Rate Cuts, Rising Sales and a New Season of Optimism: Jamaica Homes Monthly Review — January 2016

Publication Date: 3 January 2016 | Coverage Period: 3 December 2015–2 January 2016 | Category: Monthly Review

December in Brief

• Paris Agreement on climate change concluded on 12 December at COP21, delivering a landmark accord; Caribbean SIDS secured the aspirational 1.5°C warming target in the final text.
• US Federal Reserve raised its benchmark rate by 25 basis points on 15 December — its first hike in nearly a decade — marking a pivotal shift in global monetary conditions.
• Commercial mortgage rates in Jamaica average approximately 9.5%, with building societies at the lower end; NHT’s new J$5.5 million ceiling takes full effect, stimulating new-home enquiries.
• December holiday period sees traditionally firm diaspora remittance inflows, supporting household purchasing activity and property deposits.
• New commercial bank mortgage lending up 21.6% quarter-on-quarter and 34.6% year-on-year in December, per Bank of Jamaica data.
• General election campaign heating up ahead of the constitutionally required poll; housing policy emerges as a key battleground issue between PNP and JLP.

Housing Market Conditions

Jamaica’s residential property market closes 2015 on a notably stronger footing than it opened it. The final quarter of the year saw a sharp acceleration in commercial bank mortgage lending — up more than 34% year-on-year in December, according to Bank of Jamaica statistics — a signal that pent-up demand, easing lending conditions and improving household confidence are translating into genuine transaction activity. The NHT’s J$5.5 million loan ceiling, operative since November, is already generating a higher volume of applications from first-time buyers in the J$6–8 million price bracket.

Price momentum has been uneven but broadly positive. St. Catherine remains the most dynamic parish for volume, driven by the concentration of NHT schemes and developer pipelines along the Highway 2000 corridor. Kingston and St. Andrew are recovering more gradually, with premium properties in Cherry Gardens, Norbrook and Stony Hill holding value, while the mid-range market in Half Way Tree and Constant Spring shows early signs of renewed activity. North-coast parishes, where diaspora and foreign buyers are the dominant demand source, continued to see enquiry volumes supported by steady US-dollar-denominated income streams.

Government Policy: Election Housing Promises Take Shape

With Jamaica’s general election widely expected in the first quarter of 2016, housing has become one of the most politically charged policy arenas. The incumbent People’s National Party (PNP) government has pointed to the NHT loan ceiling increase, accelerating construction starts and the continuing HAJ programmes as evidence of its commitment to housing access. The Jamaica Labour Party (JLP), meanwhile, has been sharpening its alternative housing platform, with leader Andrew Holness and his team highlighting delays in delivery and the persistent gap between NHT benefit levels and actual market costs.

Both parties are acutely aware that housing affordability resonates particularly strongly with younger voters, who face the dual challenge of a large existing housing deficit and construction costs that have risen faster than wages. The PNP government’s stewardship of the NHT — which now manages a portfolio of roughly J$221 billion in outstanding loans — will be a central point of debate as the campaign enters its most intensive phase in January and February.

Construction Activity

Construction output maintained solid momentum through December. NHT joint-venture developments in St. Catherine, Manchester and sections of St. James remained active, with contractors reporting that the combination of lower fuel costs and NHT’s enhanced financing capacity had improved the economics of new residential schemes. The Housing Agency of Jamaica’s serviced-lot programme continued to attract buyers in rural and peri-urban parishes, where land costs are lower and self-build financing through the NHT remains viable.

Private developer activity in the upper-end residential market — apartments and townhouses in Kingston’s northern suburbs targeting the professional and returning-resident market — remained cautious but not stalled. Several mixed-use schemes that had been on hold since 2013 are reportedly being revisited by their promoters as the macro outlook brightens.

Monetary Policy: Fed Hike, BOJ Holds Steady

The US Federal Reserve’s 25-basis-point rate increase on 15 December — the first tightening move in 9 years — was the defining global monetary event of December. The move, while widely anticipated, marks the formal end of the post-2008 era of near-zero US interest rates and has broad implications for Caribbean economies. For Jamaica specifically, a tightening Fed cycle raises the risk premium on Jamaican government debt held by international investors and could exert upward pressure on the exchange rate through reduced capital inflows.

The Bank of Jamaica, for its part, maintained its accommodative domestic stance. With inflation for 2015 expected to close significantly below the lower end of the 5.5–7.5% target band — a result of low oil prices and subdued demand-side pressures — the BOJ has the policy space to keep its deposit facility rate close to zero. Market participants expect the BOJ to remain on hold in early 2016, with any future rate decisions contingent on the external environment and the inflation trajectory.

Global Climate Agreement: What It Means for Jamaican Property

The conclusion of the Paris Agreement on 12 December, which secured the aspirational target of limiting warming to 1.5°C above pre-industrial levels, was welcomed by Caribbean governments as a historic commitment. For Jamaica’s property sector, the agreement’s significance lies not in its immediate operational effect — which will depend on years of national implementation — but in the signal it sends about the direction of global climate policy and the growing focus on coastal adaptation.

Jamaica’s National Environment and Planning Agency and the Planning Institute of Jamaica are expected to use the Paris framework to reinforce building standards for coastal developments, with particular attention to setback requirements, flood-resistant construction and infrastructure resilience. Property professionals are advised to monitor evolving regulatory guidance that may affect development permissions in low-lying and coastal zones.

Diaspora and Investment

December’s traditional diaspora homecoming — with Jamaicans returning from the UK, USA and Canada for the holiday season — generated notable property enquiry activity, particularly in resort parishes and in the Kingston area. Estate agents report that returning residents and diaspora visitors frequently use the Christmas period to conduct property viewings and to finalise purchase decisions that have been in discussion for several months.

US-based diaspora buyers have benefited from a strong dollar and a labour market that, as of late 2015, was running at its strongest in many years. UK-based Jamaicans are watching British political developments with some interest: Prime Minister David Cameron’s commitment to hold a referendum on EU membership before the end of 2017 is beginning to generate discussion in diaspora communities about the long-term implications for residency rights and cross-border financial flows.

Affordability

The average commercial mortgage rate of approximately 9.5% in December — down from the 9.7% recorded in 2014 — represents a modest but meaningful improvement in affordability for market-rate borrowers. For an NHT-eligible first-time buyer combining a J$5.5 million NHT loan at 2–3% interest with a commercial top-up mortgage, the blended cost of borrowing has fallen to levels not seen since before Jamaica’s fiscal crisis. This is encouraging households that had deferred purchase decisions to re-engage with the market.

Macroeconomic Context

Jamaica’s economy is estimated to have recorded its fourth consecutive quarter of positive real GDP growth in the December 2015 quarter — a streak not seen in many years. The IMF Extended Fund Facility remains in compliance, and the primary fiscal surplus is on track to meet its target. Brent crude oil, trading near US$37 per barrel at year-end, continues to compress Jamaica’s energy import bill and support the current account. The Jamaican dollar has stabilised at approximately J$122–123 per US dollar.

Looking Ahead

The new year opens with Jamaica’s property market in its best position since 2013. The combination of expanded NHT lending, declining commercial mortgage rates, improving household confidence and a stabilising macroeconomy creates conditions for continued recovery in transaction volumes and prices through 2016. The approaching general election — expected no later than March under constitutional requirements — introduces political uncertainty, but both major parties’ housing platforms suggest that investment in affordable housing supply will remain a priority regardless of the outcome. Buyers, developers and investors would do well to act before the pre-election period introduces any temporary market pause.

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