Publication Date: 3 August 2018 | Coverage Period: 3 July – 2 August 2018 | Category: Monthly Review
July in Brief
- Jamaica tourism arrivals tracking toward new annual record; north coast at capacity
- Housing deficit estimated above 100,000 units; annual production far below replacement pace
- Diaspora summer visits driving elevated inquiry and purchase activity
- Hurricane season enters active phase; ODPEM alerts raised to seasonal norm
- NHT joint venture schemes advancing; St Catherine pipeline most active
- Federal Reserve hiked again in June; USD strengthening; J$ under mild pressure
Housing Market
July has historically been one of the most active months in Jamaica’s residential property calendar, and 2018 has conformed to that pattern. The combination of diaspora visitors — many of whom combine family visits with property viewings and, in some cases, purchasing decisions — and the sustained inquiry pipeline from the domestic first-time buyer segment has produced a market that is, by most measures, performing at or above prior-year levels.
Price appreciation in the Kingston market has been modest but consistent, reflecting the fundamental tension between strong demand and constrained supply. Sellers of well-located, recently refurbished residential properties in established Kingston suburbs — Cherry Gardens, Norbrook, Stony Hill, and the upper reaches of St Andrew — are finding buyers without prolonged marketing periods. The condominium and serviced apartment segment in New Kingston has seen particular buoyancy, with rental yield expectations sustaining investment buyer interest.
In the outer Kingston market and Portmore, the gated community segment has continued to perform. Greater Portmore’s development pipeline — comprising a mix of NHT joint-venture schemes and entirely private-sector developments — has been the most active in terms of new unit launches, and absorption has been satisfactory. The St Catherine corridor more broadly is increasingly seen by developers as the frontier of affordable family housing for the Kingston commuter population, given land availability and price relative to the capital’s increasingly expensive residential market.
Tourism and the North Coast Market
Jamaica’s tourism sector is on course for what may be a record year in 2018, building on the 4.3 million arrivals recorded in 2017. Visitor spending, hotel occupancy, and cruise passenger numbers along the north coast corridor have all been tracking above year-earlier levels through the first half of the year, and July has seen summer peak conditions that the island’s hospitality infrastructure has absorbed with minimal capacity strain.
The residential property market on the north coast has been a direct beneficiary of this tourism vitality. Investor demand for villa and apartment product that can be placed into the short-let vacation rental market — particularly through Airbnb — has been the defining trend of the north coast residential market in 2018. Montego Bay and its suburban parishes of St James have attracted the largest volume of investment-grade purchases, while Negril and Ocho Rios have drawn smaller-scale individual investors seeking entry-point units at lower capital commitment thresholds.
The linkage between tourism performance and housing demand creates a virtuous cycle for north coast property values, but it also creates a degree of vulnerability: a significant tourism downturn — whether from hurricane activity, a geopolitical event, or a shift in visitor preferences — would likely dampen short-let yields and reduce investment buyer appetite. For the moment, that risk is assessed as remote by most market participants.
Hotel and resort construction along the north coast has been proceeding at pace, with several major properties in various stages of development. This commercial construction activity is drawing skilled tradespeople from the residential sector, adding to labour cost pressures that compound the impact of rising materials costs on residential project economics.
The Deficit Dimension
The structural housing deficit that sits at the heart of Jamaica’s property market story is worth examining in detail at this mid-year point. Estimates from housing sector analysts and government sources place the cumulative shortfall at between 100,000 and 120,000 units — a figure that encompasses inadequate housing conditions as well as absolute unit scarcity. Against this deficit, annual new housing production from all sources — NHT schemes, HAJ developments, private developers, and self-build — is producing somewhere in the range of 6,000 to 8,000 units per year.
The arithmetic is stark: at current production rates, the deficit is not being eliminated; it is at best being held roughly stable, and may be growing as new household formation outpaces new housing completions. Population growth, urbanisation, and the breakup of multi-generational households into smaller family units are all structural forces that sustain and expand underlying housing demand.
The NHT’s institutional response to this deficit — expanded joint-venture programmes, the Guaranteed Purchase Programme, land-and-building loans for self-builders — represents a genuine and serious attempt to mobilise the Trust’s resources against the problem. But the scale of resources available to the NHT, and the constraints imposed by the Consolidated Fund transfer arrangement and the requirement to maintain loan book quality, mean that the Trust alone cannot resolve a challenge of this magnitude. A more comprehensive response would require additional government capital allocation, reformed planning systems, and innovative land utilisation policies — all of which are longer-term structural changes that political and administrative systems are typically slow to deliver.
Hurricane Season: Peak Risk Window
August marks the beginning of the statistical peak of the Atlantic hurricane season, with the historical record showing that the majority of major Caribbean hurricane events occur between mid-August and mid-October. Jamaica’s Office of Disaster Preparedness and Emergency Management has issued updated seasonal guidance, and the property market is, as every year, acutely aware of the potential for a catastrophic weather event to disrupt both construction activity and the broader economic conditions that sustain housing demand.
The 2018 Atlantic season has been relatively quiet through the early months — a relief given the devastation of 2017 — but forecasters are cautioning against complacency, noting that sea surface temperatures in the Atlantic remain elevated and conditions remain favourable for storm intensification should disturbances develop. Jamaica’s position in the western Caribbean makes it vulnerable to storms tracking through the Gulf of Mexico approaches, and the island’s housing stock — including a significant proportion of informal and self-built homes that do not meet modern wind-resistance standards — remains exposed.
Government Policy and NHT
The NHT has been maintaining its programme delivery schedule, with mid-year progress on joint-venture schemes in St Catherine and St James the principal focus of public communications. The HAJ has continued its land-titling work and has been active in the construction of social housing in St James, where urban renewal needs are acute. The government’s broader housing policy has not produced significant new announcements in the July period, with the focus on programme execution rather than new initiatives.
Diaspora Buying Season
The summer period is the peak diaspora buying season, and 2018 appears to be tracking consistently with prior years for US and Canadian buyers. The exchange rate at approximately J$129 to the US dollar is broadly neutral — not providing the dramatic tailwind of earlier years when the Jamaican dollar weakened more rapidly, but equally not representing a headwind for hard-currency buyers. Diaspora mortgage products at JN Bank, NCB Financial Group, and VM Group remain actively marketed, with pre-approval processes designed to accommodate buyers who complete the transaction process during or immediately after Jamaican visits.
Looking Ahead
The August and September period will be defined by hurricane season risk management, the tail end of the diaspora buying season, and market preparation for the traditionally more active autumn transaction period. The north coast market should sustain its momentum as tourism peak season continues. The deficit story — the fundamental mismatch between Jamaica’s housing needs and its production capacity — is unlikely to produce a breakthrough resolution in the near term, but any NHT policy announcements on loan limits or new programme expansions would be welcomed by the market and would likely catalyse buyer activity.
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