Two Years of New Direction: Measuring What the JLP’s Economic Reforms Mean for Jamaican Homebuyers

Jamaica Homes Housing Affordability & Cost of Living Review — April 2018

• Two years since the JLP’s February 2016 election victory: the economy is growing, employment is rising and mortgage rates have compressed to historic lows
• Jamaica’s public debt-to-GDP ratio falls below 100 percent for the first time in over a decade, marking a turning point in the nation’s fiscal trajectory
• BOJ maintains low policy rate as inflation remains contained, creating space for commercial mortgage rates to remain favourable
• NHT records its highest mortgage disbursement volume in years as contributor base grows with formal employment expansion
• Private sector developers respond to improving conditions with new residential launches in Kingston, St. Catherine and St. James
• Housing affordability gap persists despite macro improvement: the bottom third of income earners remain structurally excluded from formal homeownership

Two years into the Jamaica Labour Party’s government, the housing market report card looks considerably better than it did in February 2016. Jamaica’s public debt has crossed below the hundred percent of GDP threshold that many economists regarded as the outer limit of sustainable burden. Employment has grown steadily; unemployment has dropped from the double-digit rates of the adjustment years to levels that, for Jamaica, represent something approaching full employment in the formal sector. The Bank of Jamaica’s inflation-targeting framework has delivered price stability that the island has rarely known in its modern history, and the consequent rate environment has made mortgages more affordable, in serviceability terms, than at any point in a generation.

These are genuine achievements. They are, in a meaningful sense, the cumulative product of the painful fiscal adjustment that Jamaica began under the PNP’s IMF programme in 2013 — an adjustment whose dividends are only now fully materialising under a different government that had the political fortune of inheriting the hard work without the political cost of initiating it. The JLP government has, to its credit, maintained the discipline of the programme through its own quarterly review passes while bringing its own growth-oriented agenda to the mix. The combination of inherited stability and new growth energy has created conditions that the housing market is, belatedly, beginning to reflect.

Debt Below 100 Percent: Why It Matters for Housing

The reduction of Jamaica’s public debt-to-GDP ratio below one hundred percent is not merely a fiscal milestone. It has direct consequences for the housing market through multiple channels. Lower debt service requirements free fiscal resources for capital spending, including housing-related investment. The improved sovereign credit rating that accompanies debt reduction lowers the cost at which the Jamaican government and Jamaican institutions can borrow in international markets. Lower sovereign borrowing costs percolate through the financial system, compressing the rates at which commercial banks fund themselves and, consequently, the rates at which they lend to mortgage borrowers. The connection between fiscal discipline and mortgage affordability is real, if indirect, and it runs directly through the debt trajectory that the IMF programme and its successors have addressed.

The NHT, while funded primarily through its own contribution mechanism rather than sovereign debt markets, also benefits from the improved macroeconomic environment. A more stable economy means fewer contributor defaults, lower administrative burden and better returns on the Trust’s investment portfolio. These financial improvements translate directly into the Trust’s capacity to expand its lending programme and, eventually, to increase the loan limits that define what its beneficiaries can afford to buy.

New Supply: Where and Why

Private sector developers have been incrementally responding to the improving demand environment. Projects that were deferred during the crisis years are advancing. New launches in the New Kingston and Half Way Tree apartment segment, in the suburban residential communities of St. Andrew and St. Catherine, and in the resort corridor of St. James reflect developer confidence in a market that buyers are actively entering. The pipeline of new completions is growing, though it remains insufficient relative to the accumulated deficit.

The spatial pattern of new supply reflects the economics of urban land. Central Kingston and the most desirable uptown suburbs trade at land prices that make affordable construction effectively impossible without subsidy. New supply at price points below JM$25 million is concentrated in St. Catherine — Portmore, Spanish Town and points along the Highway 2000 corridor — and in peri-urban areas of other parishes. This geographic displacement of affordable supply from employment centres imposes transport costs and time burdens on buyers that are substantial but are rarely incorporated into housing affordability calculations. A home that looks affordable on paper may be considerably less so when the commuting costs of living forty minutes from work are accounted for.

What Hasn’t Changed

Two years of economic improvement have not changed the fundamentals of Jamaica’s structural housing challenge. The deficit — the gap between housing need and adequate formal supply — has not materially narrowed. Land titling rates have improved but the backlog remains immense. Squatter settlements in Kingston and the major towns continue to house a significant share of the urban population under conditions of tenure insecurity that formal homeownership aspirations cannot address. The lower third of the income distribution remains essentially without a formal housing market pathway, relying on informal arrangements that serve immediate need but preclude the wealth accumulation that homeownership represents.

What This Means

For buyers with NHT eligibility, April 2018 is a productive moment to engage. Contribution accounts that were opened during the employment recovery years of 2014 to 2016 are now reaching the minimum qualification thresholds for NHT mortgage eligibility. Buyers should check their contribution status, review NHT loan limits and scheme availability, and — if a qualifying property is available at an accessible price — consider acting rather than waiting for conditions to improve further.

For the government, the two-year mark is a useful prompt for an honest assessment of whether the macro progress has translated into the supply-side housing improvements that were part of the JLP’s 2016 platform. The answer, on current evidence, is: partially, but insufficiently. The tools that would accelerate affordable supply — developer incentives, land regularisation acceleration, NHT limit increases — remain underutilised at the scale the deficit requires.

The Outlook: Halfway There

Two years in, Jamaica’s housing market is meaningfully better than it was. The macro environment is the best since before the global financial crisis. The institutional infrastructure for housing finance is functional and improving. The question is whether the government’s second half delivers the supply-side ambition that the first half’s macro progress has made possible but has not yet activated. The buyers are there. The lenders are there. The policy space is there. The supply is not, yet, at the scale that Jamaica’s housing story requires. That is the agenda for the next two years.

This review is produced for informational and journalistic purposes only and does not constitute financial, legal or investment advice.

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