Trump Takes Office, Diaspora Watches: Jamaica’s Housing Market Reads the New Landscape — February 2017

Publication Date: February 3, 2017 | Coverage Period: January 3–February 2, 2017 | Category: Monthly Review

January in Brief

• Donald Trump inaugurated as 45th US President on January 20, raising diaspora concerns.
• Bank of Jamaica holds policy rate steady at historically low levels near 3.5 percent.
• NHT loan applications rise as low interest rates stimulate first-time buyer demand.
• Corporate Area apartment market sees continued strong enquiry from young professionals.
• Remittance inflows from January 2016 set a solid baseline; observers watching 2017 trajectory.
• Holness government reaffirms housing as a national priority in parliamentary statements.

Housing Market

Jamaica’s residential property market opened 2017 on a measured note of cautious optimism. The sustained low-interest-rate environment engineered by the Bank of Jamaica over the preceding three years has continued to compress the cost of mortgage finance, drawing buyers off the sidelines — particularly in Kingston and St Andrew, where apartment developments in New Kingston and the broader Corporate Area have attracted significant interest from salaried professionals and returning residents alike.

Commercial mortgage rates at Jamaica’s major banking institutions have settled in the 8–9 percent range for Jamaican-dollar facilities, a level that, while not negligible relative to incomes, represents a substantial improvement on the double-digit rates that prevailed through much of the previous decade. National Housing Trust borrowers, meanwhile, continue to access financing at rates as low as 0–5 percent, creating a significant structural advantage that keeps the Trust at the centre of the affordable segment’s activity.

Demand for residential land plots in St Catherine — particularly along the Spanish Town–Portmore corridor and northward into areas adjacent to Bog Walk — has remained robust, driven by self-builders who see land acquisition as the first viable step on the property ladder. Developers report steady sales of gated townhouse communities in Portmore and Greater Portmore, which continue to offer relative affordability compared with Kingston proper.

Government Policy

The Holness administration’s commitment to housing has been a recurring theme since the JLP’s return to power in the February 2016 general election. Prime Minister Andrew Holness has consistently framed housing expansion as both a social imperative and an economic stimulus lever. Parliamentary statements in January 2017 reaffirmed the government’s intention to accelerate NHT-backed housing schemes and engage the private sector in public-private partnerships targeted at the lower-middle-income segment.

The NHT’s Strategic Mandate Review — expected to produce its findings later in the year — is being watched closely by industry stakeholders. Its terms of reference encompass the Trust’s loan limits, product range, and the ongoing debate over contributions from the NHT surplus to the government’s Consolidated Fund. That debate, which has prompted recurring criticism from housing advocates and the opposition PNP, is expected to resurface during the upcoming budget season beginning in February.

Construction Activity

Construction activity as measured by permits issued through parish councils and reports from major contractors indicates a market in modest recovery. The pre-construction pipeline across the Corporate Area features a mix of medium-density apartment blocks in the J$15–30 million bracket and upscale condominium units aimed at professionals and diaspora buyers. On the north coast, hospitality-linked residential construction in the St James and Trelawny corridors has continued to generate ancillary housing demand, as resort expansions attract workers who require nearby accommodation.

The self-build sector — which accounts for a substantial portion of Jamaica’s net housing stock additions — has benefited from relatively stable cement and steel prices. Hardware retailers report that the opening weeks of 2017 have seen typical seasonal patterns, with activity expected to pick up as tax refunds and NHT benefit payouts are processed in early spring.

Infrastructure

The continued expansion of the North-South Highway corridor and the Highway 2000 network has been a structural tailwind for residential development in communities along these arteries. Journey times between Kingston and the south coast, and between the capital and Ocho Rios, have improved materially, making it feasible for commuters to consider housing options that would previously have been dismissed as too remote. Developers in Linstead and May Pen have taken note of this dynamic, and several schemes in those areas are at various stages of planning.

