Publication Date: February 3, 2023 | Coverage Period: January 3, 2023 – February 2, 2023 | Category: Monthly Review
January in Brief
- BOJ monetary policy committee meets; policy rate held at 7.00 per cent
- Inflation decelerates to 8.1% in January, continuing gradual retreat from 2022 peak
- NHT contributor registrations rise as formal employment expands into new year
- Apartment complex launches in New Kingston and Half Way Tree attract investor buyers
- Self-build sector active; hardware and building supply retailers report strong January trade
- Short-term rental market on north coast sustaining occupancy through January tourism season
Housing Market Overview
January 2023 confirmed that Jamaica’s residential property market enters the new year in the same posture that defined the latter half of 2022: demand vigorous and broadly based, supply constrained, and the financing environment substantially tougher than it was two years ago. The month offered no catalyst for a shift in that fundamental balance, and the prognosis for the coming quarters remains one of continued pressure on affordability for buyers without access to concessionary public-sector financing.
Transaction volumes in the Corporate Area — Kingston and St. Andrew — reflected the seasonal January slowdown that typically follows the busy holiday period, but underlying enquiry and registration levels at real estate agencies remained elevated. The appetite for residential property among working Jamaicans, and among members of the diaspora evaluating purchases remotely, has not abated. What has changed is the set of conditions attached to realising that appetite in the commercial mortgage market.
The proliferation of gated communities and apartment complexes in Kingston’s northern and eastern suburbs, in Portmore’s expanding western neighbourhoods, and along the St. Catherine growth corridor reflects the developer community’s response to this demand. Projects in the J$8 million to J$25 million price range — broadly spanning the NHT-accessible and NHT-plus-top-up segment — continue to attract the strongest pre-sales interest. Luxury developments at higher price points are also selling, driven by upper-income buyers and diaspora investors, though at a more measured pace.
Monetary Policy and the Rate Outlook
The Bank of Jamaica’s Monetary Policy Committee concluded January without signalling any imminent change to the 7.00 per cent overnight policy rate. The BOJ’s communications have been consistent: rates will remain at their current level until inflation returns convincingly and sustainably within the 4 to 6 per cent target range. January’s inflation reading of 8.1 per cent — down from 9.4 per cent in December 2022 and from the 2022 peak that touched 10 to 11 per cent — represents welcome progress but does not yet constitute the confidence threshold the MPC has indicated it requires.
The implications for commercial mortgage markets are clear. Financial institutions are not positioned to price mortgage products substantially below the policy rate, and the current commercial mortgage band of 9 to 11 per cent reflects not only the policy rate but also credit risk pricing, term premia, and institutional funding costs. Housing market participants seeking commercial finance must budget for debt service at these elevated levels until there is a meaningful shift in the BOJ’s stance — a shift that, on current indications, appears unlikely before the second half of 2023 at the earliest.
In February, the BOJ’s Monetary Policy Committee took an additional step alongside the rate hold: a decision to increase the domestic and foreign currency Cash Reserve Requirements applicable to deposit-taking institutions by one percentage point, effective April 1, 2023. This move, aimed at absorbing excess liquidity from the financial system, signals that the central bank remains in active tightening mode even as its headline rate is held steady. For commercial lenders, the increase in reserve requirements represents an additional cost of funds that may sustain upward pressure on lending rates even absent a formal policy rate increase.
NHT: The Essential Gateway
Against the backdrop of elevated commercial rates, the National Housing Trust’s position as the primary financing mechanism for Jamaica’s working and lower-middle classes has never been more clearly defined. The gap between what commercial lenders charge and what the NHT offers — broadly 5 to 11 percentage points depending on the borrower’s income tier — translates directly into hundreds of thousands of Jamaican dollars in annual debt service for a typical residential mortgage. Over a 25-year loan term, the differential is transformative.
NHT contributor registrations continue to grow alongside formal employment expansion in Jamaica’s gradually recovering economy. Tourism’s strong performance — arrivals and revenues tracking well against 2022 comparators — is contributing to NHT contribution growth in parishes with heavy hospitality employment: St. James, St. Ann, and Portland. Manufacturing and logistics employment in St. Catherine’s industrial zones is similarly expanding the NHT contributor base in that parish.
