Jamaica Real Estate Roundup — Q1 2020: A Strong Start, Then the World Changed

• January–February strong: tourism at peak winter season, property market active.
• COVID-19 confirmed in Jamaica March 10 — the quarter fractures in two.
• BOJ begins emergency rate cuts; overnight rate heads toward historic low.
• Government closes borders, imposes curfew — transactions freeze by late March.
• Tourism shut down entirely; the island’s largest sector suspended indefinitely.

The first quarter of 2020 was, in the most literal sense, two quarters in one. The first two months — January and February — were among the most positive opening periods that Jamaica’s property and tourism sectors had experienced in the post-IMF-programme recovery era: a strong winter tourism season, an active residential transaction market, and a general economic environment that the data of 2019 had given practitioners reason to enter 2020 with confidence. The third month — March 2020 — was something else entirely. It was the month in which COVID-19 arrived in Jamaica, the month in which the island’s government imposed curfews and movement restrictions that had no modern precedent, and the month in which the property market’s active January-February pace ground, within weeks, to a near-complete halt.

The COVID-19 virus, which had been spreading through China and then Europe and the United States through January and February while Jamaica’s tourism season proceeded normally and its property market transacted, arrived in Jamaica with the confirmation of the island’s first case on March 10, 2020. The response was swift: the government imposed a curfew, closed schools, restricted non-essential business, and within days had suspended international air passenger arrivals — a measure that, in a single decision, removed the tourism sector’s demand base and set in motion the economic consequences that would define the balance of 2020.

The Bank of Jamaica’s response was equally swift. The Monetary Policy Committee convened outside its normal meeting schedule to begin the series of emergency rate reductions that would, over the coming months, bring the overnight policy rate to 0.50 per cent — a level without precedent in the institution’s history. The BOJ’s communications through the final weeks of March 2020 were explicit about the scale of the economic shock and the monetary authorities’ determination to deploy every available tool in support of a recovery whose timeline was, at that moment, completely unknown. The accommodative rate environment these emergency cuts created would, in ways that no one in late March 2020 could have anticipated, become one of the defining structural conditions of the property boom that followed.

The First Two Months: Strength and Confidence

The contrast between the quarter’s first two months and its final weeks makes the January-February period worth examining on its own terms. Tourism had entered its peak winter season with the momentum of a 2019 that had been, by several measures, among the strongest in Jamaica’s modern tourism history. Visitor arrivals, hotel occupancy and tourism revenue had all tracked at or above target through 2019, and the early 2020 winter season — the January to mid-April period that traditionally draws the heaviest concentration of North American and European visitors seeking Caribbean warmth — had opened strongly. The major resort operators were reporting occupancy rates and per-room revenue figures consistent with or ahead of the comparable 2019 period. The outlook for full-year 2020, as February drew to a close, had been for another strong year.

The residential property market in January and February 2020 was likewise operating with the confidence that Jamaica’s improving economic fundamentals had sustained through the post-IMF-programme period. Transaction volumes in the Kingston and St Andrew market were healthy. The strata apartment sector, which had been building momentum through 2018 and 2019 as the development pipeline responded to the demographic demand for urban apartment product, had several projects in active pre-sales and a number of completions and transfers in process. The NHT’s lending activity through the opening months of the year was reflecting steady demand from contributors in the qualifying entitlement cohort. The land market in the resort parishes was active. The overall picture, as of February 2020, was of a property market building on the foundations of a strong 2019 and expecting another year of solid, if not spectacular, activity.

March: The Break

The speed at which the picture changed in March 2020 was disorienting for every participant in the property market. Within two weeks of the confirmation of Jamaica’s first COVID-19 case on March 10, the island was operating under conditions that no professional in any sector of the economy had experienced in their working life. The government’s curfew — initially from 8pm to 6am, subsequently extended and tightened as the public health authorities assessed the situation — restricted the physical movement that property transactions depend upon. Law offices, estate agency premises, the National Land Agency’s service centres and the financial institutions whose approvals were required to complete purchases all moved to restricted or remote operations with varying degrees of operational effectiveness.

