COVID Shuts the Sites: Jamaica’s Housing & Construction Sector Confronts the Pandemic — April 2020

Publication Date: April 3, 2020 | Coverage Period: March 3–April 2, 2020 | Category: Monthly Review

March in Brief

• Jamaica records its first confirmed COVID-19 case on March 10; public health emergency declared.
• WHO declares global pandemic on March 11; Jamaica’s borders placed under heightened control.
• Nationwide night curfew imposed from March 28; only essential services permitted to operate.
• Construction activity severely curtailed; non-essential sites paused pending government guidance.
• BOJ cuts policy rate a further 25 basis points to 1.25%; NHT announces emergency mortgage relief.
• Property viewings suspended; real estate agents pivot rapidly to virtual consultations.

Housing Market Overview

March 2020 will be remembered as the month that altered the trajectory of Jamaica’s property market with startling abruptness. Until the March 10 announcement of Jamaica’s first confirmed COVID-19 case — a couple who had returned from the United Kingdom — the housing market had been operating in a state of cautious optimism, supported by low interest rates, a functioning NHT apparatus and moderate but steady demand. The announcement changed everything within days.

By the third week of March, normal real estate activity had largely ceased. Open house events were cancelled. Property viewings were suspended on public health grounds. Lawyers’ offices, through which conveyancing transactions are processed, restricted operations. Title searches at the National Land Agency slowed as staff numbers were reduced. Mortgage applications that had been in process were deferred or frozen as buyers and lenders alike assessed a situation for which there was no recent precedent.

The immediate market impact is one of paralysis rather than collapse. Vendors are not dumping properties; buyers have not disappeared. The pipeline of transactions that existed before March 10 — agreements for sale signed, mortgages approved — is working through the system, albeit more slowly than normal. What has suspended is new activity: new listings, new enquiries, new mortgage applications. The market is not in freefall, but it is in suspension.

Government Policy and the National Housing Trust

The NHT has moved with commendable speed to support its contributor base. Effective April 2020, the trust has reduced interest rates on all new mortgage loans by 1 percentage point and cut rates on all existing NHT loans by 0.5 percentage points — a measure that will benefit an estimated 100,000 existing NHT mortgage holders directly. The trust has also initiated a payment deferral programme for contributors whose employment and income have been materially affected by the public health emergency.

The government’s declaration of a public health emergency under the Disaster Risk Management Act has provided the legal framework for the measures being imposed. Prime Minister Andrew Holness, in a series of late-March addresses, outlined the rationale for the restrictions and the government’s economic support measures. Housing and construction were among the sectors specifically identified as requiring transitional support as the initial shock response gives way to a managed reopening strategy.

A curfew between 8pm and 6am was imposed on March 28, with only essential services permitted to operate outside those hours. The definition of essential services, and the criteria for construction site exemption, became an immediate point of concern for the development and contracting community.

Construction Sector

The construction sector has been among the most immediately and severely affected by Jamaica’s COVID-19 response. With the implementation of curfew measures and restrictions on movement, most construction sites across the island suspended operations in the final week of March. Workers, many of whom are daily-paid labourers without formal employment contracts or sick leave provisions, faced an abrupt cessation of income. The human cost of the construction pause is significant and concentrated among the most economically vulnerable workers in the sector.

HAJ and NHT-supervised sites entered a holding pattern as the agencies worked through the health and safety protocols that would govern any resumption. The physical distancing requirements imposed under the Disaster Risk Management Act are particularly difficult to implement on active construction sites, where communal tool use, confined working spaces and shared transportation are endemic to the production process.

The government signalled in late March that construction would be permitted to resume under a structured protocol regime, with sites required to demonstrate compliance before workers could return. This welcome development — given the sector’s importance to the economy and the housing pipeline — is expected to result in a phased reopening through April, with project timelines extended by weeks or months depending on the scale of interruption.

Major Developments

All major private and public sector development projects have been affected by the March disruption. Projects in advanced stages of completion — where interior finishing and fit-out are underway — face the greatest relative disruption, as these activities are typically more labour-intensive and require specialist tradespeople who are subject to movement restrictions. Projects at early earthworks stages are somewhat better placed to resume rapidly once protocols are in place, as the work is more amenable to physical distancing.

