Hurricane Florence Spares Caribbean as Jamaica’s Autumn Market Picks Up Pace — Monthly Housing Review, September 2018

Publication Date: 3 September 2018 | Coverage Period: 3 August – 2 September 2018 | Category: Monthly Review

August in Brief

• Atlantic hurricane season active; Jamaica maintains heightened preparedness status
• Hurricane Florence approaches Atlantic basin; early tracking places US East Coast in path
• Autumn transaction pipeline building; Kingston and north coast markets active
• NHT mid-year scheme completions progressing; St Catherine handovers scheduled
• IMF issues positive mid-year commentary on Jamaica’s economic performance
• Emerging market currency pressures intensify globally; JMD holds broadly stable

Housing Market

Jamaica’s residential property market has moved into the autumn transition period with encouraging momentum, supported by a post-summer pipeline of buyer inquiries that is running at healthy levels across the Kingston Metropolitan Area and the north coast resort market. The diaspora buying season that peaked through July and August has produced a cohort of committed buyers who are in various stages of completing transactions, adding to the pipeline of autumn completions that typically characterises this time of year.

Sellers in established Kingston suburbs have maintained their pricing positions, with limited distress selling and strong buyer competition for well-presented properties in desirable locations. The gated community market in Portmore and the wider St Catherine corridor has seen new scheme launches in August, with several developers reporting strong pre-sale registration levels prior to formal launch. The Kingston condominium market has continued to attract both investor-buyers seeking rental yield and owner-occupiers drawn to the convenience and security profile of purpose-built apartment living.

In the rural and peri-urban market, the self-build segment has been active through the August period, with NHT materials loans and land-and-building products continuing to service households that are constructing homes incrementally. HEART/NSTA-trained graduates entering the trades market have helped maintain labour supply to this segment, which represents the primary housing production channel for Jamaica’s lower-income communities.

Hurricane Season: Alert and Relief

The Atlantic hurricane season has been unfolding with more activity than the relatively quiet early months suggested, and August saw several systems develop in the Atlantic basin that kept Jamaica’s emergency management authorities in heightened monitoring mode. Hurricane Florence, which has developed into a powerful system in the Atlantic, has been tracking toward the US East Coast rather than the Caribbean — a trajectory that, while catastrophic for the Carolinas, has spared Jamaica and its regional neighbours from direct impact.

The relief in Jamaica’s property and construction sectors at avoiding a direct hurricane impact is palpable but tempered by the knowledge that the season’s most statistically dangerous weeks — mid-September through mid-October — still lie ahead. The memory of the 2017 season’s catastrophic impact on fellow Caribbean territories remains fresh, and Jamaica’s building and insurance industries are taking no comfort from Florence’s non-appearance on the island’s doorstep.

For the property market, hurricane season awareness continues to translate into buyer interest in construction quality and building standards. Developers who can demonstrate reinforced concrete construction, hurricane-rated glazing, and code-compliant roofing systems are finding these features are actively sought by buyers — particularly in the retirement and vacation home segments where buyers may not be permanently resident and need confidence that their property can withstand a weather event without supervision.

Government Policy and NHT Delivery

The NHT has been progressing its mid-year scheme delivery schedule, with handovers of completed units in St Catherine expected through the September to October window. The Trust’s Guaranteed Purchase Programme has remained active, with continued transactions between NHT and approved private developers providing the liquidity floor that sustains developer confidence in the affordable housing segment. Joint-venture schemes in St James and Manchester have been advancing through planning and early construction phases.

The question of the NHT loan ceiling — which has remained at J$5.5 million through the year — continues to be debated in policy circles. Housing advocates have been pointing to the cumulative effect of construction cost inflation in eroding the ceiling’s real purchasing power, and the NHT’s own data on the gap between loan limits and average scheme unit costs is understood to have informed internal discussions about a prospective revision. No formal announcement has been made, and the expectation within the industry is that if a revision is coming, it is more likely to be signalled in the context of the next budget season rather than as a standalone mid-year announcement.

Construction Sector

Construction activity in Jamaica has remained at solid levels through the August period, supported by a combination of private residential development, hotel and hospitality construction, and public infrastructure works. The oil price environment — with Brent crude holding in the US$72 to US$78 range through August — has continued to exert upward cost pressure on construction inputs, though the rate of increase has moderated somewhat from the sharp rise seen through May and June.

Steel prices have been more stable in recent weeks, providing some relief to developers who had been grappling with rapid cost escalation in the first half of the year. Cement availability has been adequate, with Carib Cement maintaining production and supplementary imports available. The skilled labour shortage in certain trades — electrical, plumbing, and specialist masonry — persists as the structural constraint that slows project timelines for residential developers.

Global Financial Context

The global financial environment has become materially more challenging for emerging market economies since the Federal Reserve began its current rate-hiking cycle. The US dollar has strengthened against a broad basket of currencies through 2018, and several emerging market economies — Turkey and Argentina most prominently — have experienced significant currency crises. Jamaica has been insulated from the worst of this pressure by its strong IMF programme track record, disciplined fiscal management, and the ongoing positive sentiment generated by its status as an EFF success story.

The Jamaican dollar has experienced modest depreciation against the US dollar through the year — moving from approximately J$125 at the start of 2018 toward J$130 by late August — a pace of depreciation that is broadly consistent with inflation differentials and well within the range considered manageable by the Bank of Jamaica. For diaspora buyers, this gradual weakening of the Jamaican dollar translates into slightly improved purchasing power for their US dollar savings, providing a small but real incentive to proceed with Jamaican property purchases.

Diaspora Market Update

The UK diaspora market has continued its post-Windrush recovery through August, with JN Bank and other financial institutions reporting that the initial shock has begun to stabilise. Some UK-based Jamaican buyers who paused their property plans in the immediate aftermath of the scandal’s peak public exposure are beginning to re-engage, with legal clarity on the UK government’s commitment to a compensation scheme and the restoration of rights for those wrongly classified providing some reassurance. The longer-term question of whether the Windrush experience permanently alters the UK Jamaican community’s relationship with Britain — and thus their appetite for a Jamaican property anchor — remains open.

North Coast

The north coast market has been in its post-summer transition, with hotel occupancy moving off peak-season highs but remaining well above prior-year levels. Short-let vacation rental occupancy has also moderated from the July peak but continues to perform strongly for well-located properties with good online ratings. Developers of north coast residential schemes have been reporting continued inquiry interest from both Jamaican and international buyers, with several projects achieving key pre-sales milestones that enable construction financing drawdowns.

Looking Ahead

September brings the statistical peak of the hurricane season, and Jamaica will remain on heightened alert through the month. The autumn transaction market is expected to build further through September and October as buyers who visited in the summer finalise purchase decisions and the year-end motivation for transaction completion sharpens. The NHT’s delivery programme for the second half of the fiscal year will be watched closely, and any policy developments on loan limits would be significant. Globally, continued Federal Reserve rate hikes are expected, which will sustain USD strength and maintain the mild pressure on emerging market currencies including the Jamaican dollar.