Rates Low, Demand Rising: Jamaica’s Housing Sector Finds Its Footing — March 2017

Publication Date: March 3, 2017 | Coverage Period: February 3–March 2, 2017 | Category: Monthly Review

February in Brief

• Bank of Jamaica signals continued monetary easing supportive of mortgage affordability.
• NHT scheme launches in St Catherine attract strong buyer interest from first-time applicants.
• Jamaica budget debate approaches; NHT loan limit revision expected on the agenda.
• Corporate Area apartment pre-sales accelerate as developers report improved confidence.
• Diaspora remittances hold firm; January 2017 inflows tracking ahead of 2016 pace.
• Construction permits in parishes outside Kingston rising as suburban demand strengthens.

Housing Market

February is typically among the quieter months in the Jamaican property calendar — the post-Christmas lull blends into pre-budget caution among buyers and developers alike. Yet the month just concluded offered more activity than the seasonal norm, as several converging factors continued to tilt conditions toward buyers willing to act. The Bank of Jamaica’s policy rate, held at historically depressed levels, has continued to drag down funding costs for financial institutions, and the transmission to the retail mortgage market — while imperfect and subject to the spreads that commercial banks maintain — has been sufficient to bring more buyers into productive conversations with lenders.

In Kingston’s secondary and tertiary residential submarkets — communities such as Barbican, Mona, Manor Park and Havendale — asking prices for three-bedroom houses have generally held in a J$20–40 million range, depending on condition, lot size and finishes. These price points remain well above what NHT financing alone can cover, requiring buyers to combine NHT loans with commercial top-up facilities. This blended financing structure has become the de facto standard for middle-income purchases, and the efficiency with which Jamaica’s banking system handles such arrangements has improved over time.

Government Policy

The budget season countdown has dominated Jamaica’s policy conversation through February. Finance Minister Audley Shaw is expected to present the 2017/18 budget in late March or early April, and the housing sector will be watching closely for several things: the NHT’s approved capital allocation; any announced revision to loan limits; and the government’s position on the recurring proposal to draw funds from the NHT surplus into the Consolidated Fund. That proposal — which has been a point of tension between successive administrations and housing sector advocates — is once again circulating in pre-budget discussions.

Separately, the government’s stated ambition to establish new national housing policy frameworks has proceeded at a deliberate pace. Consultations with parish councils, housing advocacy groups and the private sector development industry have continued, though a finalised policy document has yet to be published. Stakeholders acknowledge that the complexity of Jamaica’s housing needs — spanning formal scheme housing, inner-city upgrading, informal settlement regularisation and disaster-resilient construction standards — makes a comprehensive policy an inherently time-consuming undertaking.

Construction Activity

The construction sector has entered its traditionally more active season with reasonable momentum. Hardware and building materials suppliers report an uptick in retail demand that began in late January, consistent with the pattern of self-builders resuming work after the holiday season. In the formal sector, several medium-scale apartment and townhouse projects in Kingston and St Catherine have moved from planning to foundation stage, a transition that typically triggers a cluster of local employment and materials purchases.

The north coast continues to be an active zone for hospitality-linked construction. Major hotel operators expanding capacity along the Montego Bay–Falmouth–Ocho Rios corridor have generated subcontracting activity for Jamaican construction firms, and the workforce drawn to these projects has created demand for nearby rental accommodation — a trend that is beginning to attract the attention of small-scale residential investors.

NHT Activity

The National Housing Trust remains the dominant institution in Jamaica’s affordable housing financing ecosystem. February saw continued processing of loan applications from the previous quarter, with scheme housing in St Catherine and St James among the most sought-after offerings. The Trust’s current loan limit — hovering in the J$4.5–5 million range depending on product type — has faced growing criticism from those who argue it has not kept pace with the appreciation in land and construction costs since limits were last substantively revised. The NHT’s management is expected to address this in its pre-budget submissions to government.

The Trust has also been working to increase the efficiency of its scheme delivery pipeline, with particular attention to reducing the lag between project approval and construction commencement. Some schemes approved in 2015 and 2016 remain in pre-construction phases, a source of frustration for registered contributors who have been allocated units but cannot yet take possession.

Mortgage Rates and Financing

Commercial mortgage rates at the leading Jamaican financial institutions — NCB, Scotiabank, JN Bank, and CIBC FirstCaribbean — have remained in the 8–9 percent band for standard residential facilities in Jamaican dollars. US dollar-denominated mortgages, available primarily to borrowers with established foreign-currency income streams, have carried lower nominal rates but expose borrowers to exchange-rate risk in a currency that has historically depreciated at a measured pace against the US dollar. At the current exchange rate of approximately J$128–130 per US dollar, dollar-denominated borrowing requires careful analysis of income currency matching.

Diaspora and Remittances

The first full month of the Trump presidency has not produced an immediate measurable impact on remittance flows to Jamaica. Bank of Jamaica data, while subject to reporting lags, does not indicate a deterioration in transfers from the United States, which remains the single largest source of remittance income for Jamaican households. The UK-based diaspora, a second major source, continues to navigate Brexit uncertainty — the pound sterling has remained under pressure since the June 2016 referendum, reducing the Jamaican-dollar value of sterling-denominated remittances — a headwind that has been present since mid-2016 and has not materially resolved.

Affordability

A recurring theme in the housing policy conversation is the gap between what the NHT can finance and what the market actually delivers. The Trust’s scheme prices are calibrated to income bands well below median professional salaries, meaning they address the needs of lower-income contributors effectively. But the cohort just above that threshold — earners who make too much to qualify for the most concessional NHT products but not enough to comfortably service a commercial mortgage on Kingston residential property — remains underserved. This “middle-market squeeze” has been identified in numerous consultations as one of the most persistent failures of Jamaica’s housing ecosystem.

Investment and Outlook

Institutional investors and private equity players with exposure to Caribbean real estate have maintained an interest in Jamaica’s hotel and resort sector, which is expected to post strong visitor arrival numbers in 2017 following record performance in 2016. The spillover from hospitality investment into residential development around tourism corridors is a feature of Jamaica’s property landscape that is not always captured in headline market statistics but represents a meaningful component of new supply in parishes like St James, Hanover and Portland.

Looking Ahead

March will be dominated by the budget debate. The NHT’s position on loan limits, scheme delivery targets and the Consolidated Fund transfer question will be clarified, at least partially, in Finance Minister Shaw’s budget presentation and in the Trust’s own public communications. The housing sector will also be watching for any government announcement on the pace of public land releases for residential development. If April’s budget confirms meaningful increases in NHT loan ceilings and a credible scheme delivery pipeline, developer and buyer sentiment could see a material improvement entering the second quarter of 2017.

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