Opening Week in London: Jamaica’s Athletes and the Diaspora Moment – August 2012

Publication Date: August 3, 2012 | Coverage Period: July 3-August 2, 2012 | Category: Monthly Review

Month in Brief

• The London 2012 Olympic Games opened on July 27, igniting global Jamaican pride in the first week of competition.
• Jamaica’s housing deficit remains above 100,000 units; the PNP government signals further NHT contribution threshold reviews.
• Bank of Jamaica holds its benchmark rate near 6-7%; commercial residential mortgage rates continue at 11-14%.
• Construction activity in the Corporate Area and St. James recorded modest upticks, driven partly by diaspora remittance flows.
• Prime Minister Portia Simpson Miller reaffirms commitment to affordable housing targets set at the start of the PNP’s January 2012 term.
• Diaspora remittances averaged approximately US$170 million per month in the first half of 2012, sustaining demand in Portmore and Spanish Town corridors.

Housing Market

The residential property market enters August 2012 in a state of cautious equilibrium. Demand for homes priced below J$8 million remains robust, supported by National Housing Trust financing and pressure from first-time buyers locked out of the market for years. At the upper end — properties above J$25 million in St. Andrew’s upland communities of Cherry Gardens, Barbican and Beverly Hills — transaction volumes have slowed as buyers with liquid capital adopt a wait-and-see posture ahead of broader economic signals.

Listings data from Kingston agents indicate that the total active inventory in the Corporate Area edged up approximately 4% month-on-month in July, with sellers in the mid-market bracket (J$8 million to J$18 million) the most active segment. Average days-on-market in this bracket stand at roughly 90 days — unchanged from the previous quarter — suggesting that while buyers are present, financing frictions continue to extend negotiation cycles.

Outside Kingston, Montego Bay and its surrounding parishes (St. James, Trelawny, Hanover) are drawing increasing attention from both local investors and returning diaspora. Land prices along the Ironshore and Rose Hall corridors have appreciated roughly 8-10% year-on-year in nominal terms, a figure that barely keeps pace with domestic inflation but still represents a preferred store of value for many Jamaicans wary of keeping savings in depreciating local currency.

Government Policy

The Simpson Miller administration, now seven months into its term, has accelerated consultation on affordable housing delivery mechanisms. The Housing Agency of Jamaica (HAJ) is expected to announce new scheme targets before the end of the calendar year, with particular emphasis on units priced within NHT eligibility ceilings. Ministry sources indicate that land acquisition in St. Catherine and Clarendon remains a priority, given lower per-hectare costs compared with the Corporate Area.

NHT contribution rates remain a subject of ongoing debate. The Trust’s concessionary mortgage rates — ranging from 0% for the lowest income tier to approximately 5% for higher contributors — continue to represent the most accessible financing available to formal-sector workers. However, stakeholders in the construction industry have pressed for expansion of eligibility to include a larger share of the self-employed and informal-sector workforce, which accounts for an estimated 45% of Jamaica’s labour market.

Construction Sector

Building permits issued in the second quarter of 2012 showed a modest recovery from the subdued pace of early in the year. The Kingston and St. Andrew Corporation (KSAC) processed approximately 340 applications in Q2, up from around 290 in Q1, though both figures remain well below the pre-2008 peak. Commercial and mixed-use approvals have increased proportionally, reflecting investor preference for income-generating assets over pure residential speculation.

Materials costs remain elevated. Steel reinforcing bar, imported principally from North America and China, has seen a partial price reduction following softer global commodity markets in mid-2012, offering marginal relief to contractors. Portland cement, however, continues to reflect high energy input costs, and small contractors report difficulty accessing working capital from commercial banks at rates that allow viable margins on affordable-housing projects.

Investment Outlook

The opening of the London Olympics on July 27 has, even in its first week, generated something measurable in Jamaica’s investment environment: a surge of national visibility. Global broadcasters are covering Jamaica’s athletes — particularly the sprinting programme — with an intensity that positions the island as a brand in the international consciousness. Property developers and tourism operators are already noting an uptick in enquiries from overseas Jamaicans and international investors who associate the island with excellence and aspiration.

This effect should not be overstated. Foreign direct investment in Jamaican real estate remains constrained by the same structural factors that have always applied: foreign exchange controls, the complexity of title transfer under the Registration of Titles Act, and lingering perceptions of crime risk in certain parishes. Nonetheless, the Olympic platform offers Jamaica a marketing moment that money cannot easily buy, and savvy developers in Montego Bay and Negril are already adjusting their international outreach accordingly.

Anticipation runs particularly high for the athletics track programme, where Jamaica’s sprint cohort — led by Usain Bolt, Yohan Blake, and the deep women’s 100m squad — is expected to contend for multiple medals in events scheduled in the coming days. The 100m men’s final is set for August 5. Whatever the outcome, the global audience tuning in is a captive one for the Jamaica brand.

Diaspora Flows

Remittance inflows remain the single most important source of external financing for Jamaican households outside the formal tourism and bauxite sectors. Western Union, MoneyGram, and bank wire data compiled by the Bank of Jamaica show total remittance receipts for the January-June 2012 period trending ahead of the same period in 2011, supported by a stable US labour market and continued community fundraising within the diaspora.

A notable proportion of these flows is directed toward real estate: purchasing land, funding construction of family homes, or covering mortgage payments on NHT loans held by relatives. Agents specialising in diaspora clientele — particularly those with offices in Toronto, London, and New York — report that enquiries from UK-based Jamaicans have increased ahead of the Olympics, with some buyers using the occasion of travel to London as a prompt to also review their Jamaican property interests.

Affordability

For the median Jamaican household earning J$400,000-600,000 per annum, homeownership through the commercial banking system remains effectively out of reach. A J$6 million home financed at 13% over 20 years demands monthly payments of approximately J$70,000 — well beyond the 30% income threshold that responsible lending guidelines prescribe for a household at the median income level.

The NHT bridging role is therefore critical. Subscribers who have maintained contributions for five or more years and whose incomes fall below the Trust’s upper eligibility limit can access loans at 3-5%, reducing the monthly obligation on a J$6 million property to approximately J$40,000 — still stretching for many, but within reach for dual-income households. The Trust’s continued financial health, and the government’s resistance to raiding its reserves for general budget purposes, is accordingly one of the most important housing policy commitments the administration can make.

Looking Ahead

The next four weeks will be defined, in the popular imagination, by what happens on the track at the Olympic Stadium in Stratford. For Jamaica’s property market, however, the more immediate catalysts are fiscal: the Ministry of Finance’s mid-year budget review expected in September, and ongoing negotiations with the International Monetary Fund over the shape of a successor programme to the arrangements that have governed Jamaica’s macro-fiscal framework since 2010.

Should those negotiations result in a credible fiscal compact, interest rate expectations may begin to ease — a development that would meaningfully improve mortgage affordability and potentially unlock a tranche of latent demand that is currently sitting on the sidelines. For now, the market watches, waits, and takes quiet pride in what its athletes are achieving on the world stage. The next edition of this review will carry the full results of the athletics programme and their implications for Jamaica’s international property brand.

Jamaica Homes Monthly Review is published on the first business day of each month. Data reflect market conditions as of the coverage period close date.

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