Holness Housing Agenda Builds Momentum as NHT Pipeline Expands — April 2017

Publication Date: April 3, 2017 | Coverage Period: March 3–April 2, 2017 | Category: Monthly Review

March in Brief

• Finance Minister Shaw presents 2017/18 budget; NHT loan limits increased for key product lines.
• NHT Home Improvement Loan ceiling raised to J$2.5 million from J$1.5 million, effective July 1.
• Housing-related NHT grants expanded for low-income long-term contributors.
• Property market enquiries surge post-budget as buyers gain clarity on financing parameters.
• Construction activity in St James and St Catherine accelerates into Q2.
• Remittances from US holding steady despite continued immigration enforcement anxiety.

Housing Market

March delivered the budget clarity that the housing market had been waiting for since the start of the year. Prime Minister Andrew Holness’s administration — with Finance Minister Audley Shaw as its fiscal steward — used the 2017/18 budget presentation to deliver a set of NHT benefit enhancements that had been anticipated for some months. The measures, which take effect July 1, 2017, represent the most substantive revision to NHT loan parameters in several years and have been received positively by developers, mortgage lenders and affordable housing advocates.

In the residential sales market, the clarification of NHT parameters appears to have released some pent-up demand. Property agents in Kingston, St Catherine and St James report an uptick in serious buyer enquiries in the days following the budget, with prospective purchasers recalculating their financing options under the new limits. The effect is most visible in the J$3–8 million segment, where NHT financing is the primary purchase mechanism and adjustments to loan ceilings and grant thresholds have direct purchase-enabling consequences.

Government Policy: Budget Highlights

The NHT benefit changes announced in the 2017/18 budget are multi-dimensional. The Home Improvement Loan limit has been raised to J$2.5 million, up from J$1.5 million — a 67 percent increase that acknowledges the substantial appreciation in construction material costs over the period since the previous limit was set. A House Lot Loan limit increase, to J$2.5 million from J$2 million, acknowledges the pressure on land prices particularly in urban and peri-urban areas. The most targeted measure is an enhanced Home Grant for contributors earning below J$12,000 weekly who have been contributing for more than seven years, providing up to J$2.5 million — a significant extension of NHT’s pro-poor function.

The NHT’s commitment to 100 percent mortgage financing for its own scheme units has been reaffirmed — a feature that distinguishes the Trust’s product from commercial alternatives and makes NHT scheme allocation a particularly valuable outcome for qualifying contributors. The Trust’s scheme delivery pipeline for fiscal year 2017/18 is expected to include projects in multiple parishes, with St Catherine and St James among the primary delivery targets.

The recurring question of the NHT’s Consolidated Fund contribution — a mechanism that diverts a portion of the Trust’s surplus to the government’s general fiscal accounts — was addressed in the budget. Housing advocates had lobbied for these transfers to be reduced or eliminated, arguing that the funds diverted represent foregone capacity to finance additional housing units. The government’s position reflects its broader fiscal consolidation objectives, which the IMF’s Extended Fund Facility programme has underpinned and which have produced Jamaica’s primary surplus — a fiscal milestone that the administration is understandably reluctant to compromise.

NHT Strategic Mandate Review

Alongside the budget measures, the NHT’s ongoing Strategic Mandate Review continues to gather submissions. The review, launched in 2016, is examining the Trust’s purpose, product range, governance and long-term mandate in light of Jamaica’s evolving housing needs. Its findings — expected later in 2017 — could shape NHT policy for the next decade and are being watched carefully by all stakeholders in the housing finance ecosystem. Key questions before the review include whether the Trust should expand its role in rental housing, how it should serve the growing informal sector, and whether its geographic coverage is appropriately calibrated.

Construction Activity

March is traditionally the month in which the construction season shifts into higher gear in Jamaica, as the dry season provides better site conditions and the budget’s passage removes a layer of policy uncertainty. This year’s pattern is consistent with that dynamic. Building materials retailers across Kingston, St Catherine and St James report improving sales volumes, and larger contractors indicate that their order books for Q2 are at levels not seen in several years.

The apartment sector in the Corporate Area has seen notable activity. Several medium-scale developments in New Kingston and along Constant Spring Road are in various stages of construction or final approvals. These projects target the professional-class buyer and the diaspora purchaser and are priced in ranges that require a combination of NHT entitlement and commercial financing. The absorption rate for completed units in well-located Corporate Area developments has remained healthy, providing developers with reasonable confidence in their exit assumptions.

Regional Development: St James

Montego Bay’s property market has continued to reflect the dynamism of Jamaica’s tourism-dominant western parish. The announcement earlier in the year of a 1,200-unit housing development for tourism workers in Negril signals a recognition at government and developer level that rapid resort expansion has created an accommodation gap for the workforce it attracts. St James more broadly is seeing rising land values in residential communities adjacent to the hotel strip and along roads that offer manageable commuting distances to the tourism employment base. Gated communities marketed to middle-income buyers have found a receptive audience among tourism sector employees who have accumulated savings and NHT entitlements.

Diaspora and Investment

Diaspora property interest, particularly from the United States, has been shaped through March by the ongoing uncertainty around the Trump administration’s immigration posture. The administration’s early executive orders on immigration enforcement have been subject to legal challenge, with federal courts issuing stays that have slowed the implementation of some measures. This legal uncertainty has, paradoxically, prevented a sharp deterioration in diaspora economic activity — the most severe deportation scenarios have not materialised in the first quarter of 2017 — though the community anxiety that characterised January persists at a lower level of intensity.

Diaspora property purchases remain a feature of the Kingston and resort-area markets. Agents working with overseas buyers report that interest in Jamaica property as an investment or eventual retirement home has not diminished measurably since Trump’s inauguration. Some buyers appear to be accelerating decisions, motivated by either the desire to establish a financial anchor in Jamaica or by specific personal circumstances relating to their US residency status.

Affordability

The budget’s NHT enhancements represent a meaningful improvement in affordability at the lower end of the market. However, the structural challenge of the middle-income segment remains. For a household earning the median formal-sector wage in Kingston — roughly J$60,000–80,000 per month — the mathematics of purchasing a three-bedroom house in a safe, well-located community remain difficult without a substantial down payment or a family contribution. The government’s signalled commitment to releasing public land for development, combined with the NHT’s expanded product range, is the most plausible path to addressing this gap, but execution risk remains significant.

Macro Context

Jamaica’s macroeconomic backdrop remains supportive of property market activity. GDP growth, while not spectacular, is tracking in a 1.5–2.0 percent range consistent with the steady recovery of recent years. Inflation, running at 4–6 percent, has remained within ranges that the Bank of Jamaica considers manageable and has not triggered a shift in monetary policy. The IMF’s EFF programme, which Jamaica has executed with unusual discipline for a country with its fiscal history, is approaching its conclusion and has been held up as a regional and international success story. The fiscal consolidation it has demanded has generated a primary surplus that is now a reference point in Jamaica’s fiscal discourse.

Looking Ahead

With the budget settled, the housing market now enters Q2 with improved clarity. The next key milestones are: the July 1 effective date for the NHT benefit enhancements, which will create a near-term window of elevated demand from buyers calibrating their decisions around the new limits; the NHT’s scheme announcement calendar for the remainder of fiscal 2017/18; and the government’s pace of delivery on its commitments around public land release and private sector partnership. The market is better positioned than it was a year ago, but the gap between demand and affordable supply remains Jamaica’s defining housing challenge.