Holness Wins and Project Housing Begins: Jamaica’s Property Market Under New Management — March 2016

Publication Date: 3 March 2016 | Coverage Period: 3 February–2 March 2016 | Category: Monthly Review

February in Brief

• Jamaica Labour Party wins the February 25 general election by the narrowest of margins — 32 seats to 31 — ending four years of PNP government under Portia Simpson Miller.
• Andrew Holness, 43, is sworn in as Prime Minister and immediately signals that housing delivery under “Project Housing” will be a first-term priority.
• Markets and property sector respond with cautious optimism; JLP’s business-friendly reputation and IMF programme continuity assurances underpin positive sentiment.
• Commercial mortgage rates average 9.62% in February; NHT continues processing applications at elevated levels following the J$5.5 million ceiling increase.
• Construction sector awaits new administration’s policy signals before committing to project expansions; existing schemes continue on schedule.
• Jamaican dollar stabilises near J$124 per US dollar; low oil prices persist, supporting household and business cost structures.

The Election Result and Its Immediate Meaning for Property

On February 25, 2016, Jamaica went to the polls and delivered one of the closest general election results in the country’s post-independence history. The Jamaica Labour Party, under the leadership of Andrew Holness, won 32 of the 63 parliamentary seats to the People’s National Party’s 31 — a majority of one seat that nonetheless conferred a clear constitutional mandate. After four years in opposition, the JLP returned to government, and Holness was sworn in as Prime Minister within days of the result.

For Jamaica’s property market, the verdict was broadly welcomed by the commercial property and developer community, which has historically viewed the JLP as the more market-oriented of the two major parties. The new administration’s emphatic commitment to private-sector partnership in housing delivery — a contrast with the PNP’s more state-centric approach through the NHT and HAJ — is expected to unlock project pipelines that stalled or moved slowly under the previous government. At the same time, experienced market participants note that the margin of victory was so narrow that the new government will need to move quickly and credibly to demonstrate delivery capability before any formal assessment of its housing record.

Project Housing: What We Know So Far

The centrepiece of the JLP’s housing platform — “Project Housing” — was one of the most debated policy proposals of the campaign, and its implementation will now be scrutinised closely by the real estate sector. As articulated during the campaign, Project Housing commits to providing 10,000 homes to first-time buyers, with an emphasis on mobilising private sector construction capacity under NHT-backed financing arrangements.

The mechanics of the programme are still being worked through by the new government’s transition teams and housing ministry officials. Key questions that the property sector is watching include: the price points at which the 10,000 units will be offered; the land bank that will be available for development; the extent to which NHT financing will be supplemented by commercial bank mortgages; and the timeline for first deliveries. Industry sources expect a formal policy statement and programme launch within the first 100 days of the new administration.

Independent housing analysts are broadly supportive of the programme’s ambitions while flagging the structural constraints that have limited previous housing initiatives: land availability, planning approval timelines, the skilled labour supply in the construction industry, and the ongoing mismatch between NHT loan ceilings and actual construction costs. A J$5.5 million NHT loan, while recently increased, remains below the all-in cost of a new unit in most urban areas when land, infrastructure and developer margin are included.

Housing Market Response

The immediate market response to the election result has been one of cautious optimism. Estate agents in Kingston and across the island report that buyer enquiries — which had been restrained during the pre-election period — have picked up in the days following the result, as prospective homeowners who had been waiting for the political landscape to clarify now resume their search activity. Developers with ready-to-launch projects are reassessing their timelines in light of the new government’s commitments.

Mortgage lenders report no immediate change in lending appetite but are watching the new administration’s fiscal and monetary policy signals. The JLP’s pre-election commitment to maintain Jamaica’s IMF Extended Fund Facility and fiscal surplus targets — a key reassurance to the financial sector — suggests that the macro environment underpinning mortgage market conditions will remain stable. Any deterioration in fiscal discipline that raised inflation or the exchange rate depreciation rate would directly undermine the affordability improvements of recent years.

