Publication date: 5 December 2023 | Covering: November 2023
Monthly Briefing
- BOJ holds overnight rate at 7.00 per cent; December meeting approaching with year-end QMPR
- US Federal Reserve holds at Nov 1; Powell signals financial conditions may be tight enough
- Jamaica CPI continues declining; approaching 6 per cent target ceiling from above
- NHT July 2023 reforms four months in; J$7.5 million limit taking hold in mortgage applications
- Pre-holiday property market activity; north coast and Kingston diaspora demand seasonal uptick
- Hurricane season draws to close; property market re-engages after mid-year pause
BOJ Maintains 7.00 Per Cent; December Meeting and QMPR Approach
The Bank of Jamaica’s overnight policy rate remains at 7.00 per cent per annum through November 2023, with the December Monetary Policy Committee meeting and its accompanying Quarterly Monetary Policy Report expected later in the month. The December QMPR will be the BOJ’s most comprehensive formal statement of its outlook for inflation, growth, and the policy rate path into 2024. The rate has been held at 7.00 per cent since November 2022, and December’s meeting is expected to maintain the hold while the QMPR may provide clearer signalling on when easing might begin.
Jamaica’s inflation through November 2023 has continued its gradual downward path from the elevated readings of 2022. The most recent available data shows point-to-point CPI in the 6 to 7 per cent range — still above the BOJ’s 4.0 to 6.0 per cent target but substantially improved from the 10 to 12 per cent levels seen at the commodity shock’s peak. The BOJ has consistently communicated that it will begin easing once inflation is durably within or approaching the target range. With the 6.0 per cent upper bound within sight as the trend continues, 2024 is increasingly viewed as the year when the easing cycle begins.
For Jamaica’s commercial mortgage market, the sustained hold means that the elevated rate environment persists. Borrowers continue to face rates of 8 to 12 per cent on commercial mortgage products, maintaining the significant affordability challenge for buyers who cannot access NHT finance. The combination of high mortgage rates, elevated construction costs, and property prices that have continued to appreciate through the tightening period has created a compression of affordability — particularly for first-time buyers — that only a combination of rate relief and improved supply can address over time.
US Federal Reserve November Decision: Tightening Cycle May Be Over
The US Federal Reserve’s Federal Open Market Committee held the federal funds rate at the 5.25 to 5.50 per cent target range at its November 1 meeting, as universally expected. The more significant communication came from Chair Jerome Powell’s press conference, in which he noted that the tightening of financial conditions that had occurred through rising long-term bond yields over the preceding months had itself done some of the work the Fed might otherwise have needed to do with further rate hikes. While Powell stopped well short of declaring the hiking cycle over, the market interpretation of his remarks was broadly dovish: the Fed was acknowledging that additional hikes might not be necessary, and that the next substantive discussion would be about when to cut rather than whether to raise further.
This shift in framing — from a market that feared additional hikes to one that began pricing cuts for mid-2024 — had immediate effects on global asset prices. US Treasury yields, which had touched multi-decade highs above 5 per cent in October 2023, began to decline. The US dollar softened. Risk assets including equities and bonds in emerging markets benefited from the improved global sentiment. For Jamaica, the reduction in upward pressure on the US dollar and the beginning of the global pivot narrative improved the context for the BOJ’s own eventual easing, reducing the exchange rate risk associated with Jamaica cutting before the Fed does.
NHT: Four Months of the New Product Framework
The National Housing Trust’s July 2023 product reforms have now been in effect for four months. The J$7.5 million individual loan limit, the new 5 per cent interest rate band for higher earners, and the elevated multi-applicant ceilings of J$15 million and J$21 million have become the operating framework within which the Trust’s mortgage activity is now conducted. The early evidence of take-up suggests that the new limits are meeting genuine market demand: the number of mortgage applications seeking the J$7.5 million maximum has increased relative to the J$6.5 million maximum under the previous framework, confirming the expectation that the old limit had been constraining for a meaningful cohort of applicants.
The NHT’s housing supply pipeline continues to be developed across multiple parishes. The Trust’s dual mandate — to provide affordable mortgage finance to contributors and to develop housing solutions that expand the supply of affordable residential units — means that its activities span both the demand and supply sides of the housing market. On the supply side, NHT scheme deliveries in the fourth quarter of 2023 have maintained the programme’s momentum, with handovers in St. Catherine, Kingston and St. Andrew, and St. James. On the demand side, the mortgage portfolio has continued to grow, with the higher loan limits of July 2023 contributing to an increase in the average loan value.
The Pre-Holiday Property Market
November and December represent an important pre-holiday period for Jamaica’s residential property market. The end of the Atlantic hurricane season — which runs officially until November 30 — has historically marked a resumption of more active market engagement, as buyers who paused during the season return to viewings and developers who held back major launches in August and September begin their fourth-quarter campaigns. The 2023 pre-holiday period has seen this seasonal pattern hold, with activity in Kingston’s established communities, the Highway 2000 corridor in St. Catherine, and the tourist-adjacent communities of Ocho Rios, Montego Bay, and Port Antonio picking up from the hurricane season lull.
Diaspora purchasing, always a notable feature of the November to January window when overseas Jamaicans visit during the Christmas and New Year period, is expected to contribute meaningfully to market activity. Returning residents and diaspora buyers with accumulated savings in US dollars, British pounds, or Canadian dollars benefit from the exchange rate differential: at approximately J$155 to J$157 per US dollar in late 2023, their foreign currency savings purchase meaningfully more Jamaican real estate than would have been possible five years ago. This structural advantage makes the year-end period particularly active for properties in the segments most attractive to diaspora purchasers.
Looking Ahead
The BOJ’s December Monetary Policy Committee meeting, expected in the third week of December, will provide the year-end policy statement and the accompanying Quarterly Monetary Policy Report. Market participants will be examining the QMPR closely for any shift in the BOJ’s inflation projections that might bring forward the timing of the first rate cut from the broadly expected second-half 2024 window. The US Federal Reserve’s December 12 to 13 meeting will precede the BOJ’s, and its updated economic projections and communications will shape the global context in which the BOJ formulates its own end-of-year statement.
For Jamaica’s housing market, the close of 2023 finds it in a position of accumulated pressure and deferred demand. The elevated rate environment has suppressed the number of new borrowers entering the market and has slowed decision-making across the commercial mortgage segment. But the structural drivers of demand — population growth, household formation, the 150,000-unit housing deficit, and the aspirational homeownership culture that runs deeply through Jamaican society — remain intact. The year 2024, with its anticipated rate relief, is positioned to see this deferred demand begin to re-engage with the market.
Mortgage & Housing Finance Disclaimer: This publication is for general information only and does not constitute mortgage, financial, legal or investment advice. Mortgage products, lending criteria, interest rates and borrowing costs vary between lenders and may change without notice. Readers should obtain independent advice from a qualified mortgage adviser, financial adviser or legal professional before making financial or property decisions.
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