Publication date: 5 January 2024 | Covering: December 2023
Monthly Briefing
- BOJ holds overnight rate at 7.00 per cent at December meeting; 2023 ends with rate unchanged
- US Federal Reserve Dec 12–13 dovish pivot: holds 5.25–5.50% but projects three 2024 cuts
- Jamaica 2023 annual CPI averaged approximately 6.47 per cent; above target throughout the year
- NHT July 2023 reforms complete their first six months; J$7.5 million limit well-received
- Remittance inflows estimated at US$3.37 billion for 2023; strong diaspora housing support sustained
- 2024 outlook: BOJ easing cycle expected to begin in second half; commercial rate relief anticipated
BOJ Closes 2023 at 7.00 Per Cent: A Year of Sustained Restriction
The Bank of Jamaica concluded 2023 with the overnight policy rate at 7.00 per cent per annum — precisely where it began the year. The rate has been at this level since November 2022, and the BOJ’s December 2023 Monetary Policy Committee meeting saw no change. The Bank’s communication for the year has been consistently focused: Jamaica’s inflation, while declining, has remained above the 4.0 to 6.0 per cent target range throughout 2023, and the Bank has been determined not to ease prematurely and risk a resurgence of inflationary pressure. As 2023 closes, the message is one of continuing vigilance, with the explicit expectation that easing will become appropriate in 2024 once the inflation data provides sufficient grounds.
Jamaica’s annual average headline inflation for 2023 was approximately 6.47 per cent — a significant improvement from the 11 to 12 per cent readings at the peak of the global commodity shock in 2022, but still above the BOJ’s target band. The pattern through 2023 was one of gradual and sustained deceleration: from 8 to 9 per cent readings in the first half of the year to 6 to 7 per cent by year-end. Each successive monthly CPI release brought Jamaica closer to the target range, but not yet within it. The year’s inflation trajectory provides the foundation for the BOJ’s expectation that 2024 will see the target range achieved.
For Jamaica’s mortgage market, 2023 has been a year of elevated costs and constrained affordability. Commercial mortgage rates in the 8 to 12 per cent range have prevailed throughout, reflecting the BOJ’s tight policy stance and the cost of funds in a market that has priced in the sustained hold. The impact on first-time buyers has been particularly pronounced: the combination of high borrowing costs, elevated construction prices, and property values that have continued to appreciate has widened the gap between the dream of homeownership and the financial reality for many Jamaicans. The NHT’s July 2023 reforms provided meaningful partial relief, but the underlying affordability environment remained challenging.
The Federal Reserve’s December Pivot: Three 2024 Cuts on the Table
The most significant global monetary policy event of December 2023 was the US Federal Reserve’s Federal Open Market Committee meeting on December 12 to 13. As expected, the Committee held the federal funds rate at the 5.25 to 5.50 per cent target range. What was not fully expected was the dramatic shift in the accompanying Summary of Economic Projections: the median FOMC member now projected three 25-basis-point rate cuts in 2024, compared to just one cut projected at the September 2023 meeting. Fed Chair Jerome Powell’s press conference reinforced this dovish signal, noting that discussions of rate cuts had begun in earnest and that the Committee was considering when — not whether — to begin easing.
Global financial markets responded with enthusiasm. US Treasury yields fell sharply, equity markets rallied, and the US dollar weakened against most major currencies. For Jamaica, the immediate effect was a reduction in the exchange rate pressure that elevated US rates had been imposing, with the Jamaican dollar benefiting marginally from the improved global risk sentiment. More significantly, the Fed’s pivot validated the expectation that 2024 would see the global monetary cycle turn toward easing — a development that supports the BOJ’s own anticipated easing trajectory and improves the macro environment within which Jamaica’s housing market operates.
NHT: The First Six Months of the July 2023 Framework
The National Housing Trust’s July 2023 product reforms have completed their first six months of operation. The J$7.5 million individual loan limit for open market purchases, the J$8.5 million option for qualifying lower-value properties, the 5 per cent interest rate band for contributors earning above J$100,000 per week, and the elevated multi-applicant ceilings of J$15 million and J$21 million have collectively expanded the Trust’s reach among its contributor base. Demand for the new, higher limits has been robust, confirming the diagnosis that the previous J$6.5 million ceiling had been creating a bottleneck for a significant segment of NHT contributors whose target properties exceeded it.
