Developers who sat on approved schemes for five years are now building. NHT loan limits have been increased to match construction cost inflation, commercial lending windows are the most accommodating they have been since the early 2000s, and the BPO sector is providing the anchor employment that makes first-time buyers’ mortgage applications credible. The affordable housing pipeline is moving.
Highlights
- NHT loan limits increased to track construction cost inflation; new ceiling J$5.5 million
- BPO sector at 32,000+ employees; first-time buyer mortgage qualification improving
- IMF EFF fourth review completed; Jamaica maintaining all performance criteria
- Residential prices in KMA rising modestly; 5–8% year-on-year in suburban corridors
- North coast resort market recovering; Montego Bay residential enquiries at 5-year high
- Commercial bank construction finance more accessible; developer confidence improving
The housing scheme that finally broke ground on a hillside in St Catherine in the second quarter of 2014 had first received planning approval in 2009. Its developer — a mid-sized Kingston company with a track record of delivering affordable residential schemes — had watched the economic landscape collapse around the approved plans, then waited through the JDX, the recovery, the NDX, the gap period, and the EFF before concluding that the conditions had, at last, aligned sufficiently to justify putting steel in the ground. The scheme was not unusual. Across Jamaica, construction sites that had been quiet for five years were resuming activity, and the dormant period between approval and groundbreaking was finally being repaid in a wave of new supply delivery that the market urgently needed.
The NHT had adjusted its loan limits during the quarter to reflect the inflation in construction costs that had accumulated over the preceding five years. The new ceiling — raised to J$5.5 million per beneficiary, or combinations of up to J$11 million for joint contributors — was sufficient to cover a meaningful portion of a townhouse unit in the J$12–18 million range that dominated new affordable supply. The Trust’s lending volume through the second quarter was running at its highest level since 2007, reflecting both the increased availability of qualified supply and the pent-up demand of contributors who had been waiting for schemes that matched their savings and eligibility.
The BPO sector’s contribution to the residential market was becoming structural rather than incidental. By mid-2014, the sector employed more than 32,000 workers, a large proportion of them in the 25–35 age cohort that represents the core of the first-time buyer demographic. These workers — earning formal sector wages, contributing to NHT, building the employment history that commercial banks required for mortgage qualification — were arriving in the mortgage market with the paperwork that previous generations in similar income brackets had lacked. The BPO operator’s pay stub, unlike the informal sector worker’s variable income, was the kind of documentation that fit cleanly into a bank’s credit assessment template.
Residential prices in the Kingston Metropolitan Area’s suburban corridors — the communities of St Catherine closest to the Highway 2000 interchange, the outer suburbs of Portmore, the developing areas of eastern St Andrew — were showing appreciation of five to eight percent year-on-year. The number was not high by the standards of a boom market, but it was positive, sustained, and supported by genuine demand rather than speculative leverage. Vendors who had held properties through the crisis years and had been unwilling to sell at the distressed prices of 2009–2011 were now finding that patience had been rewarded: the gap between their asking price and the offers they were receiving had compressed to the point where transactions were occurring at prices both sides could accept.
The north coast resort market was recovering on its own timeline. Montego Bay residential enquiries from North American buyers were at their highest level in five years, driven by a combination of improving wealth conditions in the primary feeder markets, a Jamaican dollar depreciation that made US dollar-priced properties look more affordable than they had before the crisis, and a property stock in some resort communities that had fallen to prices well below replacement cost. The transactions that were occurring in this segment were characterised by careful due diligence and realistic pricing: the buyers who returned to the north coast in 2014 had learned from the experience of 2007–2009, and they were not paying boom prices for resort real estate in an emerging market. But they were buying.
What This Means
The second quarter of 2014 demonstrates that the property market’s recovery is deepening beyond the initial transaction volume recovery into the supply-side activity — new construction, developer confidence, expanded financing — that marks a genuinely healthy market cycle. The transfer tax remains a friction, and the exchange rate’s continued drift adds a background cost to import-intensive construction. But neither is sufficient to suppress the momentum that has built through eighteen months of improving conditions. The market is in a positive cycle: growing employment supports mortgage qualification, rising demand supports developer confidence, rising construction supports housing supply, and expanding supply makes homeownership accessible to more households. The cycle is not yet at the velocity of the mid-2000s boom, but its foundations are more durable.
Follow Jamaica Homes on Youtube @jamaicahomes and Instagram @jamaica_homes and on Facebook @jamaicahomesnews Send us a message or email us at onlinefeedback@jamaica-homes.com or editor@jamaica-homes.com
Visit our YouTube Community ↗