Real estate developers with large scheme developments across the island are conducting urgent reviews of project costs, timelines and financing arrangements. Pre-sales agreements that locked in prices and completion commitments before the pandemic are now being reviewed in light of the construction pause. The legal implications of force majeure provisions in sale agreements — whether the pandemic qualifies as an event relieving a developer of completion obligations — are being actively discussed in the legal and real estate communities.

Infrastructure

Public infrastructure works have also been curtailed, though critical maintenance and road works on major arteries have continued under essential service classifications. The suspension of non-critical public works will have budgetary implications, as capital spending programmed for the 2019/20 fiscal year ending March 31 will be deferred into the new fiscal year. The revised 2020/21 budget, which will need to accommodate significant emergency spending, is expected to show material changes to the original capital programme.

Investment and Financing

The Bank of Jamaica has cut its policy rate aggressively: from 0.50% pre-pandemic, with a 25-basis-point cut in February and a further 25-basis-point reduction on March 27 to 1.25%, with further easing widely anticipated. The BOJ has also reduced cash reserve requirements for commercial banks, injecting liquidity into the financial system at a moment when credit demand from the private sector is likely to be elevated even as the capacity to service new debt has been impaired.

Commercial banks are in active dialogue with the BOJ and the government about the framework for loan moratoria and mortgage payment deferrals. NCB, Scotiabank Jamaica and Victoria Mutual Building Society have each signalled flexibility on payment arrangements for customers in genuine hardship — a posture consistent with both commercial prudence and the public interest in preventing a housing default crisis on top of the health emergency.

Diaspora Segment

Diaspora engagement with the Jamaican property market has shifted dramatically in the space of weeks. Physical travel to Jamaica for property inspection and purchase finalisation is now impossible for most overseas buyers, as Jamaica has imposed restrictions on incoming travel. The pivot to fully virtual property engagement — video walkthroughs, video-conference legal consultations and digital conveyancing documentation — has been accelerated by necessity. Agents who had been progressively building digital capabilities are now deploying them at scale.

Remittance flows in March are expected to show initial resilience, as the economic effects of the pandemic on diaspora incomes in the UK and North America were only beginning to materialise through the month. The medium-term remittance outlook is more uncertain, given the severity of economic contractions underway in major source markets. Diaspora members in hospitality, food service and retail — sectors severely impacted by lockdowns in the UK, US and Canada — face real income risk that could affect future remittance capacity.

Affordability

The NHT’s emergency interest rate reductions improve affordability in a technical sense — lower mortgage rates reduce monthly repayment obligations for new and existing borrowers. But the more pressing affordability concern for March is income: households that have lost employment or seen hours severely reduced face an immediate cash flow crisis that no interest rate reduction can fully address. The NHT payment deferral programme is the more relevant policy tool for affected contributors, providing breathing space rather than a structural affordability improvement.

Regional Context

Across the Caribbean, the COVID-19 pandemic has imposed a near-simultaneous shutdown of tourism and a paralysis of normal economic activity. No island economy is insulated: Barbados, Trinidad, the Dominican Republic and the Cayman Islands have all implemented emergency measures. The regional property market implications are broadly similar — suspension of transaction activity, construction disruption, and acute uncertainty about medium-term tourism-driven demand. Jamaica’s experience of the past month mirrors that of its regional peers, compressed into a shorter timeframe.

Looking Ahead

April will be the critical test of Jamaica’s capacity to manage the health emergency while keeping its economy functional. The government has indicated that construction will resume under protocol, which is the most important near-term signal for the housing sector. The pace of reopening, the effectiveness of health protocols on sites, and the ability of daily-paid workers to return safely will determine how quickly the backlog of delayed projects can begin to clear.

For the property market, the key questions are: how long the transaction paralysis persists; whether the BOJ cuts rates further and how commercial banks respond; and whether the diaspora and domestic demand that existed pre-pandemic can be regenerated once restrictions ease. The depth of Jamaica’s housing deficit — an estimated 100,000+ units — means that structural demand is not in question. What is in question is the timing of its re-expression in the market. This review will continue to track developments through what promises to be the most extraordinary period Jamaica’s housing sector has faced in modern times.