Seven Years Running: Jamaica’s Property Market Closes 2018 With a Record it Has Never Before Achieved

The North Coast at the Top of Its Cycle

Tourism’s strong 2018 performance — 4.4 million visitor arrivals, a new annual record — kept the north-coast property market active into the year’s final quarter. Beachfront and near-beach land in the Montego Bay, Ocho Rios, and Negril corridors had been appreciating at the highest sustained rates in the country for three consecutive years, and by year-end the absolute price levels for well-located north-coast land had moved into territory that was beginning to attract developers’ attention to the economic viability of high-density resort development — the kind of project that requires a certain minimum land value to justify the investment in infrastructure, planning, and construction that large-scale resort development demands.

What This Means

Jamaica closes 2018 having achieved something that fiscal analysts would have considered improbable in 2010 and implausible in 2005: a debt-to-GDP ratio below one hundred percent, a seventh consecutive year of economic expansion, record tourism arrivals, and a property market sustaining post-crisis high volumes at moderating but still healthy appreciation rates. These are not the metrics of a developing economy in crisis. They are the metrics of a developing economy that has made consistent structural progress over a decade and is beginning to reap the compounding returns of that progress.

The outlook for 2019 raises a question that Jamaica’s modern economy has never previously been in a position to ask: what does a normalised economic cycle look like for Jamaica, without the IMF conditionality that has anchored its fiscal behaviour for most of the preceding decade? The PLL arrangement provides insurance, not direction. The Fiscal Responsibility Framework provides rules, not guarantees. What holds the fiscal framework together in a normalised environment is political will — and that political will is about to be tested in an election cycle that the constitutional calendar is approaching. The market is watching, and it knows what fiscal slippage looks like. The confidence of the past seven years is real. It is also, like all confidence, conditional.

jamaica-homes.com | Market Analysis | Q4 2018

GDP growth in 2018 will mark Jamaica’s seventh consecutive year of economic expansion — a sequence without precedent in the modern era. The property market closes the year in step with the economy: quieter than 2017’s boom, but deeper and more durable.

• GDP growth estimated 1.9 percent for 2018; seventh consecutive year; an unprecedented Jamaica record
• Full-year property transaction volumes hold at post-crisis highs despite price moderation
• Premium residential prices appreciate eight to ten percent for the year; middle market six to eight
• NHT annual mortgage disbursements exceed J$28 billion for first time
• Debt-to-GDP falls below one hundred percent for first time in Jamaica’s modern fiscal history
• Tourism records 4.4 million visitor arrivals; north-coast land market buoyant into year-end

The number that defined 2018 for Jamaica was not a property statistic. It was a fiscal one: the debt-to-GDP ratio fell below one hundred percent for the first time in Jamaica’s modern economic history. The figure that had once seemed like an asymptote — the level toward which policy aspired but which the country’s structural fiscal dynamics always seemed to prevent it from reaching — had been breached. Jamaica’s national debt was, for the first time since before the FINSAC crisis of the 1990s, smaller than the annual output of the economy. For a country that had carried a debt burden in excess of one hundred and forty percent as recently as 2013, the achievement was remarkable. It was also, for the property market, highly significant: it represented the terminal evidence that the fiscal transformation underpinning the low-rate environment was structural and not temporary.

The property market’s year was characterised by the sensible moderation that follows a period of exceptional appreciation. Full-year transaction volumes held at the post-crisis highs established in 2017, maintaining the momentum but without the frantic pace that had characterised Q2 and Q3 of the previous year. Premium residential prices appreciated at eight to ten percent for the year — half the rate of 2017 but still well above the long-run average of the pre-crisis decade, and consistent with an underlying demand environment that remained active. The middle market, where NHT financing set the effective price ceiling, saw appreciation of six to eight percent, tracking closely with the income growth and NHT limit adjustments that determined affordability in that band.

The National Housing Trust’s annual mortgage disbursements crossed the J$28 billion threshold for the first time, a milestone that reflected both the volume of lending and the rising average loan size as property prices increased through the expansion. The NHT’s balance sheet capacity, built on decades of mandatory payroll contributions, was proving to be an extraordinary structural asset in a rising market: its ability to deploy capital at below-market rates to a defined contributor class meant that the affordability floor in Jamaica’s residential market was institutionally maintained even when market prices moved above the point where purely commercial lending could serve first-time buyers in the lower-income bands.

The North Coast at the Top of Its Cycle

Tourism’s strong 2018 performance — 4.4 million visitor arrivals, a new annual record — kept the north-coast property market active into the year’s final quarter. Beachfront and near-beach land in the Montego Bay, Ocho Rios, and Negril corridors had been appreciating at the highest sustained rates in the country for three consecutive years, and by year-end the absolute price levels for well-located north-coast land had moved into territory that was beginning to attract developers’ attention to the economic viability of high-density resort development — the kind of project that requires a certain minimum land value to justify the investment in infrastructure, planning, and construction that large-scale resort development demands.

What This Means

Jamaica closes 2018 having achieved something that fiscal analysts would have considered improbable in 2010 and implausible in 2005: a debt-to-GDP ratio below one hundred percent, a seventh consecutive year of economic expansion, record tourism arrivals, and a property market sustaining post-crisis high volumes at moderating but still healthy appreciation rates. These are not the metrics of a developing economy in crisis. They are the metrics of a developing economy that has made consistent structural progress over a decade and is beginning to reap the compounding returns of that progress.

The outlook for 2019 raises a question that Jamaica’s modern economy has never previously been in a position to ask: what does a normalised economic cycle look like for Jamaica, without the IMF conditionality that has anchored its fiscal behaviour for most of the preceding decade? The PLL arrangement provides insurance, not direction. The Fiscal Responsibility Framework provides rules, not guarantees. What holds the fiscal framework together in a normalised environment is political will — and that political will is about to be tested in an election cycle that the constitutional calendar is approaching. The market is watching, and it knows what fiscal slippage looks like. The confidence of the past seven years is real. It is also, like all confidence, conditional.

jamaica-homes.com | Market Analysis | Q4 2018

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