Publication Date: August 3, 2022 | Coverage Period: July 3 – August 2, 2022 | Category: Monthly Review
August 2022 in Brief
- BOJ lifts policy rate to 6.0 per cent — the eighth hike since September 2021 — signalling housing market risk.
- Senior Deputy Governor Wayne Robinson acknowledges potential for construction sector slowdown.
- Building society mortgage portfolio climbs to J$106 billion despite rising rate environment.
- Jamaica’s GDP growth trajectory remains positive as tourism and agriculture rebound.
- Caribbean construction costs up average 19–20 per cent over two years; Jamaica among hardest hit.
- Demand for NHT mortgages intensifies as commercial rate advantage widens further.
Housing Market Overview
The August 2022 review finds Jamaica’s housing market in a condition that defies easy characterisation. On one reading, the market is remarkably resilient: building societies’ mortgage portfolios are expanding, NHT construction continues at pace, and residential property listings in key markets continue to clear at prices that reflect sustained buyer appetite. On another reading, the warning signs are multiplying: the Bank of Jamaica’s eighth consecutive rate hike has been accompanied by explicit central bank acknowledgement that housing market fallout is a genuine risk, and the cost environment facing developers and self-builders has reached levels not seen in recent memory.
What is beyond dispute is that the August 2022 housing market is more complex, more pressured, and more structurally divided than it was at the start of this year. The structural forces that created Jamaica’s post-COVID property boom — pent-up demand, diaspora engagement, low NHT rates, limited supply — remain in place. But the external environment has shifted materially, and the market is beginning to price in risks that were theoretical abstractions just six months ago.
The BOJ’s Rate Cycle and Housing Market Risk
The Bank of Jamaica’s decision in August to raise its benchmark policy rate by a further 50 basis points — bringing it to 6.0 per cent — was the eighth upward revision since September 2021. The cumulative scale of this cycle is extraordinary by Jamaican monetary policy standards: from approximately 0.5 per cent at the start of 2022 to 6.0 per cent by mid-year represents a tenfold increase in the policy rate over nine months.
Senior Deputy Governor Dr Wayne Robinson addressed the housing market implications directly, acknowledging that there was a risk and slowdown expected, while stopping short of predicting a recession in the construction and housing sectors. The BOJ’s position is nuanced: the rate hikes are necessary to control inflation — which has been running in the 8–11 per cent range — but the central bank is aware that the transmission into higher mortgage costs carries real consequences for the housing market.
The Jamaica Gleaner reported the BOJ’s housing market assessment on August 21, noting that while the central bank expected some fallout, it did not view the housing market as a sufficient reason on its own to pause the tightening cycle. This framing places the BOJ firmly in the camp of central banks globally — including the US Federal Reserve and the Bank of England — that are prioritising inflation control over near-term asset market stability.
Mortgage Market: The Squeeze Deepens
Commercial mortgage rates are now approaching or exceeding 8–9 per cent at some lenders, compared to rates in the 6–7 per cent range that characterised the market at the start of 2022. For a prospective buyer of a J$20 million property with a J$15 million mortgage, this represents a meaningful deterioration in monthly debt service — enough to push some buyers to the edges of their affordability envelope or beyond it.
The building societies, which dominate the middle-market mortgage space, have seen their aggregate portfolio expand despite the rate environment — a function of the substantial backlog of existing applications and pre-approvals working through the system. The value of mortgages on building society balance sheets climbed from J$96.3 billion in September 2021 to J$106.3 billion by mid-2022, suggesting that disbursement activity has remained elevated. But the rate at which new applications are being submitted is a question that the sector is watching closely.
The NHT, which operates on an income-linked rate structure immune to the BOJ’s policy cycle, continues to receive strong application volumes. Practitioners report that contributors who had been weighing their options between NHT and commercial financing are now more firmly in the NHT camp — or are deferring purchase until they qualify for NHT products. The Trust’s rate advantage over the commercial sector has arguably never been wider in recent history.
Construction Sector: The Materials Crisis
The construction sector’s cost crisis deepened further in the coverage period. Caribbean-wide data from industry bodies indicates that average construction costs across the region have risen approximately 19–20 per cent from 2020 to mid-2022. Jamaica — which is exposed to imported material costs through its dependence on US-dollar-priced steel, cement, timber, and petroleum-derived construction products — has experienced cost increases at the higher end of this range.
The Ukraine war’s effect on global commodity markets remains the dominant driver of materials price pressure. Steel, whose production is energy-intensive and whose global supply was already disrupted by the conflict, remains elevated. Cement, produced domestically by Caribbean Cement Company but also dependent on imported fuel and clinker inputs, has also risen in cost. Energy price spikes — diesel for construction machinery, propane for site operations — add a further layer of cost pressure.
For the self-build sector, the cumulative effect is severe. Surveys of hardware retailers suggest that some key inputs have risen by 30–40 per cent in price terms over the past twelve to eighteen months. Jamaican families who planned and budgeted their self-build projects in 2020 or early 2021 are finding those budgets structurally deficient. Some are seeking additional NHT top-up financing; others are scaling back plans, extending timelines, or pausing construction entirely.
NHT and Government Housing Activity
Notwithstanding the challenging cost environment, the National Housing Trust has maintained its construction programme. Multiple schemes are active across the island — in St Catherine, St James, Trelawny, and the Kingston Metropolitan Region — with the Housing Agency of Jamaica also advancing social housing and land titling initiatives. The NHT has indicated it is on track to approach 4,000 housing starts for the 2022 calendar year, supported by its joint-venture partnership model with private developers.
The political context for NHT activity remains significant. Prime Minister Holness’s June directive to refocus the Trust on affordable housing is now being operationalised, with reviews of the development pipeline underway. The NHT’s annual transfer to the Consolidated Fund — which has run at approximately J$11 billion annually under a government arrangement — is a continuing source of debate, with housing advocates arguing the funds would be better deployed in direct construction.
Diaspora Investment and Remittances
Diaspora-driven demand continues to provide a floor under the upper and mid-tier property markets. Remittances are tracking towards a record year, with US-based Jamaicans the dominant source cohort. The relative stability of the Jamaican dollar against the US dollar — at J$152–157/US$1 — preserves the effective purchasing power of USD-denominated savings for property acquisition. North coast luxury and mid-tier properties, and the upper Kingston residential market, continue to benefit from diaspora buyer activity.
Looking Ahead
As this review publishes in early August 2022, the housing market’s trajectory is genuinely uncertain in a way that was not true six months ago. The BOJ has warned of housing market fallout; construction costs are at historical highs; commercial mortgage rates are climbing. Yet demand has not collapsed, NHT activity continues, and the structural housing deficit remains unsolved. The September and October data will be critical in determining whether the market stabilises at its current level, adjusts gradually downward, or faces something more abrupt. Close monitoring of mortgage application volumes, building permits issued, and NHT disbursement data will be essential indicators in the months ahead.
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