Supply Catches Up: Jamaica’s Pipeline Delivers as First-Time Buyers Enter the Market in Force

Housing schemes planned before the global crisis and held in suspension through six years of economic difficulty are finally delivering keys to buyers. The first-time buyer cohort — BPO workers, civil servants, young professionals — is arriving in the mortgage market with the qualifications that tight credit conditions demand, and finding supply that, at last, matches their needs.

Highlights

• Residential completions in St Catherine and Portmore at post-crisis record
• NHT approvals tracking 15% above 2013 pace; first-time buyers dominant
• Commercial mortgage rates holding 7–8%; variable-rate products competing below 7%
• NEPA processing times improving as planning system adapts to higher volumes
• GDP tracking +1.0% for 2014; second consecutive year of positive growth
• Exchange rate approaches J$114/US$ by quarter end; depreciation pace moderating

In the St Catherine communities where Jamaica’s affordable housing pipeline had been most active over the preceding decade, the third quarter of 2014 brought a particular quality of busyness. Schemes that had been delayed, suspended, or crawling through construction for years were finishing simultaneously, producing a cluster of completions that, while not unprecedented in scale, felt significant in contrast to the near-total drought of new supply delivery through 2009–2012. Buyers who had been on NHT waiting lists, who had been paying deposits on units not yet begun, who had been qualifying and re-qualifying as their financial circumstances evolved, were finally receiving completion notices and preparing to move.

The National Housing Trust’s approval volumes were running approximately fifteen percent ahead of the comparable 2013 pace, a sustained acceleration that reflected both the expansion of eligible supply and the growing pool of contributors who had matured to the point of qualifying for their first loan. The Trust’s demographic pipeline was deep: the decade of formal employment growth driven by the BPO sector, civil service expansion, and the tourism recovery had created a cohort of contributors in their late twenties and early thirties who had been building entitlement for five to eight years and who were now ready to apply. The combination of entitlement maturity, adequate savings, and a supply pipeline that was finally delivering in the right size and price range was producing the Trust’s most productive approval quarter since before the global crisis.

Commercial banks continued to refine their mortgage offerings in response to a competitive environment that was, for the first time in years, actually competitive. With rates holding in the 7–8 percent fixed range and some institutions offering variable-rate entry points below 7 percent, the difference between lenders had shifted from the headline rate to the terms and conditions attached to it: processing fees, prepayment penalties, loan-to-value flexibility, and the responsiveness of the mortgage origination team. Banks that had restructured their retail operations during the crisis years were now reaping the benefit of having retained experienced mortgage officers, and their processing times were becoming a meaningful point of differentiation.

The planning system was adapting, more slowly than industry participants would have preferred, to the increased volume of applications flowing through NEPA. The Environmental and Land Use Division’s processing times had improved from the extended durations of 2013, reflecting both staffing adjustments and procedural improvements that the authority had been implementing incrementally. The improvement was welcome but not yet sufficient: development applications for residential schemes in the outer parishes were still experiencing delays that added financing costs and risk to projects whose viability margins were often thin. The real estate sector’s continued advocacy for further planning reforms was a regular feature of industry communications through the quarter.

GDP growth for 2014 was tracking toward approximately one percent for the full year, a modest but genuine improvement on 2013’s half-point performance. The trajectory was consistent with the EFF’s medium-term projections, which had forecast a slow but steady acceleration in growth as the fiscal consolidation created the space for private sector investment to recover. The tourism sector was performing well, the BPO sector was adding employees and operators, and the construction sector’s revival was beginning to show in the GDP accounts. The property market’s contribution to construction GDP — through residential development, commercial fit-out, and the infrastructure spending associated with new schemes — was becoming a meaningful positive input to the national accounts.

What This Means

Jamaica’s property market is in the healthiest state it has occupied since 2006. Supply is delivering, demand is qualified and organised, financing is accessible, and the macroeconomic backdrop is supportive. The question for the remainder of 2014 and into 2015 is whether the positive momentum can be sustained through the EFF programme’s remaining review cycles and into the post-programme period without the kind of policy slip that has historically interrupted Jamaica’s growth recoveries. The structural reforms embedded in the EFF — tax administration, pension reform, public sector rationalisation — are ongoing and will create political pressures as they approach their most difficult implementation phases. A property market that has been rebuilt on the foundation of macroeconomic stability is both more resilient and more dependent on continued macroeconomic stability than the boom-era market was. The foundation matters.

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