New Year, Familiar Challenges: Jamaica’s Housing Sector Enters 2018 with Cautious Momentum — Jamaica Homes Monthly Housing & Development Review, December 2017

Publication Date: 3 January 2018 | Coverage Period: 3 December 2017 – 2 January 2018 | Category: Monthly Review

December in Brief

• December holiday season brings typical slowdown; residential property market enters seasonal pause.
• NHT posts solid year-end lending figures; joint venture completions accelerate into December.
• Bank of Jamaica closes 2017 with policy rate at 3.50%; inflation within target for the year.
• Caribbean reconstruction financing formally structured; Dominica announces rebuild masterplan.
• Jamaica’s tourism sector posts record 2017 arrivals; economic optimism feeds into residential confidence.
• Construction sector reports full-year output ahead of 2016; residential completions at multi-year high.

Housing Market Conditions

December is, by long tradition, the quietest month in Jamaica’s residential property market. The holiday season compresses transactional timelines, legal offices slow down ahead of the Christmas break, and the diaspora visitors who inject liquidity into the Jamaican economy in December tend to be in consumption rather than investment mode. The picture in December 2017 conforms to this pattern, with transaction volumes stepping back from the November level as buyers and sellers defer completions to the new year.

Beneath the seasonal quiet, however, the market’s foundations look solid. Price levels in established Kingston neighbourhoods held firm through December, and the new apartment and townhouse inventory developed through the NHT joint venture programme has been absorbed at a pace that leaves developers and the Trust encouraged. The Corporate Area remains the country’s deepest residential market; Montego Bay is the most dynamic in terms of new development activity; and the outer parishes offer value propositions that increasingly appeal to younger buyers willing to accept commuting times in exchange for space and affordability.

Looking at 2017 as a whole, the year that ends with this edition was one in which Jamaica’s residential property market demonstrated resilience. The hurricane scare of September — the closest the island came to a direct major storm impact in a generation — produced only a brief dip in transactional momentum. The fundamentals — low interest rates, steady economic growth, a persistent housing deficit, active NHT programmes — reasserted themselves once the immediate danger passed.

Government Policy and the NHT

The National Housing Trust closes its 2017 calendar with a development pipeline that its leadership has described as the most active in several years. Joint venture units in St Catherine, Trelawny and St James have moved toward or reached the handover phase. New joint venture agreements with private sector developers for schemes to be delivered in 2018 and 2019 have been signed or are in advanced negotiation.

The government has signalled that the 2018/19 budget, to be presented in the new financial year, will include measures to support affordable housing supply. The specific form of these measures — whether enhanced NHT capitalisation, tax incentives for affordable development or expanded HAJ programmes — has not yet been announced, but the political commitment to housing as a policy priority appears firm. The Ministry of Economic Growth and Job Creation has been working through the post-hurricane review recommendations, and formal proposals on building standard enforcement are expected to be tabled in the first quarter of 2018.

Construction Sector

Jamaica’s construction sector had a productive 2017 by most available indicators. The combination of government infrastructure spending, private residential development and hotel expansion in the tourism belt drove output to levels not seen since the pre-2010 era. Material and labour cost pressures remain a concern — the US dollar cost of imported inputs is an unavoidable constraint for an open, import-dependent economy — but the sector’s capacity has expanded, with several mid-sized contractors reporting new equipment investment and workforce expansion over the course of the year.

The post-Irma building standards debate has not yet produced formal policy changes, but the professional discourse has shifted: engineers, architects and developers are increasingly treating Category 5 wind resistance as a design baseline rather than an exceptional specification. This shift, if embedded in practice, will improve housing stock resilience in ways that legislation alone cannot guarantee.

Investment and Finance

The Bank of Jamaica maintained its policy rate at 3.50 per cent through December, closing a year in which monetary policy provided consistent support to economic activity without generating inflationary pressure. The BOJ’s inflation-targeting framework — formally adopted during the year — introduces a new level of transparency to monetary policy communication, which market participants have welcomed. Commercial mortgage rates ended 2017 in the 8–9 per cent annual range, unchanged from mid-year levels.

The Jamaican dollar closed 2017 approximately 4 per cent weaker against the US dollar compared with the start of the year, a relatively modest depreciation by historical standards and one that the BOJ described as broadly consistent with economic fundamentals. For real estate investors with US dollar financing, the pace of depreciation remained modest enough to be manageable; for Jamaican buyers financing entirely in Jamaican dollars, the stable interest rate environment was the dominant factor.

Major Developments

The December period saw the marketing launch of several new residential developments intended for completion in 2018. Among the schemes generating the most attention is a mid-rise apartment complex in the New Kingston area targeting professional buyers at price points of J$22–40 million, and a new phase of a Portmore townhouse scheme in the J$12–18 million range aimed at NHT contributors. Developer appetite for new project launches appears healthy, consistent with their assessment that demand conditions will remain supportive through 2018.

Diaspora

The Christmas period brought the usual wave of diaspora visitors, whose presence generates significant economic activity in retail, hospitality and family services. The real estate implications of this annual visit — with diaspora Jamaicans evaluating property options, meeting lawyers and developers, and making purchase commitments — will play out in the January transaction pipeline. Real estate agents and developers have been active in targeting the diaspora market during the Christmas holiday period, both through traditional advertising in Jamaican diaspora publications and through digital platforms that have expanded reach considerably in recent years.

Affordability

The affordability equation at the start of 2018 remains fundamentally unchanged from 2017. The NHT’s preferential mortgage rates continue to be the primary mechanism through which moderate-income earners access homeownership; commercial financing at 8–9 per cent remains the alternative for those who fall outside the NHT contribution system. Housing advocates have continued to press for an expanded definition of NHT eligibility to include the self-employed and informal sector workers, though no policy change has been announced.

Regional Context

The Caribbean reconstruction effort is entering a more structured phase. Dominica has published its reconstruction masterplan, which envisions rebuilding the island to a climate-resilient standard over a multi-year period with international development bank support. Barbuda’s recovery is slower; the island’s population has not fully returned and the reconstruction debate is complicated by questions about land tenure and development rights. Puerto Rico faces the longest and most complex reconstruction challenge of any territory affected by the 2017 season, with the electricity system, road network and housing stock all requiring simultaneous investment at a scale that will strain federal and local government capacity for years.

Looking Ahead

The opening weeks of 2018 will provide an early read on whether the confidence evident in late 2017 translates into transactional momentum in the new year. The pipeline of new NHT joint venture developments is substantial; the insurance market is expected to adjust premiums upward in response to Caribbean catastrophe losses; and the building standards debate is likely to produce government proposals in the first quarter. Jamaica’s economy, with tourism breaking records and the IMF programme delivering results, offers a supportive backdrop. For the island’s housing sector, 2018 begins with cautious but credible optimism.

This review covers the period 3 December 2017 to 2 January 2018. Market data, interest rates and development information are drawn from publicly available sources current as of the date of publication.

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