Publication Date: 3 July 2018 | Coverage Period: 3 June – 2 July 2018 | Category: Monthly Review
June in Brief
- Brent crude holds above US$75 per barrel; construction and logistics costs elevated
- Atlantic hurricane season officially begins June 1; Jamaica on standard preparedness alert
- UK diaspora market showing mixed signals in Windrush scandal aftermath
- NHT mid-year review expected; loan ceiling pressure continues
- Tourism sector running at near-capacity on north coast; investor interest sustained
- Bank of Jamaica foreign exchange reserves building; JMD broadly stable
Housing Market
Jamaica’s housing market moved through the June period with characteristic summer resilience. Transaction volumes in the formal market held at solid levels, sustained by the dual engines of first-time buyer NHT applications and diaspora purchases. The fundamental supply-demand imbalance that has characterised the market for years remained in place, with new construction struggling to keep pace with a growing population and an ever-expanding housing deficit.
The middle-income segment — broadly defined as units priced between J$8 million and J$25 million — continued to see the most active bidding dynamics in the Kingston market. Developments in the St Andrew uplands, the Portmore gated community belt, and emerging residential nodes in central St Catherine have been absorbing demand that the Kingston core itself cannot accommodate at accessible price points. Developers report that absorption of new inventory has been satisfactory across most schemes, with the primary challenge being the cost and time required to bring new units to the point of sale.
The rental market in Kingston and its immediate environs has remained notably tight. The pipeline of young professionals entering the formal labour market — many of them recent graduates of the University of the West Indies, the University of Technology, and other tertiary institutions — has sustained robust demand for rental apartments in the J$50,000 to J$120,000 per month range. This demand is slowly but meaningfully influencing developer decisions about unit specification and mix.
Government Policy
The NHT is at the midpoint of its first fiscal quarter, and programme delivery metrics have been broadly positive. However, the fundamental tension between the Trust’s resources and the scale of housing need has not been resolved. The loan ceiling at J$5.5 million remains the most persistent point of policy critique, with housing advocates and industry bodies continuing to press the case for an upward revision. The NHT’s internal review of loan parameters, which has been referenced in public statements without a concluded outcome, is expected to produce some form of announcement before the end of the calendar year — though the quantum of any increase remains uncertain.
The government’s housing policy framework continues to emphasise joint ventures between the NHT and private developers as the primary mechanism for scaling up supply. This approach has practical merit: it leverages private sector efficiency and capital alongside NHT’s financing capacity, and it has produced a growing pipeline of schemes across parishes including St Catherine, St James, and Manchester. Critics argue, however, that the joint-venture model is primarily serving the mid-market and that Jamaica’s most acute housing shortage is at the very bottom of the income pyramid, where neither NHT loans nor private developer economics can easily reach.
Construction Sector: Oil Price Squeeze
The sustained elevation of global oil prices is the single most consequential external variable currently affecting Jamaica’s construction economics. Brent crude has been trading in the US$74 to US$80 range through June, and the consensus view among commodity analysts is that prices are unlikely to fall materially in the near term, given constrained OPEC production, continued strong US economic growth, and ongoing uncertainty around Iranian supply following the US withdrawal from the nuclear deal in May 2018.
For Jamaica, the oil price effect is multifaceted. Transportation costs for imported construction materials — steel, aluminium, timber, ceramics — have risen meaningfully. Diesel prices at the pump are significantly higher year-on-year, adding to the operating cost of construction plant. And the general uplift in global logistics costs that elevated oil prices produce has widened the landed cost of virtually every imported input into Jamaica’s construction supply chain.
Carib Cement’s domestic production has provided partial insulation for cement costs, but even here, energy represents a significant share of production cost, and the company has flagged the oil price environment as a factor in its cost management. Contractors and developers are managing by seeking efficiencies in procurement and, in some cases, by incorporating cost escalation clauses into new contracts.
Hurricane Season: Jamaica on Alert
The Atlantic hurricane season officially began on 1 June, and Jamaica’s Office of Disaster Preparedness and Emergency Management has issued its standard seasonal guidance to households and businesses. For the property market, hurricane season is an annual reminder of the importance of building to code, maintaining appropriate insurance, and ensuring that roofing and structural elements meet the standards required for the Caribbean’s wind environment.
The 2017 season’s devastation — which spared Jamaica but was catastrophic for Dominica, Barbuda, and parts of Puerto Rico — has remained fresh in the consciousness of builders, buyers, and insurers alike. Anecdotal evidence suggests that some buyers have placed renewed emphasis on construction standards when evaluating new developments, and developers are responding by highlighting reinforced concrete construction and hurricane-rated windows and doors in their marketing materials.
Diaspora: Post-Windrush Recalibration
The UK-based diaspora market has been processing the Windrush scandal’s implications over recent weeks, and some clearer patterns are beginning to emerge. Financial advisers and estate agents who work closely with UK-based Jamaican clients report that the scandal has had a polarising effect: a subset of buyers is moving with more urgency to establish a Jamaica property anchor, while a distinct group is paralysed by uncertainty about their own immigration status or that of family members, making major financial commitments difficult to contemplate in the short term.
The US and Canadian diaspora markets have not been similarly affected and continue to generate steady interest, particularly in retirement properties on the north and south coasts. VM Group and NCB Financial Group’s diaspora mortgage products have been well-subscribed, with buyers in the 40-to-60 age range — many of them planning to retire to Jamaica within the next decade — the core customer segment.
North Coast and Vacation Market
The peak summer tourism season on Jamaica’s north coast has begun with encouraging visitor numbers. Hotel occupancy along the Montego Bay to Ocho Rios corridor is running at elevated levels, and the short-let vacation rental market — served by Airbnb and HomeAway listings — is similarly strong. Property investors who have positioned vacation villas and apartments for the short-let market are reporting occupancy and yield outcomes that are sustaining, and in some cases exceeding, pre-purchase projections.
New residential development on the north coast is active, with Montego Bay and its suburban parishes continuing to attract the most significant pipeline of new schemes. The mix of buyer types in this market — local Jamaican investors, diaspora buyers, and international purchasers primarily from North America and the UK — gives the north coast market a depth and diversity that insulates it to some degree from any single segment’s performance.
Affordability
Jamaica’s housing affordability challenge has deepened incrementally over the June period, as rising construction costs translate into higher asking prices for new developments while NHT loan limits have remained unchanged. The real value of the J$5.5 million NHT individual loan ceiling has been eroded by construction cost inflation, meaning that first-time buyers using NHT financing must contribute more from their own resources — or seek larger top-up commercial loans — to access the same standard of unit that was accessible at the NHT ceiling alone some years ago.
Macroeconomic Context
Jamaica’s macro backdrop remains broadly supportive of housing investment. GDP growth is running at approximately 1.5 to 2 percent, inflation is within or near the Bank of Jamaica’s 4 to 6 percent target range, and the debt-to-GDP ratio has continued its downward trajectory. The IMF Extended Fund Facility programme continues to be met with full compliance, and Jamaica is regularly cited in international financial commentary as a model of fiscal adjustment in the developing world context.
Looking Ahead
The July to August period is typically the heart of Jamaica’s summer housing market, with diaspora buyers visiting the island on holiday and making purchasing decisions, and with NHT application processing maintaining its rhythm. The hurricane season is at its statistical peak in August and September, and the property market will be monitoring developments in the Atlantic basin with customary attention. Oil price developments will remain the key external construction cost variable, and any further movement toward the US$85 to US$90 range would place additional pressure on project economics.
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