Jamaica Real Estate Roundup — Q4 2015: A Year Ends, an Election Looms, and the Market Holds Its Breath

• Election called for February 2016; campaign uncertainty begins immediately.
• Christmas diaspora season delivers solid year-end property market activity.
• BOJ easing continues; rate improvement accumulating through year.
• IMF EFF programme on track; fiscal consolidation delivering results.
• Strata apartment market closes 2015 with strongest pipeline to date.

The fourth quarter of 2015 closed the year with the Jamaica property market in the most familiar of positions: better placed than it had been at the start of the year, but still operating well below the levels of activity and the pace of price appreciation that the underlying demand conditions suggested the market could generate once the constraints of the IMF programme years and the elevated interest rate environment had fully worked themselves out. The BOJ’s easing cycle had been delivering its cumulative effect on mortgage affordability with the measured consistency that gradual monetary policy changes produce, and the residential market’s Q4 activity reflected the combination of the improving fundamentals and the powerful seasonal driver of the diaspora Christmas return — the annual influx of Jamaica’s North American and British diaspora whose December visits represent one of the property market’s most concentrated and commercially significant demand windows.

The quarter’s defining political development came in its closing weeks, when Prime Minister Portia Simpson Miller announced the dissolution of Parliament and the calling of a general election for February 25, 2016. The announcement, which had been anticipated by the market as the 2016 constitutional deadline for an election approached, immediately introduced the uncertainty premium that election campaigns impose on property market participant behaviour. The buyers who were on the verge of committing found a new reason to wait. The developers who were calibrating their project timelines against the policy environment found a new variable to factor in. The sellers who had been hoping for a year-end surge found that the campaign announcement had, in the final weeks of December, moderated the decisiveness of the buyer pool that the diaspora season had delivered.

The IMF Programme: Another Year of Delivery

The year 2015 had been another year of IMF programme compliance for Jamaica. The Extended Fund Facility’s requirements — the primary surplus targets, the structural reform benchmarks, the institutional governance improvements — had been met with the consistency that had characterised the programme since its 2013 commencement, and the Fund’s quarterly review assessments had continued to deliver the positive grades that validated Jamaica’s programme performance to the international investment community. The fiscal consolidation was working: the public debt’s trajectory had bent downward, the primary surplus was being maintained, and the institutional improvements in revenue administration and public financial management that the programme had required were beginning to deliver the efficiency gains the reform agenda had promised.

For the property market, the IMF programme’s 2015 track record mattered primarily through the macro environment it was sustaining. The programme’s disciplines had compressed the consumer spending and public investment that a more expansionary macro framework would have generated, and this compression was still the most significant constraint on the property market’s demand side. But the programme was also delivering the macro stability — the controlled inflation, the manageable exchange rate, the improving sovereign creditworthiness — that the property market’s medium-term recovery depended upon. The constraint and the enabler were both products of the same programme, and the market was living with both simultaneously.

The Christmas Diaspora Season

December 2015’s diaspora visitor season was, in its property market dimensions, an active one. The returning Jamaicans of the North American and British diaspora — who arrive in Jamaica through December with the accumulated savings of the year, the investment intentions deferred through the working months, and the emotional reconnection to the island that the Christmas visit produces — generated residential property interest that the agents and developers who serve this segment confirmed was above the December 2014 level. The exchange rate dynamics continued to work in the diaspora buyer’s favour: the Jamaican dollar’s gradual depreciation against the US dollar and British pound had been progressively increasing the purchasing power of the offshore Jamaican’s savings when translated into local property market terms.

The election announcement’s impact on the diaspora season’s final week was visible in the elevated hesitation of buyers who had been approaching decision point but found the campaign’s opening a sufficient reason to defer. The diaspora buyer’s typical decision timeline — the compressed visit-period window in which inspection, negotiation and commitment need to happen before the return flight — is sensitive to anything that introduces uncertainty into the medium-term outlook, and an impending election with a genuinely uncertain outcome was precisely the kind of uncertainty that a buyer with the option of waiting another year would invoke to justify the deferral.

The Strata Pipeline: Year-End Inventory

The strata apartment sector’s year-end 2015 position was the most developed it had been in the segment’s short Jamaican history. The projects that had been in various stages of development through the year — from planning and permitting through pre-sales to construction and approaching completion — together represented a pipeline whose volume and diversity were qualitatively different from what the segment had offered at the start of 2014. The early-mover projects’ track record was now sufficient to provide genuine comfort to buyers who had been observing at a distance, and the expanding choice of product across locations, price points and unit configurations was making the strata format accessible to a wider buyer population than the earliest launches had been able to serve.

The strata market’s Q4 2015 performance was resilient to the election announcement in the same way it had been resilient to the preceding years’ various headwinds: the segment’s buyer population, characteristically investor-oriented and long-horizon in its decision-making, was less deterred by the near-term political uncertainty than the primary residence buyer whose commitment was more emotionally and financially total. The pre-sales registrations through October and November were healthy, and December’s modest softening in the final weeks was consistent with the seasonal patterns that holiday period compression produces rather than with any systematic reassessment of the segment’s investment merit.

Residential Market: Year-End with an Asterisk

The broader residential market’s Q4 2015 performance was a tale of two months: October and November’s steady and modestly improving activity, consistent with the trajectory the year had been building, and December’s more complicated dynamic as the diaspora season’s demand met the election announcement’s uncertainty in the same window. The net result was a Q4 that was above the Q4 2014 comparable but below what the November momentum had suggested was possible before the election announcement shifted the psychological calculus of the market’s most decision-ready buyers.

Year-End Assessment: 2015 in Context

The year 2015 closes with Jamaica’s property market in a position that is better than 2014’s by the measures that matter — transaction volumes, price trends, development pipeline, financing conditions — without having broken through to the clearly recovering market that the improving fundamentals have been pointing toward. The election’s announcement in the quarter’s final days adds a new variable to the 2016 outlook that the market must now price. The base case remains a positive one: programme continuity under whichever government emerges from the February vote, continued BOJ easing, a tourism sector building toward stronger performance, and a strata pipeline that will deliver the new product that the residential market’s demand side is increasingly ready to absorb. But the election period will be, as it always is, a pause before the next chapter of the market’s improving story begins to be written.

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