Project Housing Launches and the Market Builds Momentum: Jamaica Homes Monthly Review — May 2016

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

April in Brief

• Holness administration formally announces Project Housing framework within its first 100 days, with initial targets for 10,000 homes across targeted parishes in St. Catherine, Clarendon and St. Elizabeth.
• NHT and Housing Agency of Jamaica (HAJ) align their programmes with the new government’s private-sector-led delivery model; developer partnership applications invited.
• Kingston residential property prices show modest year-on-year gains in Q1 2016; St. Catherine market volumes up sharply quarter-on-quarter.
• Commercial mortgage rates edge lower; building society average approaches 9.2%; Bank of Jamaica maintains accommodative policy posture.
• EU referendum campaign in the UK heats up ahead of the 23 June vote; UK diaspora Jamaican buyers increasingly watchful of sterling and UK economy.
• Jamaica’s tourism sector records strong Q1 2016 visitor arrivals, supporting north-coast property demand and employment in resort communities.

Housing Market: Spring Momentum

April 2016 has confirmed that Jamaica’s residential property market is in its most positive phase since 2013. The confluence of favourable monetary conditions, the new government’s explicit housing delivery commitment and a recovering consumer economy has generated the most sustained period of buyer optimism in several years. Transaction volumes for Q1 2016, while not yet at the peaks seen before 2014, have shown meaningful improvement year-on-year, and the forward pipeline of sales enquiries suggests continued momentum through Q2.

The market’s strongest performance is in the affordable and mid segments, where NHT loan availability is the critical enabling factor. Properties priced between J$6 million and J$12 million — the range now addressable through a combination of NHT loan and commercial top-up — are seeing the most active buyer engagement. In the premium segment above J$30 million, demand is more selective, driven by a smaller pool of high-net-worth buyers and returning residents, but this segment too is showing positive signals compared to the stagnation of 2014–2015.

Project Housing: The Framework Takes Shape

The Holness administration has delivered on its 100-day commitment, formally announcing the Project Housing framework in April. The programme, as outlined, targets the delivery of 10,000 homes to qualifying first-time buyers, principally in peri-urban and urban communities across Jamaica’s south and central parishes. The delivery model relies primarily on private sector developers constructing units on approved sites to government-specified standards, with NHT providing end-buyer financing and the government contributing land or infrastructure where needed to make economics viable.

The programme’s initial focus parishes — St. Catherine, Clarendon, St. Elizabeth and sections of St. Ann — reflect the availability of developable land at costs that allow viable unit pricing within the NHT loan range. Urban densification projects in Kingston are also included in a later phase, with mixed-use residential schemes in the capital targeted at the slightly higher price bracket accessible to dual-income NHT contributor households.

Developer response has been encouraging. Contractor and developer associations have signalled strong interest in participating, and the NHT’s new board is reported to be processing expressions of interest from qualified developers at a faster pace than previous programmes. The critical path items that will determine Project Housing’s success are now the pace of planning approvals and land-use change permissions, the availability of construction finance for developers, and the capacity of Jamaica’s construction labour supply to scale quickly enough to meet an accelerated pipeline.

Construction Sector

Construction output in April was brisk, with multiple housing projects in advanced stages across St. Catherine, Kingston and the north coast. NHT completions in schemes begun under the previous administration are proceeding to handover, and new Project Housing sites are entering the mobilisation phase. Private developer activity in the mid-to-upper market has also picked up, particularly in Kingston 8, Barbican and Norbrook, where apartment and townhouse developments targeting the professional and returning-resident market are progressing.

The construction sector faces a growing skills bottleneck as demand accelerates. Trained masons, carpenters and concrete workers are in high demand, and contractors report difficulty sourcing sufficient skilled tradespeople for expanded project pipelines. This supply constraint, if not addressed through accelerated vocational training and potentially regional labour mobility, could slow Project Housing’s delivery timeline regardless of developer capacity and financing availability.

