Post-Elsa Recovery Fuels Construction Sprint as Jamaica’s Property Market Enters Peak Season — Jamaica Homes Monthly Housing & Development Review — September 2021

Publication Date: 3 September 2021 | Coverage Period: 3 August – 2 September 2021 | Category: Monthly Review

August in Brief

• Construction sector reports full recovery from Elsa disruption; repair demand adds to pipeline.
• Jamaica GDP growth data for first quarter of fiscal 2021/22 confirms recovery trajectory.
• Kingston apartment market records strongest August in five years; young buyer demand intact.
• NHT third-quarter approvals on pace; HAJ advances St James and Trelawny schemes.
• Inflation pressures acknowledged by BOJ; policy rate held at 0.50% but tone shifts.
• Hurricane season peak approaches; construction insurance demand rises across parishes.

Housing Market Overview

August 2021 has brought confirmation that Jamaica’s residential property market has absorbed the disruption of Tropical Storm Elsa and resumed its pre-storm trajectory with momentum intact. Transaction volumes in August have recovered to levels consistent with the strong first-half performance, and the additional demand generated by storm repair work has provided a further fillip to the construction sector.

The market’s resilience through the Elsa disruption has reinforced a view among property investors and developers that Jamaica’s housing demand fundamentals are robust enough to absorb periodic weather-related disruptions without a material change in trajectory. The structural drivers of that demand — a housing deficit that the NHT and private sector combined cannot close quickly, demographic pressure, strong remittance flows, and historically low borrowing costs — remain firmly in place.

Prices have continued to rise across the major market segments. The J$15 million to J$40 million range — the primary financing band for NHT-eligible buyers and combined NHT/commercial mortgage borrowers — remains the most competitive segment, with well-located properties in good condition attracting offers at or above asking price from multiple parties. Above J$50 million, the diaspora and upper-income local buyer market is showing renewed activity following several months of relative quietness in the immediate post-lockdown period.

Government Policy

The NHT’s third-quarter performance under the 2021/22 fiscal year targets reflects the sustained pipeline of applications and approvals. The Trust has maintained its commitment to zero-percent interest rates for the majority of contributors, and the enhanced loan ceilings introduced on July 1 are beginning to be reflected in the application mix, with a larger share of applicants accessing the higher loan tiers made available by the revised eligibility criteria.

The Housing Agency of Jamaica is advancing its St James and Trelawny programmes, both of which are targeting the mid-market segment in parishes where private developer activity has historically been less concentrated than in Kingston and St Catherine. The HAJ’s role in these markets — assembling land, providing infrastructure, and selling serviced lots or completed units to NHT-eligible buyers — remains essential to ensuring that housing supply is developed beyond the primary Kingston metropolitan market.

The Bank of Jamaica held the policy rate at 0.50 per cent at its August meeting, but the tone of the MPC’s communication has shifted perceptibly. Inflationary pressure, which the Committee has consistently described as externally driven and therefore potentially transitory, is showing signs of persistence, and the MPC has indicated that it is monitoring the trajectory closely. Governor Byles’s public statements have become somewhat more explicit about the conditions under which a rate adjustment might be considered, setting the stage for a potentially significant policy decision before the end of 2021.

Construction Sector

The construction sector’s August performance has been strong, combining the ongoing momentum of the broader residential market with the additional demand created by Elsa repair work. Contractors across the island are reporting full order books, and some are turning away new work due to capacity constraints on both the materials and the skilled labour fronts.

The materials cost environment has not improved materially. Global commodity prices for steel and copper remain elevated, and shipping costs — which have been a compounding factor in import price inflation for Jamaican builders throughout 2021 — show no sign of returning to pre-pandemic norms in the near term. Contractors and developers have adapted by building larger contingency allowances into project budgets, extending material procurement lead times, and in some cases redesigning projects to reduce reliance on the most price-volatile imported materials.

The formal construction sector — licensed contractors operating on permitted projects with professional oversight — is benefiting disproportionately from the current environment, as clients and lenders are increasingly insistent on documented compliance with building codes and approval processes. The events of July, in which informal and non-compliant structures performed significantly worse in the storm than properly built equivalents, have strengthened the practical as well as the regulatory case for proper construction management.

