New Government, New Momentum: Jamaica’s Housing Sector Takes Stock Under Holness — April 2016

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

March in Brief

• Prime Minister Holness’s first full month in office sees the new Cabinet commissioned and housing ministry officials begin work on Project Housing programme design.
• NHT receives new board appointments as the JLP administration begins reshaping the Trust’s strategic orientation toward private sector partnership.
• Estate agents across Jamaica report post-election recovery in buyer enquiries; transaction volumes in Kingston and St. Catherine returning toward Q4 2015 levels.
• Bank of Jamaica maintains accommodative policy stance; commercial mortgage rates hold near 9.5%, with building societies competitive at 9.2–9.4%.
• Global oil prices stabilise in the US$35–40 range (Brent), continuing to support Jamaica’s energy cost structure and current account balance.
• Jamaica’s 2016/17 budget presented to parliament; primary surplus target set at 7% of GDP, with increased capital spending for housing and infrastructure.

Housing Market: Post-Election Recovery Takes Hold

March has confirmed the pattern that Jamaica’s property market professionals anticipated: the pre-election pause in buyer activity has been replaced by a post-election surge in enquiries and a return of transactional momentum. Estate agents across Kingston, St. Andrew, St. Catherine and the north coast report that viewings and offer activity have recovered to levels broadly consistent with the strong Q4 2015 trend, as prospective buyers who deferred decisions through January and February return to the market.

The composition of demand reflects the dual dynamics of Jamaica’s property market. In the affordable segment — NHT-eligible properties priced at J$6–J$9 million — first-time buyers and young families are driving activity, encouraged by the J$5.5 million loan ceiling and the new government’s explicit housing delivery commitment. In the upper-middle and premium segments — properties above J$20 million in Kingston’s northern suburbs and in north-coast resort communities — returning residents, diaspora buyers and professional investors are the primary demand source, and their activity has recovered quickly following the election result.

Project Housing: Programme Architecture Emerging

The Holness administration has begun the detailed work of translating its Project Housing election commitment into an operational programme. Ministry of Housing officials and NHT management are reported to be engaged in extensive consultation with private developers, land owners and financial institutions to define the parameters of the programme, including target geographies, unit types, price brackets and financing structures.

Early indications suggest that the programme will focus on the J$7–J$12 million price range, targeting first-time buyers who are NHT contributors but who currently cannot access housing at prices achievable with the NHT loan alone. The private sector partnership model under discussion would involve developers constructing units to specified standards on land made available through the government’s land bank or through NHT-acquired parcels, with NHT financing the buyer end and commercial banks potentially providing top-up mortgages.

The 100-day programme launch target set by government officials implies a formal announcement in early June 2016. The property sector is watching closely, and developers with shovel-ready projects in St. Catherine, Portmore, Clarendon and St. Elizabeth are positioning to be first movers once the programme parameters are confirmed.

NHT: New Board, New Direction

The new administration has moved quickly to reshape the National Housing Trust’s governance structure. New board appointments announced in March reflect the JLP’s emphasis on private sector expertise and commercial acumen at the Trust. Industry observers note that the incoming board composition signals a shift in NHT’s operational culture toward a more developer-partnership-oriented model, contrasting with the previous administration’s preference for direct delivery through the Trust’s own construction capacity.

The NHT’s existing loan book — J$221 billion as of mid-2015 and growing — and its continuing role as Jamaica’s largest mortgage provider mean that its strategic direction has material consequences for the housing market as a whole. Any expansion of the Trust’s joint-venture activity will affect the supply pipeline; any change in its lending criteria or rate structure will affect buyer eligibility across the market.

Construction Activity

Construction sector activity in March reflected the transitional phase of the new government’s first weeks. Existing NHT and HAJ programmes continued on schedule, with completions in several St. Catherine schemes near enough to allow handover in Q2 2016. Private developer activity increased as project decisions deferred through the election period were revived. Contractor associations report growing enquiries for residential construction in the J$8–12 million range, consistent with anticipated Project Housing demand.

Building material costs have remained relatively stable in March, with low oil prices continuing to compress fuel, transport and energy inputs. Steel and cement — the largest cost items in Jamaican residential construction — have been stable in international markets, providing contractors with reasonable cost visibility for project pricing. The Jamaican dollar’s continued mild depreciation against the US dollar remains a structural headwind for any imported construction material, however, and contractors factor ongoing depreciation into multi-year project cost estimates.

Mortgage Market and Affordability

Commercial bank mortgage rates remain approximately 9.5% for standard residential lending, with building societies offering rates in the 9.2–9.4% range. NHT rates — from 0% at the lowest income tier to 5% at the upper threshold — continue to provide a decisive affordability advantage for eligible contributors. The blended cost of a first-home financing package combining NHT and commercial mortgage funds has improved meaningfully from the 2013–2014 peak.

Affordability remains most acute for workers in the informal economy — a substantial share of Jamaica’s labour force — who cannot access NHT benefits. This population is largely excluded from formal homeownership and represents the deepest layer of Jamaica’s housing deficit. Addressing this segment requires interventions beyond NHT and commercial mortgage reform: land tenure regularisation, self-build support programmes and community upgrading initiatives of the type that government housing agencies have pursued with mixed success over many years.

Infrastructure and Regional Development

The Holness administration has confirmed its intention to accelerate infrastructure investment as a growth stimulus, with the budget for the 2016/17 fiscal year incorporating increased capital expenditure. Road network improvements in St. Catherine, Clarendon and the north coast are expected to be among the early infrastructure priorities, both because they generate short-term employment and because improved connectivity directly enhances the value of peri-urban and rural housing development opportunities.

The south-coast coastal highway project and ongoing improvement of the Highway 2000 interchange system continue to make St. Catherine and Portmore more attractive for housing development. Land prices along the improved corridor have been rising since 2014, and developers are watching zoning decisions on former industrial and agricultural parcels for potential residential conversion opportunities.

Diaspora Buyers

The Jamaican diaspora’s response to the election has been broadly positive. North American-based buyers — the largest and most financially significant component of Jamaica’s overseas property investment base — have re-engaged with the market following the political clarity provided by the February 25 result. Several north-coast developers report an uptick in enquiries from the United States in March, reflecting both the new government’s market-friendly reputation and the continued strength of the US economy and dollar.

UK diaspora engagement has been somewhat more muted, reflecting the ongoing domestic uncertainty created by the approaching EU referendum. Prime Minister Cameron has confirmed that the referendum will be held on 23 June 2016 — a date now fixed in the UK political calendar. UK-based Jamaican buyers face uncertainty about sterling’s trajectory and the broader UK economic outlook depending on the referendum outcome, and some are choosing to defer large investment decisions until after June 23.

Macroeconomic Context

The Jamaican economy continues on its gradually improving trajectory. The IMF EFF programme is being maintained by the new administration, which has signalled no intention to deviate from the fiscal framework agreed by its predecessor. The primary surplus target and debt management programme remain intact, providing continuity of the economic policy environment that underpinned mortgage market improvement over the previous two years. Global oil prices, recovering from January’s trough but still in the US$35–40 range, continue to benefit Jamaica’s energy-intensive economy.

Looking Ahead

The next 60–90 days will be critical for Jamaica’s housing market. The expected launch of the formal Project Housing programme in the Holness administration’s first 100 days will either validate the market’s post-election optimism or temper it with the reality of implementation constraints. Mortgage rates are expected to continue their gradual downward drift through Q2 2016 as the BOJ’s accommodative stance is maintained. For buyers, conditions remain favourable: a motivated new government, improving affordability and a recovering market all point toward 2016 being a better year for Jamaica’s property sector than the three that preceded it.