Mortgage Market and Affordability

Commercial bank mortgage rates have continued their gradual downward trend, with building society rates reaching approximately 9.2% in April — the lowest levels in several years. The Bank of Jamaica’s sustained accommodative policy has contributed to this easing, as has the broader improvement in bank funding costs associated with Jamaica’s improved fiscal position and declining country risk premium. For the first time in many years, the spread between NHT rates and commercial bank rates is narrowing, which is gradually reducing the financial penalty faced by NHT-ineligible buyers.

For a first-time buyer eligible for the NHT’s J$5.5 million loan at a blended rate of approximately 2.5%, combined with a J$2 million commercial top-up mortgage at 9.2%, the combined monthly payment on a J$7.5 million property is now materially lower than it was two years ago. This improvement in real affordability — driven by falling rates rather than falling prices — is the primary driver of the market’s recovery momentum.

UK Diaspora: Brexit Uncertainty Mounts

The United Kingdom’s approaching EU membership referendum — now scheduled for 23 June 2016 — is generating growing anxiety among UK-based Jamaican property investors. The campaign has intensified through April, with both the “Remain” and “Leave” campaigns making increasingly dramatic economic claims. Polling shows the outcome remains genuinely uncertain, with no clear lead for either side.

For Jamaica’s property market, the principal channel of Brexit risk runs through sterling. A vote to leave the EU is widely expected by financial markets and economists to produce a significant depreciation in the pound, reducing the Jamaican dollar — and US dollar — purchasing power of UK-based buyers. Jamaica’s north coast and Kingston premium markets, where UK diaspora buyers are most active, would be the most directly affected. Several UK-based buyers who had been close to completing property transactions in Jamaica have chosen to await the referendum outcome before proceeding.

Agents active in the UK diaspora market are advising clients that the fundamentals of Jamaican property investment — improving macro conditions, a supportive new government, declining mortgage rates and an ongoing housing deficit — remain compelling regardless of the referendum outcome. Nevertheless, the near-term uncertainty is real, and the UK diaspora component of Jamaica’s external property demand is likely to remain cautious until after 23 June.

North American and Regional Investment

By contrast, North American diaspora and investor interest in Jamaica property has continued to strengthen through April. The US economy is performing well, the dollar remains strong and Jamaica’s improved macro fundamentals — combined with the new government’s business-friendly signals — are generating positive coverage in North American Jamaican community media. Tourism’s strong Q1 2016 performance is also providing confidence in the north-coast resort property market, where villa rentals and short-term letting provide important income streams for non-resident property owners.

Major Developments and Infrastructure

Several major private developments advanced through planning and construction phases in April. In Kingston, mixed-use residential and commercial schemes in the New Kingston corridor and in the Barbican–Havendale area are attracting professional buyer interest. On the north coast, hotel-linked residential developments in Montego Bay and Ocho Rios are drawing enquiries from international buyers and returned residents seeking lifestyle properties with rental income potential.

Infrastructure progress on the Southern Coastal Highway Improvement and the Highway 2000 network continues to widen the economic and residential geography of the Greater Kingston area, opening land corridors in Clarendon and central Jamaica for lower-cost housing development that remains within feasible commuting distance of Kingston employment centres.

Macroeconomic Context

Jamaica’s broader economic performance in April 2016 continued to support the property market’s recovery. The IMF EFF remains in compliance; inflation is subdued; oil prices — at approximately US$40–45 per barrel (Brent) — remain historically low for Jamaica’s energy import bill. The exchange rate has drifted mildly to approximately J$124–125 per US dollar, consistent with the gradual long-run depreciation trend but not at a pace that materially disrupts construction cost structures or household financial planning.

Looking Ahead

The coming weeks will see continued Project Housing site mobilisation, the processing of developer partnership applications by the NHT, and market digestion of the government’s first substantive budget under the JLP’s economic framework. The UK’s EU referendum on 23 June is the principal external uncertainty for the property market, and its outcome — still genuinely unclear at the time of writing — will have direct bearing on UK diaspora buyer confidence and sterling purchasing power. Domestically, the trajectory is positive: rates declining, policy supportive, market momentum building. Jamaica’s housing recovery has become self-reinforcing, and the second half of 2016 is positioned to be the strongest period for the island’s property sector in several years.