Major Developments

The Kingston apartment market’s August performance has been its best in five years, according to agents active in the sector. Multiple projects in the New Kingston, Half Way Tree, and Liguanea districts are reporting strong pre-sales, with buyers in the 25 to 40 age cohort driving registration volumes. The appeal of this market segment is clear: urban convenience, security, professional management, and the ability to purchase without the maintenance burden of a standalone property are all factors that resonate with Jamaica’s growing professional class.

In Portmore, August has continued the parish’s strong run. Several schemes of between 150 and 500 units are at various stages of planning, approval, and construction, with sales programmes running across the price spectrum from J$12 million starter units to J$35 million family homes. The NHT’s July 1 loan ceiling increase has been particularly significant for Portmore buyers, as it has elevated the accessible price point for NHT-only financing in a market where many schemes were previously priced just above the old loan limit.

Infrastructure

The repair of roads and drainage infrastructure damaged by Elsa is progressing across the affected parishes. The National Works Agency has prioritised the completion of key arterial routes before the peak of the hurricane season in September, recognising that road infrastructure integrity is a critical determinant of emergency response capacity as well as economic activity.

The Southern Coastal Highway’s progress continues to generate property market interest in the parishes along its route. Communities in the eastern portion of St Catherine and into Clarendon that will gain improved Kingston connectivity upon the highway’s completion are already seeing speculative land activity from investors who understand the historical pattern of residential land appreciation in highway-adjacent communities.

Investment and Finance

Jamaica’s economic recovery data are providing an encouraging backdrop for property investment. First-quarter fiscal 2021/22 GDP data have confirmed positive growth, with the construction, manufacturing, and services sectors all contributing positively after the severe contraction of the pandemic year. The recovery’s pace and breadth are strengthening the employment and income base from which residential mortgage demand is drawn.

The JSE property sector and real estate investment vehicles continue to attract inflows from retail investors who want property exposure without the capital requirement of direct ownership. Fund managers report that property-linked products are among their better-performing offerings in 2021, reflecting the combination of income yield and capital growth that the Jamaican property market has been delivering.

Diaspora Activity

Remittance flows have maintained their elevated pace through August. The additional flows prompted by Elsa in early July appear to have normalised, but the underlying level of diaspora financial engagement with Jamaica remains at or above the record levels established in 2020. Property-related remittances — funds sent specifically to support land purchases, construction, or mortgage payments — are estimated to represent a significant share of the total inflow, though disaggregated data at this level of detail are not routinely published by the BOJ.

Jamaicans in the diaspora who have been planning property purchases are beginning to move from intention to action as the prospect of in-person visits to the island becomes more realistic with the gradual easing of travel restrictions. Attorneys and agents who work extensively with overseas clients report that the pace of transaction progression has accelerated noticeably in August compared with earlier in the year.

Affordability

The affordability challenge in the Jamaican housing market has not diminished through the summer. Rising construction costs are being passed through to new-build prices, and the stock of resale properties at price points accessible to first-time NHT buyers is becoming thinner as existing homeowners who purchased several years ago at lower prices are reluctant to sell at a time when replacement cost is high. The net effect is a compression of supply at the more affordable end of the market at precisely the moment when demand from NHT contributors is at its highest.

Regional Context

The 2021 Atlantic hurricane season continues to be active, with the National Hurricane Center tracking several systems in the Atlantic basin as September approaches. Jamaica, which sits at the historically vulnerable latitude for Caribbean hurricane tracks, is maintaining its seasonal emergency preparedness. The property market’s memory of July’s disruption is keeping insurance demand elevated and building standards discussions active in the professional community.

Looking Ahead

The September and October months will be critical for several aspects of Jamaica’s housing market outlook. The Bank of Jamaica’s next monetary policy decision will be watched closely for any signal that the rate-hold posture is shifting — any movement in the policy rate would have significant implications for commercial mortgage costs and, over time, for the affordability of homeownership for the income bands that rely on commercial financing. The NHT’s concessionary rates provide insulation for the largest segment of the market, but commercial mortgage borrowers represent a meaningful and growing share of buyer demand, particularly in the upper portion of the mid-market.

The passage through the peak of hurricane season without a further significant event would provide a welcome boost to confidence among developers, contractors, and buyers who are navigating an already complex operating environment. The market’s fundamentals remain sound; the question is how much additional uncertainty the external environment will impose before the final quarter of 2021 brings, all things being equal, a period of clearer conditions for Jamaica’s property market to continue its recovery and growth.

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