Clinton Impeached as Jamaica’s Property Market Navigates a Winter of Global Uncertainty — January 1999

Publication Date: 3 January 1999 | Coverage Period: 3 December–2 January 1999 | Category: Monthly Review

Month in Brief

• The United States House of Representatives voted on 19 December 1998 to impeach President Bill Clinton on charges of perjury and obstruction of justice, only the second presidential impeachment in American history; the Senate trial is now scheduled to commence in January.
• Jamaica’s residential property market recorded a quiet December, consistent with seasonal patterns; the Christmas period reduced transaction activity while diaspora visits provided modest stimulus to the upper residential segment.
• Bank of Jamaica interest rates remain in the 20–25% corridor; commercial mortgage rates at 25–30%; no material change in financing conditions is anticipated for the early weeks of 1999.
• Georges reconstruction continues in the affected parishes, with NHT’s deferral programme now two months into operation and the early stages of more substantial repair work beginning in some communities.
• The global macroeconomic backdrop heading into 1999 remains one of caution: the Asian financial crisis continues to suppress global growth; the post-LTCM stabilisation of financial markets is fragile; and the Russia situation, while no longer in acute crisis, has not been resolved.
• FINSAC’s absorption of the last major distressed financial institution portfolios in the Jamaican banking sector continued through December, consolidating a process that has fundamentally reshaped the island’s financial landscape since 1996.

Housing Market Overview

December’s political earthquake in Washington — the House impeachment of President Clinton on 19 December — dominated global news coverage in the final days of the coverage period and has opened 1999 with a sense of American political uncertainty that, while geographically distant, has tangible implications for the Jamaican economy and, by extension, its property market.

For the Jamaican residential market in December itself, the story was one of seasonal quiet overlaid on structural constraint. The festive period — typically characterised by reduced professional activity, limited conveyancing transactions, and the temporary return of diaspora visitors who constitute an important segment of upper-market demand — produced the pattern observable in most years: some tentative inquiries and viewings, few completed transactions, and a deferral of substantive decisions into the new year.

The diaspora visitor dynamic deserves particular attention. The Christmas and New Year period brings several tens of thousands of overseas Jamaicans home, many of whom use the visit to assess property they already own, explore purchases, or consult with family regarding the management of shared property interests. Kingston-based estate agents report that viewings in the J$5–15 million range — the segment most accessible to diaspora buyers with UK or North American earnings — were reasonably active in December, though, as in previous years, the conversion rate from viewing to offer remains low. The gap between vendor expectations — often calibrated to the exchange rate dynamics of a previous era — and buyer willingness to pay at current JMD/USD levels continues to slow transaction completion.

Government Policy and NHT Response

The new calendar year opens with the government’s housing policy agenda shaped by three concurrent imperatives: addressing the ongoing reconstruction needs from Hurricane Georges, maintaining NHT’s operational effectiveness in a challenging macroeconomic environment, and managing the fiscal constraints that FINSAC’s legacy imposes on public investment capacity.

Prime Minister P.J. Patterson’s government heads into 1999 with a relatively secure parliamentary majority but an economy that has not yet demonstrated the sustained recovery that the post-FINSAC stabilisation was supposed to unlock. The People’s National Party’s social democratic orientation creates political pressure for visible action on affordable housing, but the fiscal programme agreed with the IMF constrains the public expenditure through which such action would historically be expressed.

NHT’s post-Georges deferral programme is now in its third month. The Trust has not published detailed statistics on the programme’s uptake, but anecdotal evidence from its parish offices suggests take-up has been substantial in the worst-affected areas, particularly St. Elizabeth and Westmoreland. The challenge as the deferred period extends will be managing the eventual resumption of payments for mortgagors whose income capacity has been genuinely disrupted by the storm — not merely their property.

Construction Sector

December is typically a slow month for the formal construction sector; year-end accounts are closed, workers take leave, and site activity is reduced. The January 1999 restart will provide the first real signal of how much new project activity has been contracted for the new year.

The informal repair and reconstruction sector has been more active through December, with the relative calm of the post-hurricane period allowing homeowners in the affected parishes to progress repair work with materials purchased over the preceding months. Hardware retailers in Kingston and the major parish towns report that demand, while below the immediate post-Georges peak, remains above pre-hurricane norms — a signal that the repair backlog is being worked through, albeit slowly.

For the formal sector, the key constraint heading into 1999 remains the absence of project financing on terms that make new residential development commercially viable. Several developers have indicated they are prepared to initiate projects in the J$5–10 million per unit range — targeting the diaspora and upper-professional market — if pre-sales commitments can be secured. The challenge is that potential buyers in this segment remain cautious, uncertain about exchange rate stability and reluctant to commit substantial JMD sums to forward purchases in a volatile macroeconomic environment.

