Publication Date: 3 February 2018 | Coverage Period: 3 January – 2 February 2018 | Category: Monthly Review
January in Brief
- January brings expected market rebound; transactional activity recovers sharply from December seasonal lull.
- Diaspora purchase commitments made during the Christmas visit period translate into January completions.
- Bank of Jamaica policy rate unchanged at 3.50%; monetary conditions remain supportive of mortgage demand.
- NHT mortgage applications up year-on-year; joint venture pipeline for 2018 formally announced.
- Caribbean property insurance premiums begin to rise in response to 2017 hurricane season losses.
- Global equity markets volatile in late January; Jamaican dollar holds steady against US dollar.
Housing Market Conditions
January delivered the market rebound that observers had anticipated, with transactional activity recovering sharply from the December seasonal pause. The Christmas-to-New-Year window — during which the Jamaican diaspora returns in largest numbers and real estate decisions are made over kitchen tables and in lawyers’ offices across Kingston and Montego Bay — generated a visible pipeline of purchase commitments that translated into January completions and exchange of contracts. Real estate agents across the Corporate Area reported a busy first fortnight, with NHT contributor applications up on the prior January by most accounts.
Price levels remain firm. The established Kingston market — Norbrook, Cherry Gardens, Barbican, Stony Hill — is showing annual appreciation in the 5–8 per cent range, consistent with inflation slightly below the midpoint of the BOJ’s 4–6 per cent target. In Montego Bay, where new supply has been more abundant given larger available land parcels and strong developer confidence, price growth has been somewhat more moderate but remains positive. The rental market, across both Kingston and Montego Bay, continues to reflect strong demand from professionals priced out of purchase or prioritising mobility over ownership.
The mid-market segment — new townhouses and apartment units in gated developments at J$18–40 million — is the most actively traded. NHT mortgage availability at below-market rates is the critical enabler for buyers at the lower end of this range; commercial bank financing at 8–9 per cent is required for those above the NHT loan limit or outside the contributor base. The gap between NHT and commercial rates remains one of the most significant distortions in Jamaica’s housing finance system and one that housing advocates argue should be addressed through broadening NHT access.
Government Policy and the NHT
The National Housing Trust opened 2018 with the formal announcement of its joint venture pipeline for the year. Schemes under development or completing in St Catherine, St James and Trelawny are expected to deliver several hundred units to the market over the course of 2018, representing a meaningful contribution to a market that chronically undersupplies affordable formal housing. The Trust has signalled continued commitment to the joint venture model and to maintaining its mortgage rates below those of commercial institutions.
The Ministry of Economic Growth and Job Creation has moved to formalise the recommendations of the post-hurricane building standards review, with proposals on enhanced enforcement capacity expected to go to Cabinet in the coming months. The Building Act of 2017 provides the legislative framework; what is required, professional bodies have argued, is the institutional capacity to enforce it consistently and at scale. Parish councils’ building inspection capacity is widely regarded as the weakest link in the chain.
Construction Sector
Construction activity for 2018 is expected to maintain the momentum of 2017, with several large-scale projects beginning or resuming in January. In Kingston, a number of commercial-to-mixed-use conversion projects are in the planning pipeline, reflecting the emerging appetite for urban living among younger professionals. In the tourism belt, hotel refurbishment and expansion projects continue to compete with residential development for skilled tradespeople, keeping wages for carpenters, plumbers and electricians elevated relative to broader wage trends.
Materials prices have not changed dramatically from 2017 levels. Steel and cement remain the key cost inputs for concrete construction, both of which track global commodity prices and the US dollar exchange rate. The relative stability of the Jamaican dollar through the first weeks of January — trading in the J$130–133 range — has provided some cost predictability to contractors tendering for new projects.
Investment and Finance
Global financial markets experienced significant volatility in late January, with equity indices in the United States and Europe moving sharply on inflation and interest rate concerns. The Jamaica Stock Exchange’s strong multi-year run has given the island’s investor class — a growing cohort following years of JSE outperformance — some exposure to sentiment shifts. In the near term, however, the direct impact on Jamaica’s residential property market of external financial volatility is limited; the market is primarily driven by domestic fundamentals, with NHT mortgage rates and employment conditions the dominant variables.
The Bank of Jamaica held its policy rate at 3.50 per cent through January, consistent with its inflation-targeting mandate. The next scheduled policy meeting will provide an opportunity to assess whether the external environment warrants any adjustment; for now, the BOJ has signalled no immediate change. Commercial mortgage rates have remained steady in the 8–9 per cent range.
Insurance Market
As anticipated following the Caribbean’s catastrophic hurricane season, property insurance premiums in Jamaica have begun to rise at the January renewal. Reinsurance rate increases — imposed by global reinsurers reflecting the exceptional losses from Irma and Maria — are being passed through to local policyholders in higher homeowner premiums. Industry estimates suggest increases in the range of 10–25 per cent for residential properties in exposed coastal locations; inland properties and reinforced concrete structures have seen more modest adjustments.
The premium increases have intensified the debate about insurance penetration. Industry representatives are using the moment to press for government incentives to expand coverage among lower-income homeowners, arguing that premium subsidies or tax relief for insurance expenditure would reduce the burden on the state in the event of a major disaster. This proposal is under consideration but has not yet been formally advanced.
Diaspora
The January effect of diaspora engagement was clearly visible in transaction data and agent reports. UK-based buyers remain somewhat constrained by the pound’s relative weakness, which has reduced the real value of sterling-denominated savings when converted to Jamaican dollars for property purchases. US and Canadian diaspora buyers are more active, and the strong North American dollar has maintained the appeal of Jamaican property as a retirement and investment proposition for the significant Jamaican-origin communities in Toronto, New York, Miami and other diaspora centres.
Affordability
Housing affordability remains the sector’s central challenge. The improving labour market — Jamaica’s unemployment rate recently reached an 11-year low — is gradually improving household incomes and financial capacity, but the pace of income growth lags behind property price appreciation in the most desirable residential areas. The NHT’s low-rate mortgage products remain the primary policy response, with the Trust’s joint venture programme the principal vehicle for expanding the supply of units at accessible price points.
Regional Context
The Caribbean reconstruction effort continues to advance through January. Dominica is moving forward with its climate-resilient rebuilding programme with IDB and World Bank support. Barbuda remains a work in progress, with the Antiguan government navigating the complex politics of land tenure reform alongside the practical challenge of rebuilding an entire island’s housing stock. Puerto Rico’s recovery is measurably slow; electricity restoration remains the most pressing priority, with tens of thousands of residents still without power months after Maria. The scale of the ongoing Puerto Rico crisis is a sobering reference point for any Caribbean island contemplating its own disaster preparedness.
Looking Ahead
February typically maintains the January momentum, with the post-Christmas transaction pipeline completing and new buyer activity building through the pre-Easter window. The government’s building standards enforcement proposals are expected in the first quarter, which will set the tone for construction sector compliance through 2018. The insurance market adjustment will play out over the coming months as renewals are completed. For the residential market overall, the fundamentals heading into February — stable interest rates, growing employment, active NHT supply and a confident developer community — support a constructive near-term outlook.
This review covers the period 3 January to 2 February 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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