The cruise industry had globally suspended operations by mid-March, removing at a stroke one of the significant visitor segments that contributed to Jamaica’s tourism economy and the property markets of the parishes through which cruise passengers moved. International air passenger arrivals were suspended from March 22. The resort hotels began the process of managing the departure of their remaining guests and the suspension of operations, with major operators announcing temporary closures whose duration was, at the time, presented as weeks but would ultimately extend to months.

Property Market: Transactions on Hold

The property transactions that had been in active process as March began — the purchasers who had made offers, agreed prices and instructed attorneys; the sellers whose transfers were approaching completion; the developers whose pre-sold units were approaching the stage at which purchasers would need to arrange their financing and begin the formal conveyancing process — found themselves in an environment where the normal processing mechanisms had been disrupted without the underlying intention to transact having changed. Most buyers and sellers wanted to complete their transactions. Most lenders were willing, in principle, to process their commitments. But the physical processes that Jamaican property law required — the in-person elements of conveyancing, the attendance at the NLA’s offices, the physical inspection and valuation that mortgage approvals require — were impeded by conditions that had no procedural precedent.

The result, through the final two weeks of March 2020, was a property market in suspension. Not a collapsed market — the prices were not falling, the sellers were not in distress, the buyers were not withdrawing — but a market in which the mechanism of transaction had been disrupted to a degree that made completion impractical. The Q1 2020 transaction data would ultimately reflect a strong January-February and a near-blank March, a pattern that matched the experience of virtually every sector of the Jamaican economy through the same period.

Economic Context and Policy Response

The government’s economic policy response to the pandemic was as swift as its public health response. The Minister of Finance articulated a package of fiscal measures — wage support for affected businesses, deferral of certain tax obligations, support for the tourism sector’s payroll — that was designed to cushion the economic shock while the duration of the disruption remained unknown. The CARICOM regional framework for coordinated economic response was invoked. The IMF’s Rapid Financing Instrument, which provides emergency financing to member countries facing sudden economic shocks, was accessed. The fiscal architecture that Jamaica had constructed through its IMF programme period — the debt reduction, the primary surplus discipline, the reserve buffer — provided the credibility with international financial institutions that made access to emergency support facilities possible on terms that a less fiscally disciplined economy would not have obtained.

The NHT implemented a package of relief measures for its contributors and mortgagors. Payment deferral facilities were made available to mortgagors experiencing COVID-19-related income disruption — particularly important for contributors in the tourism and hospitality sectors whose income had been directly and immediately affected by the shutdown. The Trust’s new lending activity, which had been healthy through January and February, was disrupted by the operational constraints and the income uncertainty that March’s events had created, and the Q1 closing data would reflect this disruption in the form of reduced approvals and disbursements relative to the year’s opening projections.

As the Quarter Closes: Unprecedented Uncertainty

As this review is compiled in the first days of April 2020, Jamaica’s property market is in a state of suspension whose duration is unknown. The pandemic’s epidemiological trajectory, the government’s public health response and the timeline for the restoration of the economic conditions that property transactions require are all unresolved. The tourism sector’s recovery — the critical input to the resort property markets and, through employment income and foreign exchange flows, to the broader economic conditions that support the residential market — will depend on variables that include the global pandemic trajectory, the decisions of source market governments on travel, and the response of international travellers whose confidence in Caribbean resort destinations will need to be rebuilt.

What can be said is that the conditions that were assembling before COVID-19’s arrival — the underlying demand drivers of the housing deficit, the demographic aspiration and the diaspora connection — have not been eliminated. They have been interrupted. The BOJ’s emergency rate reductions are creating a monetary environment that is, paradoxically, more stimulative than any that preceded the pandemic. And Jamaica’s institutional response — the fiscal discipline that provides access to emergency financing, the public health architecture that is managing the pandemic, the resilience of an economy that has navigated IMF programmes and external shocks before — is functioning in the conditions the crisis has created. The Q2 review will tell the story of what all of this produces.

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