The NHT’s 2023 performance will be formally documented in the Trust’s annual report, but preliminary indications suggest that mortgage account volumes and the aggregate value of the loan portfolio have grown relative to 2022, reflecting both the higher loan limits and the continued pipeline of NHT housing solution deliveries. The Trust’s housing development programme has maintained its activity across multiple parishes, with scheme deliveries in Kingston and St. Andrew, Portmore, Spanish Town, and several rural communities. The ambitious pipeline of 41,000-plus solutions remains a multi-year commitment that will shape affordable housing availability in Jamaica for years to come.
Remittances: US$3.37 Billion in 2023
Jamaica’s remittance inflows for 2023 are estimated at approximately US$3.37 billion, confirming the continuation of the multi-year growth trend in diaspora financial flows. This represents a significant real resource for the Jamaican economy: at approximately 20 per cent of GDP, remittances are larger than tourism earnings in foreign exchange contribution and represent the dominant source of household income for a substantial proportion of Jamaican families. The strength of 2023 inflows reflects both the sustained employment levels of the Jamaican diaspora in the United States, the United Kingdom, and Canada, and the deepening of digital remittance transfer infrastructure that has reduced the cost and friction of cross-border transfers.
For the housing market, the significance of remittances goes beyond the macroeconomic: they are the primary savings mechanism through which many Jamaican families accumulate the deposits required for property purchases. A remittance-supported household that receives J$500,000 to J$1 million per year in foreign exchange — not an uncommon figure for families with multiple overseas members — can accumulate a meaningful NHT or commercial mortgage deposit within three to five years, even in an environment of elevated construction costs and property prices. The sustained strength of remittances through 2023 provides a forward-looking source of buyer capacity that will underpin demand in Jamaica’s housing market through 2024 and beyond.
The Property Market at Year-End 2023
Jamaica’s residential property market closed 2023 in a state of constrained but sustained activity. The December holiday season, which typically brings a seasonal slowing of new transactions as families focus on celebrations rather than property searches, coincided this year with a strong undercurrent of investor and diaspora purchasing. Returning residents and overseas buyers taking advantage of the Christmas period to visit Jamaica have continued to account for a meaningful share of completed transactions in the upper and mid-market segments. The Jamaican December market, while quieter in volume than peak months, is often the setting for high-value deals.
For developers, the end of 2023 brought the completion of several residential schemes and the launch of planning and marketing for projects targeted at the 2024 market. The expectation of a rate cut cycle beginning in 2024 has encouraged some developers to proceed with projects that might otherwise have been deferred pending lower financing costs, betting that the improved affordability environment will generate buyer demand when the projects are ready for sale. This forward-looking investment posture, if broadly shared across the sector, could add meaningfully to the supply pipeline for mid-2024 and beyond.
Looking Ahead to 2024
The year ahead holds the prospect of the most significant improvement in Jamaica’s mortgage market conditions since the post-pandemic tightening cycle began. The BOJ is expected to begin cutting the overnight policy rate in the second half of 2024, with the August or September meeting most commonly cited as the likely starting point. The US Federal Reserve’s revised projection of three 2024 cuts provides a supportive global backdrop for BOJ easing. If both trajectories materialise, commercial mortgage borrowers could be looking at rates that are 100 to 200 basis points lower by year-end than they are today.
For Jamaica’s housing market, 2024 is shaping up as a year of transition: from the constrained, high-rate environment of 2022 to 2024 toward a more supportive financing landscape that may begin to unlock the substantial pool of pent-up buyer demand. The structural housing deficit of 150,000-plus units will not be resolved by rate cuts alone — supply must be built — but improving affordability will at least begin to reconnect the financing environment with the underlying human need for shelter that drives Jamaica’s housing market over the long run.
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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