Brexit, a New Government and a Nation Daring to Hope: Jamaica’s Property Market in a Week That Changed Everything

Jamaica Homes Housing Affordability & Cost of Living Review — July 2016

• Britain’s vote to leave the European Union on June 23 sent shockwaves through global financial markets, triggering sterling’s steepest one-day fall in decades
• Jamaica’s diaspora in the United Kingdom — numbering over 150,000 — faces new uncertainty about their economic future, with direct implications for remittance flows and Jamaica property investment
• The JLP government, barely four months old, inherits both the IMF programme and a fresh external shock that it did not anticipate when it took office in February
• Bank of Jamaica signals stability as global markets turbulence passes; Jamaica’s direct exposure to Brexit is limited but the diaspora channel is significant
• Homebuyers with income in sterling have seen their purchasing power in Jamaican dollars compress sharply; those with US dollar income are relatively unaffected
• The IMF programme’s credibility anchor continues to provide Jamaica’s macroeconomic framework with more resilience than raw economic fundamentals alone would justify

Two weeks ago, the United Kingdom voted to leave the European Union, and the world has been processing the consequences ever since. Sterling fell by more than ten percent against the US dollar in the hours after the result was declared — the currency’s worst single-day move in recorded history. Global equity markets sold off sharply before recovering. Bond markets gyrated. The pound has since stabilised at a level considerably below where it traded before June 23, and the deep uncertainty about what Brexit will actually mean for the British economy — for growth, for trade, for financial services, for the job market — has settled into the financial system as a persistent overhang rather than an acute crisis.

For Jamaica’s housing market, the Brexit vote is consequential in ways that are both immediate and structural. Jamaica is a small, open economy with deep ties to the United Kingdom through history, migration and remittances. The Jamaican-British diaspora community is among the largest in the Caribbean region and is one of the most consistent sources of foreign exchange inflows, housing investment and family support that the island receives. Brexit does not sever those ties, but it introduces uncertainty into the economic context in which they operate — uncertainty about British incomes, about the pound’s value, about the employment security of Jamaicans working in UK-based industries. That uncertainty will take years to resolve and will shape the behaviour of Jamaica’s UK diaspora in ways that the housing market needs to monitor carefully.

The Sterling Effect: Real and Immediate

The most immediate and quantifiable impact of Brexit on Jamaica’s housing market is through the exchange rate. The Jamaican dollar is managed primarily against the US dollar; sterling’s depreciation against the USD translates directly into a weaker sterling position relative to the Jamaican dollar. For UK-based Jamaicans who hold their savings in sterling and are considering property purchases priced in Jamaican dollars, a property that cost £100,000 in sterling terms before June 23 now costs meaningfully more — perhaps £110,000 to £115,000 depending on how sterling settles. This is not a trivial change; it pushes some transactions outside the comfortable affordability range of buyers who were close to their commitment threshold.

Agents working the diaspora market in the United Kingdom have already noted a change in buyer behaviour in the weeks since the vote. Some buyers who were close to committing have paused, citing uncertainty about their own financial position in a post-Brexit Britain. Others have accelerated purchases, either because they want to lock in a property before any further sterling weakness, or because they see their UK assets as more vulnerable than their Jamaican ones and are repositioning capital accordingly. The volume effect on the diaspora segment of Jamaica’s market is likely to be negative in the short run; the directional effects over a longer horizon are genuinely uncertain.

The New Government’s Brexit Inheritance

The Holness government, barely four months into its mandate, did not anticipate managing a global economic shock of this character when it took office. The government’s economic agenda — focused on growth, job creation and private sector confidence — was calibrated to a relatively stable external environment. Brexit does not fundamentally alter that agenda, but it adds a layer of complexity to the external conditions in which the agenda must be pursued. Jamaica’s direct economic exposure to the United Kingdom is limited: trade ties with the UK are less significant than those with the United States, and Jamaica’s tourism market is primarily US-sourced. The diaspora channel is the most important UK economic link, and it is here that Brexit’s consequences will be most felt.

The government has sensibly maintained calm and continuity rather than overreacting to a shock that is primarily external in origin and over which Jamaica has no influence. The IMF programme provides the macroeconomic anchor that gives the government — and the market — confidence that Jamaica will not be destabilised by external turbulence that affects other economies more directly. This institutional credibility is a genuine asset in moments of external shock, and it is earning its keep in July 2016.

The Local Market: Holding Steady

Domestic housing market conditions in July 2016 are, setting aside the Brexit noise, relatively stable. The new government has brought a confidence effect to investor sentiment that is visible in Jamaica’s financial markets and, more slowly, in the property sector. Developer activity is cautiously returning. NHT lending is proceeding at steady volumes. The rate environment is constrained but the direction of travel — toward lower rates as the IMF programme’s stabilisation work takes hold — is visible. The housing market is not booming, but neither is it in the distress that characterised 2013. It is recovering, gradually, and the change of government has reinforced rather than interrupted that recovery.

What This Means

For UK diaspora buyers, the immediate advice is patience. Sterling may stabilise or may weaken further; neither scenario can be predicted with confidence. Buyers who have the flexibility to wait should do so while monitoring the sterling-Jamaican dollar rate and Jamaica’s domestic market conditions. Buyers who have time-sensitive commitments should consider whether forward currency arrangements can lock in a more favourable rate for their purchase.

For domestic buyers, Brexit is primarily a spectator sport. The Jamaican housing market’s affordability challenge is structural and domestic; it is not materially affected by the UK’s relationship with the European Union. Buyers with Jamaican dollar incomes should make their decisions based on local conditions, which remain cautiously supportive.

The Outlook: Navigating Uncertainty With Institutional Strength

Jamaica is navigating the summer of 2016 with more institutional strength than it had in any previous moment of external turbulence since independence. The IMF programme, the Bank of Jamaica’s credibility, the NHT’s financial resilience — these are not glamorous assets, but they are the kind that matter when the external environment turns volatile. The Brexit uncertainty will persist for years; the triggering of the UK’s withdrawal process has not yet even begun. Jamaica’s housing market can absorb this uncertainty without crisis. What it cannot absorb is indefinite deferral of the domestic policy work — the supply expansion, the titling reform, the affordable finance improvement — that the external environment cannot resolve for us.

This review is produced for informational and journalistic purposes only and does not constitute financial, legal or investment advice.

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