NHT Under New Stewardship

The National Housing Trust — Jamaica’s largest mortgage institution, with roughly J$221 billion in outstanding loans and a 50% share of the national mortgage market — now falls under the oversight of a JLP government for the first time since 2011. A change in NHT leadership and strategic direction is widely expected. Industry sources anticipate that the new government will seek to use the NHT’s balance sheet more aggressively to underpin private sector housing delivery, potentially through land-banking, infrastructure financing and enhanced joint-venture programmes with private developers.

Whether the NHT’s contributor base — whose funds underpin its lending capacity — can sustain the accelerated delivery ambitions of Project Housing without compromising the Trust’s financial sustainability will be a key policy debate in the months ahead. NHT governance and the deployment of its reserves have historically been politically sensitive issues in Jamaica, and the new government will need to manage this tension carefully.

Construction Activity

Existing construction programmes continued without interruption through the election period. NHT joint-venture schemes in St. Catherine, St. Elizabeth and sections of Kingston are progressing on schedule. The HAJ’s serviced-lot and starter-home programmes, funded through prior appropriations, are continuing under the transition. Several private developers who had been awaiting the election outcome are now re-engaging with their project pipelines, with particular activity expected in the affordable-to-mid market segment in peri-urban St. Catherine and the north coast.

Monetary Policy and Mortgage Conditions

Commercial mortgage rates in Jamaica averaged approximately 9.62% in February 2016, with building societies at the lower end of the range. The Bank of Jamaica has maintained its accommodative stance, with the overnight deposit facility rate effectively near zero. As inflation continues to track below target — principally due to sustained low global oil prices — the conditions for further commercial rate compression are in place, though the pass-through from policy rates to mortgage lending rates in Jamaica has historically been slow and incomplete.

The NHT’s loan ceiling of J$5.5 million and its preferential rate structure remain unchanged, and NHT applications are running at the elevated levels seen since November. The new government is unlikely to make immediate changes to NHT rate or ceiling parameters; any modifications would require careful consultation and would more likely form part of a broader housing policy announcement later in the year.

Diaspora and International Buyers

Diaspora interest in Jamaica property has received a modest lift from the election result. The JLP’s business-friendly image and its leadership’s articulate engagement with the economic concerns of overseas Jamaicans have generated positive commentary in diaspora communities in the UK, USA and Canada. North American investors in particular, who are active in the resort parish market and in upper-end Kingston residential property, have historically been more receptive to the JLP’s policy environment.

In the United Kingdom, the EU referendum debate continues to dominate domestic politics. Prime Minister Cameron recently concluded a renegotiation of UK membership terms and is expected to set a referendum date soon. UK-based Jamaican buyers are weighing the potential implications for sterling and UK economic confidence, though the formal referendum is not yet scheduled and uncertainty has not yet translated into any measurable change in UK diaspora property investment activity in Jamaica.

Macroeconomic Backdrop

The new Holness government inherits an economy in better condition than it found the island in 2011. GDP growth of approximately 1.9% for FY2015/16 is projected, the fourth consecutive year of positive growth after years of stagnation and decline. The IMF EFF programme is in compliance, the primary fiscal surplus is on track and inflation is subdued. Oil prices, while showing some recovery from January’s sub-US$30 lows, remain sufficiently low to keep energy costs and import bills manageable. The exchange rate is stable near J$124 per US dollar.

Looking Ahead

The Holness government’s first 100 days will be closely watched by the property sector. Formal policy announcements on Project Housing, NHT governance reform and private sector housing partnerships are expected over the coming weeks. The market is positioned to respond positively to credible delivery commitments backed by fiscal realism. For buyers, the post-election period offers an historically favourable entry point: rates are declining, macro conditions are stable and the new government has made housing a signature priority. Jamaica’s property recovery, tentatively underway since 2014, now has an explicit political mandate to accelerate.