Irma at the Gate: Jamaica on High Alert as Monster Hurricane Threatens the Caribbean — Jamaica Homes Monthly Housing & Development Review, August 2017

Publication Date: 3 September 2017 | Coverage Period: 3 August – 2 September 2017 | Category: Monthly Review

August in Brief

• Hurricane Irma intensifies to catastrophic Category 5 as season peaks in the Atlantic basin.
• Jamaica government and ODPEM activate emergency protocols with the storm days away from the region.
• Bank of Jamaica holds policy rate at 3.50% following August cut; mortgage market stable.
• NHT joint venture housing completions on track across St Catherine and St James developments.
• Exchange rate holds near J$130 to US$1; inflation within BOJ’s target band.
• Tourism sector reports record visitor arrivals for the summer, underpinning economic momentum.

Housing Market Conditions

Jamaica’s residential property market entered September 2017 in reasonably good health — or so it appeared before the name Irma dominated every conversation. Sales activity through August was measured rather than spectacular, reflecting the traditional summer lull that characterises the Kingston and St Andrew markets each year as the professional diaspora departs for cooler climates. Yet underlying demand remained firm, with developers reporting continued interest in mid-tier apartment units and gated townhouse communities in the Corporate Area and in the resort corridor linking Montego Bay and Negril.

Prices in established Kingston neighbourhoods — Norbrook, Cherry Gardens, Barbican, Stony Hill — showed steady appreciation consistent with the low-inflation, low-interest-rate environment that has characterised Jamaica’s economy since 2016. The Bank of Jamaica’s decision in late August to reduce its policy rate to 3.50 per cent — its lowest level in modern times — sent a further signal of confidence in the inflation outlook and offered some support to commercial mortgage affordability. Commercial banks were advertising mortgage rates in the 8 to 9 per cent range; the NHT continued to offer rates between zero and 5 per cent, maintaining a significant advantage for contributors.

The perennial challenge of affordability persisted. A one-bedroom apartment in New Kingston was fetching J$18 million or more, placing homeownership firmly out of reach for many first-time buyers on median Jamaican incomes without NHT support. The Trust’s joint venture programme with private developers remained the most practical route to new supply at accessible price points.

Government Policy and the NHT

The National Housing Trust continued its active development calendar through August. The Trust has been processing applications under its regular mortgage programme and pursuing completion of joint venture schemes with private sector partners in St Catherine, St James and Trelawny — parishes where land availability is greater and commuter infrastructure to Kingston and Montego Bay makes development commercially viable. Officials have reiterated the government’s long-standing acknowledgement of a housing deficit estimated at more than 100,000 units, a figure that has barely budged despite years of NHT investment.

The Housing Agency of Jamaica (HAJ) has been engaged in affordable scheme completions and new site preparation, particularly targeting lower-income beneficiaries who fall outside the NHT’s contributor base. The government’s broader ambition, articulated in multiple budget presentations, is to bring formal housing within reach of Jamaicans across a wider income spectrum — an ambition that fiscal constraints and high construction costs continue to test.

Construction Sector

Construction activity was proceeding at a steady pace across the island through the period under review, though contractors and developers began keeping anxious eyes on the Atlantic by late August. The construction sector has been one of the more buoyant corners of Jamaica’s economy, benefiting from a combination of government infrastructure spending, private housing development and hotel expansion projects in the tourism belt.

Concrete block, zinc roofing and timber frame construction remain the dominant forms of residential building across Jamaica — materials and methods that have served tolerably well through decades of hurricane seasons but whose resilience against a Category 5 storm is a matter of real and immediate concern as this issue goes to press. The Building Act, passed by Parliament in 2017, strengthens standards for new construction, but enforcement on the ground has historically lagged behind the statute book.

Major Developments

Among the notable residential developments active in the August period: a 1,200-unit workforce housing project for tourism employees in the Negril area remained in discussion, reflecting the resort town’s long-standing tension between a thriving hospitality economy and severely inadequate housing for the workers who sustain it. In Portmore, the ongoing densification of St Catherine’s coastal city continued apace, with new apartment blocks filling in parcels between established residential schemes. Kingston’s Half Way Tree corridor saw further commercial-to-residential conversion inquiries as investors eye the transit hub’s long-term potential.