Diaspora

No single event cast a longer shadow over the Jamaican diaspora in January 2017 than the inauguration of Donald Trump as the 45th President of the United States on January 20. The Trump campaign’s hardline rhetoric on immigration, deportations, and undocumented residents had prompted anxiety in diaspora communities in New York, South Florida, Connecticut, and other states with significant Jamaican populations throughout the second half of 2016. That anxiety did not dissipate with the election; if anything, inauguration day brought it into sharper focus.

For Jamaica’s housing market, the diaspora dimension is not peripheral. Remittances — estimated to have exceeded US$2 billion on an annualised basis — sustain household consumption, fund construction projects, and in many cases directly finance land purchases and home completions. Analysts at the Jamaica Gleaner and the Bank of Jamaica have flagged the risk that tightened US immigration enforcement could, over time, reduce the flow of remittances to vulnerable households. In the immediate term, however, there is no sign of deterioration: January remittance flows appear consistent with recent trends, and diaspora property enquiries have not softened noticeably.

Some community observers suggest that Trump’s election may paradoxically accelerate certain diaspora property decisions. Jamaicans in the United States who are uncertain about their long-term residential security may be more inclined to invest in a home in Jamaica as a hedge against enforced return — a dynamic that property agents on the island have already begun to discuss informally.

Affordability

Affordability remains the central structural challenge for Jamaica’s housing market. At an exchange rate of approximately J$128–130 per US dollar and median formal-sector wages that have not kept pace with property price appreciation in Kingston’s primary submarkets, the gap between aspiration and access is significant. The NHT’s product range — which encompasses schemes at J$4–6 million for qualifying contributors — addresses a portion of this gap, but the Trust’s pipeline has historically fallen short of demonstrated demand.

Private developers focused on the affordable segment have struggled with the same cost pressures that constrain self-builders: land in proximity to employment centres commands a premium that makes truly affordable new construction difficult to deliver without subsidy. The government’s signalled intent to unlock public land for residential development may, if executed, alter this arithmetic in the medium term.

Investment Climate

Investor sentiment toward Jamaican property has benefited from the island’s improving macroeconomic fundamentals. The IMF’s Extended Fund Facility programme — which Jamaica has navigated with greater discipline than many observers anticipated — is approaching its conclusion, and the fiscal adjustment it has required, while painful, has produced a primary surplus and reduced the debt-to-GDP trajectory. For property investors, particularly those with longer holding horizons, this macro stabilisation has reduced the perception of systemic risk associated with Jamaican assets.

The tourism sector continues to be a catalyst for hospitality-related real estate investment. With visitor arrivals in 2016 at or near record levels, the rationale for investing in short-term rental properties, boutique villa developments, and beachfront land along the north coast has strengthened. Airbnb’s growing presence — the platform hosted approximately 59,500 local and international guests in Jamaica during 2016 — is beginning to generate serious conversations among property owners about the economics of short-term versus long-term letting.

Regional Context

Across the wider Caribbean, Jamaica’s property market is distinguished by its depth and breadth relative to smaller island neighbours. Trinidad and Tobago’s market has been under pressure from the oil price downturn; Barbados faces its own fiscal challenges. Jamaica, by contrast, is coming off a period of macro reform that, though demanding, has left the structural foundations more robust than they were four years ago. Diaspora investors comparing Caribbean destinations for property purchases are increasingly being directed toward Jamaica’s improving fundamentals.

Looking Ahead

The key variables to watch as February unfolds are: the initial signals from the Trump administration on immigration enforcement — particularly whether executive orders translate into materially heightened deportation activity affecting Jamaican nationals; the trajectory of remittance flows as monitored by the Bank of Jamaica; and the budget debate, which is expected to commence in February and will determine the NHT’s allocation for fiscal year 2017/18. The NHT’s loan limit parameters, due for potential revision, will be closely scrutinised by developers and affordable housing advocates. On balance, the market enters the shortest month of the year with its underlying demand intact and its structural challenges unresolved — the defining condition that has characterised Jamaica’s housing sector for much of the past generation.