PNP Wins: Portia’s Housing Vision and What It Means for Jamaica’s Property Market — January 2012

Publication Date: January 3, 2012 | Coverage Period: December 3, 2011 – January 2, 2012 | Category: Monthly Review

January in Brief

• PNP wins December 29 election by a landslide: 42 seats to JLP’s 21
• Portia Simpson Miller to form new government; transition arrangements under way
• Housing and NHT reform central to PNP’s mandate; market awaits policy specifics
• Property market enters 2012 with cautious optimism; transaction activity expected to recover
• Eurozone tensions persist into 2012; European recession widely anticipated
• Diaspora and investors watch for early signals on NHT loan limits and scheme priorities

Housing Market Overview

Jamaica’s housing market enters January 2012 with a clearer political horizon than it has enjoyed at any point in the past several months. The People’s National Party’s decisive victory in the December 29 general election — 42 seats to the JLP’s 21, a result that exceeded most published polling expectations — resolves the electoral uncertainty that had kept transaction activity subdued through the final quarter of 2011. Portia Simpson Miller, who leads the PNP, is in the process of forming her government as this edition goes to press, and the specific contours of her administration’s housing and NHT policy are not yet fully articulated. But the broad direction is knowable: the PNP has campaigned on expanded housing access, NHT reform, and a more inclusive approach to the Trust’s scheme allocations.

The immediate market response to the election outcome has been one of measured relief rather than exuberance. Buyers who deferred decisions during the campaign period are expected to return to active consideration of purchases, particularly in the NHT-accessible segments of the market. Developers who have been in a holding pattern are reassessing project timelines and investment commitments in light of the changed political environment. The Corporate Area market — the most liquid and least policy-dependent segment — is likely to move first; outer-parish NHT-reliant markets may take a few months longer to reactivate as the new government’s specific scheme and loan policies take shape.

It is important to note that the formal transition of governmental authority is not yet complete as of this writing. Portia Simpson Miller has not yet been sworn in as Prime Minister — that ceremony is expected in the coming days. The outgoing Holness administration remains technically in caretaker capacity. For the housing market, this means that the NHT and related institutions are operating on existing mandates, and that the first concrete policy signals from the new PNP government will emerge in the weeks ahead.

Government Policy and the PNP’s Housing Agenda

The PNP’s election victory was built in part on a clear and consistently articulated housing narrative. Portia Simpson Miller and her party positioned the National Housing Trust as an institution that had been insufficiently responsive to the needs of lower-income contributors — those in the 60 per cent of demand that falls in the lowest income band — during the JLP years. The PNP campaigned on reforming the Trust’s governance, expanding access, and ensuring that scheme allocations reach those most in need rather than being concentrated among higher-income applicants.

Specific policy commitments include a commitment to review NHT loan limits and income thresholds to ensure they remain relevant to actual construction and property costs, which have risen materially since the Trust’s parameters were last comprehensively updated. The PNP has also spoken of accelerating the inner-city housing programme, including completions in West Kingston and other communities where units are in advanced stages of development.

The new government will also face immediate questions about the NHT’s relationship with the broader fiscal framework. The Trust generates substantial contribution revenues from payroll deductions and has its own investment portfolio; decisions about how those resources are deployed — in scheme development, in mortgage lending, in infrastructure co-investment — will be among the first substantive policy choices the incoming administration makes.

Jamaica’s macro-fiscal environment remains constrained. The government’s debt-to-GDP ratio is among the highest in the hemisphere, and discussions with the International Monetary Fund about the framework for fiscal consolidation and external financing will be a priority for the new administration. The housing sector’s dependence on public financing through the NHT means that these macro-fiscal choices will have direct downstream effects on the Trust’s capacity to deliver schemes and mortgage products at the volumes the market requires.

