Jamaica Real Estate Roundup — Q4 2019: A Record Year Closes, and the Decade Turns

• 2019 sets a new record for Jamaica tourism arrivals — approximately 2.7 million stopover visitors.
• BOJ continues gradual rate easing, supporting mortgage affordability.
• Residential market closes the year with solid transaction volumes across all segments.
• Strata development pipeline expanding; Kingston apartment supply set to grow.
• GDP steady at modest growth; fiscal consolidation continues post-IMF programme.

The fourth quarter of 2019 brought the curtain down on a year that Jamaica’s property market would, in the years that followed, come to regard as a significant benchmark — not because it was the most active or the most dynamic quarter in the island’s residential history, but because it represented the pre-pandemic high-water mark against which the disruption of 2020 and the extraordinary recovery of 2021 would be measured. The market that closed 2019 was a healthy, active and broadly well-functioning one: transaction volumes were solid, prices were rising modestly, the construction pipeline was active, and the tourism sector — the economic engine that drives so much of the income and employment on which the property market’s demand base depends — was closing what would prove to be its best year on record.

Tourism’s 2019 full-year performance was the standout macro story as the decade closed. Stopover visitor arrivals for the calendar year reached approximately 2.7 million — a new record that exceeded the previous benchmark and confirmed the sustained trajectory of growth that the tourism authorities had been projecting since the return to growth following the post-2010 recession. The winter season, which spans the final months of one calendar year and the opening months of the next, was robust: December 2019 occupancy in the major resort destinations of Montego Bay, Negril and Ocho Rios was strong, forward bookings for the 2020 winter season were encouraging, and the investment pipeline for new hotel capacity and major resort refurbishments was active across the western and northern parishes. The sector was, in December 2019, operating with the confidence of an industry at the top of its cycle.

The Bank of Jamaica was, through Q4 2019, continuing the gradual rate easing that had characterised its monetary policy stance through the preceding period, as the institution worked to bring inflation sustainably within its four-to-six per cent target range while supporting the economic conditions for growth. The overnight policy rate, reduced from the higher levels that had prevailed earlier in the decade, was creating a commercial mortgage environment that was more accessible than it had been for many years — still not at the extraordinary pandemic-era lows that would arrive in 2020, but meaningfully lower than the rates that had constrained affordability for a significant segment of potential homebuyers in the years immediately following Jamaica’s IMF programme period. The direction of travel was toward greater accessibility, and the property market’s transaction volumes reflected the effect of that direction on buyer activity.

Residential Market: A Year of Solid Progress

The residential market’s 2019 full-year performance was characterised by steady rather than spectacular progress. Transaction volumes across the island’s major sub-markets were solid: the Kingston and St Andrew market was active across price segments, the St Catherine suburban corridors were absorbing the demand from buyers priced out of the Kingston metropolitan market’s inner zones, and the resort parishes’ residential markets were benefiting from the tourism sector’s strong year. Price movement was positive but measured: the sharp appreciation dynamics that would characterise the pandemic-era boom were not yet visible in 2019’s data, and the market’s behaviour was consistent with a sector that was growing steadily rather than surging.

The characteristic that distinguished the 2019 market from both the constrained environment of the earlier post-IMF years and the euphoric boom conditions of 2020-2021 was a kind of normality: a functioning, active market in which supply and demand were reasonably balanced, where price negotiation between buyers and sellers produced outcomes that both parties regarded as fair, and where the pace of transaction — from offer acceptance to completion — followed established timelines without the urgency that would later characterise the boom’s peak. It was, in the retrospective assessment that the pandemic’s disruption would make possible, a market worth preserving — and one whose underlying strength would be tested and confirmed by the extraordinary events that followed.

The Strata Development Pipeline

One of the most important structural features of the 2019 market was the developing pipeline of strata residential supply that was being built in response to the demographic and lifestyle demand that the Kingston metropolitan area’s young, urban professional population was generating. The strata apartment — the multi-family, amenity-equipped, managed residential building that offered an urban lifestyle product the traditional Jamaican housing market had not supplied at scale — had been gaining traction as a development product since the mid-2010s, but 2019 saw a significant acceleration in the pace at which developers were bringing new strata schemes to market.