Infrastructure

Road infrastructure improvements under the Major Infrastructure Development Programme continued on key arteries linking residential zones to employment centres. The Highway 2000 toll road network remained central to the development calculus for housing schemes in St Catherine, as access to Kingston via express highway has materially expanded the catchment area for affordable development. The North-South Highway link through Linstead is expected to further strengthen these connections.

Investment and Finance

The Jamaican dollar held broadly stable against the US dollar through the August period, trading in the J$129–131 range. The relative stability of the exchange rate — a marked contrast to the sharp depreciations of the early 2010s — has provided some relief to developers purchasing imported materials and to buyers financing with foreign-currency mortgages. The BOJ’s inflation-targeting framework, adopted formally in 2017, appears to be generating the credibility it was designed to establish.

Investor appetite for real estate-linked instruments on the Jamaica Stock Exchange has grown alongside the broader market rally, with real estate investment structures attracting attention from institutional and retail participants alike. The establishment of a formal REIT framework remains a medium-term policy aspiration; for now, developers list operating subsidiaries on the Junior Market as a route to equity capital.

Diaspora

Diaspora remittances — which totalled over US$2 billion annually and represent one of Jamaica’s largest sources of foreign exchange — continued to underpin residential purchasing power, particularly in parishes such as St Mary, Portland and Westmoreland where diaspora investment in family homes and retirement properties is most concentrated. Real estate agents in Mandeville, a traditional diaspora magnet, reported ongoing interest from the UK and North American communities, albeit tempered by currency movements that make Jamaican property less of a bargain in pound or dollar terms than it was five years ago.

Affordability

The affordability gap remains the defining structural challenge of Jamaica’s housing sector. The NHT’s low-rate mortgage products represent the most effective intervention available, but access is limited to formal-sector contributors, leaving the self-employed, informal workers and rural residents largely outside the net. Civil society groups and housing advocates continue to press for an expansion of affordable financing to these groups. The Urban Development Corporation’s role in providing serviced land at reduced cost to low-income developers offers a partial response, but the scale of intervention remains insufficient relative to the deficit.

Regional Context — Irma Bearing Down

No responsible housing publication can ignore the storm gathering in the Atlantic as this edition goes to press on the morning of 3 September 2017. Hurricane Irma — at this writing a ferocious Category 4 storm with maximum sustained winds of around 155 miles per hour — has been intensifying with alarming speed and is now on a trajectory that will take it through the northern Caribbean within days. The National Hurricane Center projects landfall on the Leeward Islands, including Barbuda and St Martin, in the early hours of 6 September, potentially as a Category 5.

Jamaica is not currently on Irma’s projected direct path. However, the margin of uncertainty in hurricane track forecasts at five-day range is substantial, and even a storm passing well to the north of the island can generate destructive surge, heavy rainfall and damaging winds in coastal communities. The Office of Disaster Preparedness and Emergency Management (ODPEM) is monitoring developments closely and is expected to issue guidance to local authorities and the public in the days ahead. The government’s National Emergency Operations Centre (NEOC) maintains readiness protocols for precisely these eventualities.

The fate of housing stock across the eastern Caribbean — particularly in islands with smaller land masses, limited construction standards and reduced government capacity — is a source of deep anxiety. Barbuda, a low-lying limestone island with a population of some 1,800 persons, is directly in Irma’s projected path. The prospect of catastrophic housing destruction across multiple Caribbean states is a reminder that the region’s vulnerability to hurricane-force winds is not theoretical.

Looking Ahead

The immediate priority for Jamaica’s housing sector — and indeed for its entire population — is the safe passage of Hurricane Irma. If the storm tracks as currently projected and spares the island a direct hit, attention will return swiftly to the market fundamentals that were the subject of this review before Irma dominated the agenda: NHT completions, affordability initiatives, mortgage rate dynamics and the ongoing push to close the housing deficit.

Should the storm make landfall in the eastern Caribbean with the force currently projected, Jamaica can expect to be called upon as a regional neighbour — providing emergency shelter, humanitarian assistance and, in time, reconstruction expertise. The Building Act of 2017 and the broader debate about Caribbean building standards will take on new urgency. For now, Jamaicans are watching the Atlantic with the focused attention of a people who understand, from long experience, what a serious hurricane can do.

This review covers the period 3 August to 2 September 2017. Market data, interest rates and development information are drawn from publicly available sources current as of the date of publication.