Construction and Development

The construction sector enters 2012 with a degree of renewed optimism linked to the expectation that the PNP’s housing commitments will translate into increased NHT scheme approvals and accelerated development activity. Developers who have been in dialogue with the NHT about prospective partnerships will be seeking early meetings with the new government to advance proposals that had been in abeyance during the election period.

Material costs remain a structural challenge. The exchange rate — hovering in the J$90–96 per US dollar range — continues to affect the Jamaican dollar cost of imported inputs. The Bank of Jamaica’s management of monetary conditions, with the policy rate in the 6–7 per cent range, is calibrated to balance inflation containment with support for economic activity. For the construction sector, access to credit at commercially viable rates remains a constraint on project financing, with commercial lending rates in the 11–14 per cent range adding materially to project costs.

Major Developments

The most immediate development pipeline consists of NHT and HAJ schemes in the Corporate Area and St. Catherine that were in advanced stages of construction before the election. These projects will continue to completion regardless of the political transition and represent the most significant new supply expected to enter the market in the first half of 2012. Early reports suggest that the new administration is minded to expedite completions and hand-overs as early demonstrations of its housing delivery commitment.

Infrastructure

Infrastructure delivery — roads, utilities, drainage — remains the critical enabling constraint on housing supply expansion. The new government’s public investment priorities, which will become clearer when its first budget is presented, will signal how aggressively it intends to address the infrastructure deficit in proposed development corridors. Road access in outer-ring development areas in St. Catherine, Manchester and the western parishes is essential for unlocking the land that would otherwise be available for housing schemes.

Investment Climate

The investment climate for Jamaican property enters 2012 with improved political clarity but ongoing macro-economic caution. Global financial markets begin the year still digesting the Eurozone’s unresolved sovereign debt crisis, which continues to generate volatility and risk-off sentiment that affects Jamaica’s tourism outlook and access to international capital. The Bank of Jamaica’s reserve management and monetary policy will continue to absorb these external pressures.

Domestically, investor interest in residential real estate as an inflation hedge and wealth-storage vehicle remains a consistent feature of the Jamaican market. Properties in established Kingston neighbourhoods and the north-coast tourism corridor continue to attract interest from upper-income domestic buyers and diaspora purchasers.

Diaspora and Remittances

The diaspora’s response to the election outcome will be an important variable in the housing market’s early 2012 trajectory. Jamaicans abroad who follow the island’s political developments closely will be assessing the PNP’s early policy signals on NHT access, property taxation, and foreign exchange policy before making or accelerating purchasing decisions. The January-February period is traditionally quieter for diaspora property transactions following the December holiday peak, but the post-election clarity may prompt some diaspora buyers to advance conversations with agents and developers that had been deferred.

Affordability

The affordability challenge that defined the 2011 housing debate does not resolve itself with a change of government. The structural factors — high land costs, expensive construction inputs, commercial mortgage rates that place ownership out of reach for most Jamaicans without NHT access — remain in place. What changes with the PNP’s victory is the political commitment and mandate to address these factors more aggressively through the NHT’s institutional capacity. Whether the new government’s approach will materially shift the affordability needle over its first 12 months in office will be the central housing story of 2012.

Regional Context

Jamaica’s political transition is being watched across the Caribbean with the interest that attends any change of government in one of the region’s larger economies. CARICOM partners are particularly attentive to Jamaica’s intended approach to its fiscal situation and to any signals about its posture in multilateral negotiations that affect the region more broadly. The housing sector, as a domestic policy matter, is less of a regional story than the macro-fiscal trajectory, but it is an important dimension of the new government’s social contract with Jamaicans.

Looking Ahead

The weeks ahead will be decisive in shaping the market’s 2012 narrative. The swearing-in of the new Prime Minister and Cabinet, expected imminently, will be followed by early public statements on the government’s priorities. NHT policy specifics, budget signals, and infrastructure commitments will all be closely watched by market participants. The February 2012 edition of this review will be positioned to report on the first concrete steps of the new PNP administration’s housing agenda — a moment that the market has been anticipating through all of 2011’s political turbulence.