Investment Climate

The Clinton impeachment — historic as it is — is unlikely to have a significant direct effect on the Jamaican property market. Its implications are principally political: the US Senate trial, which will dominate Washington’s attention for weeks to come, creates a degree of political uncertainty in the island’s most important bilateral relationship and largest source of diaspora remittances and tourist arrivals.

For Jamaican investors and the diaspora, the more salient question is whether the political crisis in Washington affects the US economic policy that matters most to Jamaica: the continuation of preferential trade arrangements, the posture of US-based development finance institutions toward Caribbean borrowers, and the general health of the American economy whose strength is a primary determinant of remittance volumes and tourism spending.

On the property market specifically, the impeachment’s most direct effect may be psychological: a reminder that the global environment in which Jamaica is seeking to rebuild its economy remains uncertain in multiple dimensions simultaneously. American political uncertainty, Asian economic contraction, post-Russian financial market fragility, and Jamaica’s own FINSAC legacy collectively constitute a risk environment more challenging than any single factor in isolation.

Institutional investors with interests in Jamaican commercial and residential property continue to take a cautious posture. Some hotel and resort investors on the north coast — whose activities ripple through local property markets — are said to be reviewing expansion plans in light of the uncertain global environment, though no major project cancellations have been announced.

Diaspora Perspective

The Christmas-period diaspora visits have provided the usual injection of energy and inquiry into the upper residential market. Beyond the property market dynamics, however, the Jamaican diaspora in the United Kingdom, United States, and Canada has been a fascinated and often passionate observer of the Clinton impeachment drama. The Jamaican community in the United States — which, based on census estimates, numbers several hundred thousand people in New York, South Florida, Connecticut, and New Jersey alone — has a particular stake in American political stability, given its dependence on US economic conditions for employment, remittance capacity, and the broader bilateral relationship.

The Senate trial ahead is expected to conclude before the end of January; most constitutional observers believe the two-thirds Senate majority required for conviction is unlikely to be achieved, suggesting Clinton will survive in office. But the uncertainty until that resolution is complete adds to the background noise of anxiety that characterises the diaspora’s engagement with Jamaica’s economic prospects at this juncture.

Several diaspora community groups in North America and the UK are reported to be monitoring the NHT’s overseas contributor programme with renewed interest, as the combination of relatively stable JMD/USD rates and depressed property prices in Jamaica — compared to the costs of property in London, New York, or Toronto — continues to make the long-term case for Jamaica property ownership look attractive in principle, even if near-term transaction conditions remain challenging.

Affordability

The affordability picture at the turn of the year is unchanged from the December analysis: severely constrained by commercial lending rates that are multiples of income growth rates, with NHT’s subsidised programme providing the only broadly accessible formal mortgage product for working Jamaicans. Average household income in the formal sector is estimated at approximately J$10,000–18,000 per month; at commercial mortgage rates of 25–30%, a J$3 million loan would require monthly debt service payments of J$60,000–75,000 — three to seven times average household income. The mathematics of commercial mortgage lending make formal home ownership arithmetically impossible for the majority of Jamaican households.

NHT’s programme, with its 0–5% rates, changes this calculus dramatically: the same J$3 million loan at NHT rates would carry monthly payments of approximately J$15,000–20,000 — still challenging but within reach for dual-income households in the formal sector. The Trust’s capacity to extend this benefit more broadly is constrained by its contributory financing model — it can only lend what contributors’ accumulated funds support — and by the loan ceiling that its assessment of contributor entitlements produces.

Looking Ahead

The January Senate trial of President Clinton will resolve the immediate political uncertainty in Washington; whichever way it concludes, the US political system will have demonstrated either its capacity to remove or retain a president through constitutional processes, with implications for American institutional credibility that matter to the international environment in which Jamaica operates.

For Jamaica’s housing sector in 1999, the year’s prospects rest on a small number of pivotal variables: whether the BOJ can begin to reduce interest rates without triggering exchange rate instability; whether the global financial environment — still fragile from the events of 1998 — stabilises sufficiently to restore investor confidence in emerging markets; and whether the Georges reconstruction programme can be resourced and executed quickly enough to address the most acute shelter needs created by the September storm.

On none of these dimensions is an early resolution certain. The February edition of this review will report on the Clinton trial’s conclusion, the BOJ’s first-quarter monetary policy decisions, and the initial signals from the property market as seasonal quietude gives way to the year’s first period of more active transactional engagement.

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