The Trust’s schemes remain heavily oversubscribed. For popular scheme ballots, the ratio of registered applicants to available units frequently runs to double digits, meaning that the majority of applicants in any given ballot are unsuccessful and must either wait for the next opportunity or pursue an open-market purchase with NHT loan proceeds. The latter route — purchasing on the open market using NHT funds — is increasingly constrained by the current J$6.5 million loan limit for single applicants, which falls short of the asking price for modest residential units in many Kingston-area parishes.
Development Activity
The January period saw continued activity from private developers across multiple segments. Apartment developments in the New Kingston business district and in the Half Way Tree commercial hub are attracting interest from young professionals and investors alike, reflecting a growing appetite for urban living among Jamaica’s professional class and the investment potential of short-term rental returns in well-located Corporate Area units.
In the suburban ring, gated community developments in areas such as Portmore Pines, Caymanas, and the expanding communities north of Spanish Town in St. Catherine continue to draw families seeking security, modern amenities, and relative value compared to inner Corporate Area pricing. Developers in this segment are marketing aggressively to NHT-eligible buyers with joint applications, allowing two applicants to combine loan entitlements and access properties in the J$10 million to J$15 million range.
On the north coast, development activity in the Ocho Rios corridor and around Montego Bay reflects both local demand and the investor appetite of diaspora buyers. Mixed-use schemes combining residential units with commercial space and short-term rental-ready apartments are gaining traction as developers seek to serve multiple demand segments from a single site.
Construction and Costs
Construction activity continued through January without the seasonal slowdown that might be expected in some markets. Jamaica’s construction calendar is driven less by weather — the island’s climate is broadly conducive to year-round building — than by financing cycles, project completion pressures, and the availability of materials. January hardware trade reports suggest continued healthy demand for cement, aggregate, steel, and finishing materials across the residential and commercial sectors.
Cost pressures from imported materials have not yet meaningfully abated. Global commodity markets are showing some signs of normalisation following the acute disruptions of 2022, but the pass-through to Jamaican construction costs is slow and uneven. Foreign exchange availability for importers remains a consideration, with the Jamaica dollar’s performance against the US dollar a persistent variable in the cost equation. At approximately J$153 to J$157 per US dollar, the exchange rate remains substantially weaker than the pre-pandemic period.
Affordability and Regional Context
Jamaica’s affordability challenge exists within a Caribbean-wide context of post-pandemic housing market stress. Across the region, demand surges driven by returning diaspora, remote work immigration from North America and Europe, and domestic population growth have stretched supply and elevated prices in markets from Barbados to Trinidad. Jamaica shares the diagnosis but has a distinctive set of tools — primarily the NHT — that other Caribbean territories lack in comparable form.
The short-term rental market’s growth across Jamaica’s tourist parishes is generating an affordability externality: properties that might otherwise serve long-term resident tenants are being converted to Airbnb-style usage, reducing rental supply and elevating long-term rental costs in popular areas. A regulatory framework for this sector remains a work in progress, and the balance between enabling investment and protecting residential rental supply is a policy question the government will need to address as the short-term rental market matures.
Looking Ahead
February will be watched for the BOJ’s next formal policy communication, with market participants looking for any signals about the trajectory of the tightening cycle. The February inflation reading — expected to show continued moderation — will be an input into that assessment. If core inflation, which strips out volatile food and energy components, continues to decelerate, the case for an eventual policy rate reduction will strengthen, though the BOJ has been careful to manage expectations about the timing of any such move.
The NHT’s programme calendar for the first quarter of 2023 is expected to include new scheme applications across several parishes. Contributors who have been unsuccessful in previous ballots — a substantial cohort — will be watching the Trust’s announcements closely. The question of loan limit adequacy — whether J$6.5 million is sufficient for the properties the NHT is directing contributors towards — is increasingly being raised by contributors and advocates, and it is a question the budget season may force the government to answer with concrete action.
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