningful risk that the exchange rate would begin to drift and the interest rate compression would partially reverse. The incoming government understood this. The National Debt Exchange and the EFF negotiation — which would eventually produce a successor programme in 2013 — were among the most consequential decisions the new administration would make in its first year.
What This Means
The fourth quarter of 2011 closes the year that marks Jamaica’s return to economic expansion and property market normalisation. The decisive election result reduces political uncertainty, and the incoming government’s signals suggest continuity of the fiscal framework that has underpinned the property market’s recovery. The six to eighteen month outlook depends primarily on two negotiation outcomes: the National Debt Exchange, which will produce further rate compression if successful, and the IMF Extended Fund Facility, which will provide the long-term fiscal anchor that the economy requires. If both are concluded favourably in 2012-13, the property market should continue its recovery toward the transaction volumes and confidence levels that prevailed before 2007. The key risk is the lag between political stability and economic delivery: Jamaica’s property market has recovered its structural foundation; it needs now the sustained period of fiscal discipline and external confidence that converts structural improvement into the price appreciation and development activity that marks a fully recovered market.
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