A New Government and a Waiting Market: Jamaica’s Property Sector Seven Months Into the JLP Era

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

• Seven months after the JLP’s February 2016 election victory, Jamaica’s housing market is holding steady in cautious optimism as the new government’s agenda takes shape
• Growth indicators are marginally positive for 2016 as investor and consumer confidence improves following the change of government
• Brexit, voted through in the United Kingdom in June 2016, introduces a new source of uncertainty for the Jamaican diaspora in Britain and their property investment behaviour
• Bank of Jamaica holds its rate as the new administration inherits the IMF programme and signals its intention to maintain fiscal discipline
• NHT loan activity is stable; the contributor base is growing as formal employment expands with improving economic conditions
• The structural housing deficit remains the new government’s largest social policy inheritance, unchanged by the change of political administration

Seven months is not enough time to transform a housing market. It is, however, enough time to change the mood. And the mood in Jamaica’s property sector in October 2016 is perceptibly different from what it was at the start of the year. The narrow JLP election victory of February 25 — the party won thirty-two of sixty-three parliamentary seats, defeating a PNP government that had struggled to convert the pain of fiscal adjustment into visible quality-of-life improvement — brought to government a party that ran explicitly on economic growth, business confidence and a promise to make homeownership more achievable for ordinary Jamaicans. The market is still waiting to see what that promise looks like in practice, but the optimism that the change of government generated has itself been a small but real economic input.

The new government’s housing inheritance is formidable. The deficit is large and structural. The land titling backlog is enormous. The NHT’s loan limits are constrained by the gap between what it can afford to lend and what formal housing in desirable urban locations costs. The private sector’s capacity and appetite to deliver affordable housing is limited by construction economics that make low-price development unprofitable without subsidy. These constraints did not change on February 26. They are the same challenges that the Portia Simpson Miller government spent four years being unable to resolve. The Holness government begins with the advantage of a mandate focused on growth rather than austerity; it will need to translate that mandate into housing supply before the mandate expires.

Brexit: An Unexpected Complication

The United Kingdom’s referendum vote to leave the European Union on June 23, 2016 introduced a dimension of uncertainty into Jamaica’s housing market that was not on anyone’s agenda at the start of the year. The Jamaican diaspora in the United Kingdom is one of the most significant overseas communities investing in Jamaican property. Concentrated in London, Birmingham and the major English cities, the Jamaican-British community has historically been a reliable source of property purchase demand — through direct acquisition and through remittances that fund construction and mortgage co-payments for family members in Jamaica.

Brexit has introduced uncertainty into this community along several dimensions. The immediate effect of the referendum result was a sharp depreciation of sterling against major currencies, including the US dollar against which the Jamaican dollar is primarily managed. For Jamaican-British diaspora buyers transacting in Jamaican dollars, a weaker sterling means that Jamaican property costs more in hard currency terms than it did before the vote. This effect is real and measurable; agents who work the diaspora market in London are already reporting a cautious pause in purchase decisions from UK-based buyers who are uncertain about the medium-term economic trajectory of their home country and the value of the assets they hold there.

IMF Programme Continuity: A JLP Priority

The Holness government’s decision to maintain the IMF Extended Fund Facility rather than seeking renegotiation was, from a housing market perspective, the most important policy signal of its first seven months. The IMF programme, whatever its social costs during the adjustment period, has been the institutional anchor that has kept Jamaica’s fiscal and monetary framework on a trajectory toward lower rates and improved sovereign creditworthiness. Abandoning or renegotiating it would have introduced precisely the kind of uncertainty that the property market least needs: uncertainty about Jamaica’s commitment to fiscal discipline, its relationship with international creditors, and the sustainability of the rate environment that is making mortgages gradually more accessible.

By maintaining the programme, Holness has effectively said to the market: the foundation is sound. Investors, lenders and developers have read this signal accurately. The commercial mortgage market has remained functioning; the NHT has continued to lend; developer confidence, while not yet booming, has not collapsed. The continuity is not glamorous, but it is the essential prerequisite for the more visible improvements that Jamaica’s housing market needs to see in the quarters ahead.

What the Affordable Segment Needs Now

The most urgent structural need in Jamaica’s housing market is supply at the price point where demand is concentrated: the NHT-eligible, formally titled, accessible affordable unit that the median Jamaican formal sector worker can reach with a mortgage and a modest deposit. The supply of this unit is deeply inadequate relative to the latent demand. Every year that passes without meaningful supply expansion is a year in which the deficit compounds: more households formed, fewer units available, more families doubling up in inadequate accommodation or extending informal tenure arrangements that leave them permanently outside the wealth-building possibilities of formal homeownership.

What This Means

For buyers, October 2016 is a moment of cautious opportunity. The rate environment remains constrained but the direction of travel is improving. Employment is better than a year ago. The new government’s signals, while not yet translated into specific housing supply, are directionally positive for market confidence. Buyers who are ready should act; those who are not should build their readiness with specific milestones rather than indefinite deferral.

For diaspora buyers in the UK, the Brexit moment argues for deliberate assessment rather than impulsive reaction. Sterling weakness has made Jamaican property temporarily more expensive in hard currency terms; the medium-term trajectory of sterling post-Brexit is genuinely uncertain. Buyers with longer horizons and Jamaica-based income potential should assess whether the currency effect is a temporary obstacle or a structural shift before adjusting their Jamaica property plans.

The Outlook: The Honeymoon Period Has a Shelf Life

New governments receive a grace period from markets, from communities and from analysts that reflects hope rather than evidence. That grace period is now about seven months old. The housing market will begin, through 2017, to measure the Holness government against what it actually delivers rather than what it has promised. The mandate is long enough for real housing improvement to materialise; it is not so long that delay is without cost. The new government’s housing agenda will be the clearest test of whether its growth rhetoric translates into the material improvement in Jamaican lives that its election campaign represented.

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

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