The pipeline that was visible at the end of 2019 — schemes registered with the National Land Agency, projects in active construction, and earlier-stage developments in planning approval — represented a quantum of future supply that was, by the standards of the preceding decade, substantial. The developers bringing these projects to market ranged from the established names of the Jamaican residential sector to newer entrants who had identified the urban apartment market’s potential and were committing capital to it. The locations concentrated in the established residential corridors of Kingston and St Andrew — the Half-Way-Tree and Constant Spring axis, Barbican and Liguanea, New Kingston and the expanding Portmore market — where land availability, infrastructure standards and proximity to the island’s employment and commercial centres justified the development economics of mid-rise residential construction.

NHT and Affordable Housing

The National Housing Trust’s 2019 activity reflected the dual mandate of an institution responding to both the structural housing deficit that had accumulated over decades and the immediate needs of its contributor base. The Trust’s mortgage lending programme — open market loans to qualified contributors and financing for NHT-developed scheme properties — was operating at a pace consistent with the availability of qualifying applicants and the Trust’s project delivery pipeline. The quarterly application and approval data showed steady demand from contributors who had accumulated the entitlement and identified properties that met their needs and the Trust’s qualifying criteria.

The affordable housing market’s characteristic supply-demand imbalance — more contributors with qualifying entitlements than properties available at accessible price points to accommodate them — continued to characterise the segment through the fourth quarter. The government’s housing policy pronouncements through 2019 had acknowledged the scale of the deficit and committed to acceleration of the delivery pipeline through public-private partnerships, regulatory reform to reduce the cost and time of development approvals, and the NHT’s own construction programme. The translation of these commitments into the delivered units that the waiting population required was, as always, a process measured in years rather than quarters.

Commercial Real Estate: Stability and Selective Opportunity

The commercial real estate market in Q4 2019 was characterised by a stability that reflected the broader economic conditions of an island that had completed its IMF programme, maintained its fiscal consolidation targets, and was achieving modest but consistent GDP growth in the one-to-two per cent range. Office occupancy in New Kingston’s commercial district was healthy. Retail occupancy in the island’s primary shopping centres — Sovereign Centre, Marketplace, the major parish-capital retail operations — was reflecting the consumer spending that a recovering economy and improving employment conditions were generating. The hospitality real estate market was benefiting from the tourism sector’s record year, with operators investing in property upgrades and capacity additions that supported the island’s ability to service the growing visitor numbers.

Investment property yields in the commercial sector were reflecting a market that was competitive but not overheated. The cap rates applicable to prime commercial properties in Kingston and the resort areas were consistent with the risk-return profile of a small, open economy with improving institutional credibility — higher than the yields available on comparable assets in the developed world, but lower than the distressed yields that had characterised the post-financial-crisis period when Jamaica’s economic credibility had been more uncertain. Investors who had committed to Jamaican commercial real estate through the difficult IMF programme years were, by Q4 2019, holding assets that had appreciated in value as the economy’s trajectory improved and the fiscal and monetary framework stabilised.

Entering 2020: Confidence Intact

The Quarterly Jamaica Real Estate Roundup enters 2020 with the market in a position of confidence built on solid 2019 foundations. Tourism is at its record, the construction pipeline is active, the NHT is operating, and the monetary environment is supportive of the residential demand that Jamaica’s demographics continue to generate. The risks on the horizon are the conventional ones: exchange rate volatility, the global economic outlook, the pace of domestic GDP growth and the continued tightening of the fiscal policy that manages Jamaica’s debt burden. None of these risks, as we enter January 2020, suggest a market inflection that the data cannot accommodate.

There is nothing in the information available at the close of 2019 that suggests the year ahead will be other than a continuation of the modest, steady progress that 2019 represented. The Quarterly Jamaica Real Estate Roundup’s Q1 2020 edition will report on the opening months of what all current projections expect to be another solid year for the island’s property sector. If those projections prove correct, the report will confirm a market in steady, unglamorous health. If something unexpected intervenes, the Q1 report will be where we begin to understand what it means. At the close of 2019, the former outcome seems overwhelmingly more likely than the latter.

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