A Year We Cannot Get Back: What COVID-19’s First Twelve Months Cost Jamaica’s Housing Market

Jamaica Homes Housing Affordability & Cost of Living Review — April 2021

• Jamaica’s economy contracted sharply in 2020 as COVID-19 devastated tourism, the island’s most significant economic sector
• Bank of Jamaica cut its policy rate to historic lows in 2020 and maintains accommodative conditions in 2021
• COVID-19 vaccines arrive in Jamaica in early 2021, with rollout beginning via the COVAX facility, raising cautious hopes for recovery
• The JLP government won re-election in September 2020 with an enlarged majority, providing policy continuity for the housing agenda
• Property market showed surprising resilience in 2020, supported by NHT lending, diaspora remittances and low rates
• NHT introduced emergency measures for contributors whose incomes were affected by the pandemic

A year ago, the world changed. COVID-19, which had been a distant news story in early March 2020, became in the space of weeks the defining event of a generation — a pandemic that closed borders, collapsed tourism, shuttered businesses, and forced governments everywhere to make choices about public health and economic survival for which no rulebook existed. Jamaica’s housing market, like every other aspect of Jamaican life, was reshaped by what followed.

Twelve months on, the assessment is more nuanced than the original shock suggested. The housing market did not collapse. Transactions were disrupted and delayed, particularly in the first half of 2020, as lockdowns, curfews, travel restrictions and generalised uncertainty made normal commercial activity impossible. But the market’s underlying structural features — a substantial unmet demand driven by a 150,000-unit deficit, an NHT with the financial capacity and mandate to continue lending, a diaspora committed to Jamaican property as a long-term asset, and a BOJ that moved quickly to cut rates and preserve liquidity — prevented the kind of market collapse that a pure economic impact analysis might have predicted.

What Tourism’s Collapse Did to Jamaica

Jamaica’s tourism sector, which generates more than 30 per cent of the country’s foreign exchange earnings and employs directly or indirectly a substantial share of the workforce, essentially ceased to function for most of 2020. The Jamaica Tourist Board’s data reflects the catastrophe: stopover arrivals fell by more than 70 per cent from 2019 levels. Hotels shuttered or operated at minimal occupancy. Airlines suspended routes. Cruise ships, which bring millions of day visitors annually, stopped calling entirely.

The housing market consequences played out along predictable lines. In the resort communities — Negril, Montego Bay, Ocho Rios, Runaway Bay — where the tourism economy directly feeds the short-term rental market and where much of the residential property stock is linked to tourist accommodation, revenues collapsed. Property owners who had relied on short-term rental income to service mortgages or generate investment returns found their income streams cut off essentially overnight. Some of these properties moved to long-term rental use, providing temporary supply-side relief to local workers in communities where long-term rental availability had previously been constrained by tourist-use competition. The irony is bitter: the housing crisis in resort communities briefly eased precisely because the economic crisis was so severe.

The NHT’s Pandemic Response

The National Housing Trust moved quickly in 2020 to introduce emergency support measures for contributors whose incomes had been affected by COVID-19’s economic disruption. The Trust offered mortgage deferral options, temporary interest relief, and expedited processing of improvement loan applications for contributors needing to adapt their homes to pandemic living conditions — home office conversions, ventilation improvements, space additions to accommodate family members who had returned home from closed educational institutions.

The Trust’s financial strength, built through decades of mandatory contribution from Jamaica’s formal sector workforce, gave it the capacity to extend these concessions without imperilling its mortgage lending programme. Contribution collection did contract as some contributors lost formal employment during the pandemic; the Trust’s response — continued lending supported by its accumulated reserves — demonstrated the countercyclical value of a mandatory, institutionalised housing finance system of the kind that many countries with less-developed mortgage markets entirely lack. Jamaica’s housing challenge is considerable; the institutional infrastructure to address it is, in comparative terms, a genuine asset.

Vaccines, Recovery and the Road Ahead

The arrival of COVID-19 vaccines in Jamaica through the COVAX facility in early 2021, and the continuation of the vaccination programmes in the United States, United Kingdom and Canada where Jamaica’s diaspora is concentrated, has changed the outlook for the recovery. The pace of Jamaica’s own inoculation programme has been constrained by global vaccine supply limitations; wealthier countries have secured the majority of available doses, leaving Jamaica and other smaller economies dependent on COVAX’s equitable distribution mechanism. But the trajectory — however gradual — is toward immunisation coverage that will allow something approaching normal economic activity to resume.

For the housing market, the recovery’s implications are positive on balance: returning tourism will restore incomes in resort communities, recovering employment will rebuild NHT contribution streams, and the diaspora’s recovery confidence will translate into renewed property investment in the island. The risk, as with any recovery that follows an extended shock, is that the return of demand outpaces the recovery of supply — that buyers who have been waiting for certainty all return to the market simultaneously, driving prices upward in a way that erodes the affordability improvements that low rates have created. Managing that transition well will require the NHT, the private sector and the government to ensure that supply is positioned to meet recovering demand.

What This Means

For buyers, the early months of 2021 represent a genuine opportunity that the market’s uncertain recent history should not be allowed to obscure. Interest rates are at historical lows. The NHT is lending. Developers who survived 2020 are bringing schemes back to market. The families waiting to own homes — and there are hundreds of thousands of them — will find fewer competitors today than they will twelve months from now when the recovery has fully materialised and demand is in full expression. Getting ready to act, and acting when ready, is the appropriate response to the current environment.

For the rental sector, the post-pandemic rental market will see the reversal of some of the temporary supply increase that occurred in 2020 as tourist-oriented properties returned to their previous use. Renters who benefited from this temporary easing should plan for its conclusion as tourism recovers and short-term rental economics reassert their normal advantage over long-term leasing in resort communities.

The Outlook: Cautious Optimism, Earned

Jamaica’s housing market has survived the first year of COVID-19 in better condition than the early shock suggested was possible. The structural demand is intact. The institutional capacity to serve it — the NHT, the building sector, the commercial lending market — has been preserved through a period that could have been more damaging. The rate environment is the most favourable in a generation. What the market needs now is supply: a construction sector capable of delivering the homes that the demand exists to absorb, at price points that the rate environment and the NHT’s benefit structure make accessible. That is the work of the next twelve months. It is urgent, and it should begin now.

This review is produced for informational and journalistic purposes only and does not constitute financial, legal or investment advice.

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