Real Estate & Construction
The Jamaican construction industry is a vital contributor to the national economy, generating real-time economic activity while building the very infrastructure that will spur the island to greater heights. A recently released report from the Planning Institute of Jamaica identified infrastructure spending and development as one of the leading drivers of growth in the coming year. Major projects across every category of transportation infrastructure—including an expansion of the port system, major highway expansion, and refurbishment initiatives and expansion projects at both of the country’s international airports—are expected to stimulate growth in the near and medium terms. With more than 500 companies employing over 119,000 people, the construction industry will be integral to the nation’s plan to reimagine its national infrastructure. Though the sector currently contributes around 9% to the country’s GDP, observers believe that new infrastructure initiatives can expand the sector’s impact.
By focusing on public-private partnerships (PPPs), Jamaican construction firms can leverage local low-cost capital pools and take advantage of debt reduction and tax relief. Many observers believe that such a strategy could make local Jamaican companies more competitive when putting in bids for local projects. A number of large infrastructure projects have gone to foreign firms in recent years, and industry leaders hope that by partnering with the government they can retain some of the value these projects generate among Jamaicans. Another popular strategy for opening access to capital pools is to list on the Jamaica Stock Exchange, a move that can double capital and improve debt to equity ratios, according to scholars at Jamaica’s Mona School of Business & Management.
New technologies are also being introduced and supported by Jamaican construction firms, and these companies hope that by utilizing new methods and materials they can set themselves apart from their competitors. At the country’s inaugural Build Expo and Conference in June of 2017, builders presented new and cutting-edge construction technologies. 3-D printed buildings and hemp-based construction materials were among the novel contributions of the Expo, and they piqued the interest of the Prime Minister, Andrew Holness, himself, according to the Jamaica Information Service (JIS). The Expo allowed Jamaican politicians and construction industry leaders to assess new materials that maximize efficiency and reduce cost while still maintaining their strength and integrity. Hemp-based products have shown particular promise, and builders hope they can utilize more of these materials, indirectly supporting the nation’s growing hemp industry.
As the construction industry continues to flourish, some government ministers and industry observers are calling for more equal gender participation. Jamaican Minister of Culture, Gender, Entertainment and Sport, Olivia Grange, has recently challenged the industry to employ more women, according to the Jamaica Observer. According to Grange, only 5,000 of the nearly 119,000 Jamaicans employed by the industry are women. Community and education-based efforts to increase female representation in the industry have been ongoing for decades, and while significant improvement has been made, there is still room for greater change. By creating more construction jobs for women, government officials hope to spread the prosperity generated by the industry to a broader segment of the population.
Housing has become more available thanks to an increase in growth-stimulating interest rate drops by mortgage financiers. Mortgage interest rates have declined, housing loan limits have increased, and demand for homes below USD193,000 grew appreciably in 2017, according to the Jamaica National Bank. Additionally, BNS Jamaica reported strong growth in homes between USD154,000 and USD193,000, as well as growing demand for townhouses and apartments. Government officials welcome the declines in mortgage rates, and officials in many different ministries have praised the finance sector’s enthusiasm for offering new and creative products, according to JIS.
Real estate transactions remain an important component of Jamaica’s economy, and many signs point to continued success. In the early months of 2017, transactions were up nearly 18% over the previous year, and the government expects similar growth in 2018. Additionally, the overall contribution of the real estate sector to the national economy has increased in recent years, and government reports illustrate that the overall value of transactions reached JMD65 billion in 2016. The Ministry of Finance and the Public Service has publicly stated that its goal is to have every Jamaican citizen own their own real estate, and it has worked to accelerate land title transfers to help ensure this. It has also folded the Land Administration and Management Program in with the National Land Agency in order to centralize the process and speed it along.
The Jamaican housing market has seen ups and downs in recent decades, and, while activity has been growing, the island still faces a housing shortage. In order to correct this dearth, government and private industry efforts to increase access to financing have gone hand in hand with efforts aimed at generating more PPPs. Leaders in the public and private sphere have been making strong calls for more PPPs in the construction sector. The partnerships could correct the downward trend in new home construction—between 2002 and 2015 housing projects declined from 9,396 to 1,467 units—and generate much-needed housing. According to the Jamaican newspaper The Gleaner, the government has estimated that the country needs between 10,000 and 15,000 new housing units per year to accommodate demand, and many observers believe that the private sector can play a vital role in financing and developing these projects.
At times, however, inadequate infrastructure has limited the potential for growth. Developers have had to reduce the size and the extent of some projects due to under built infrastructure, leading some private industry leaders to lament the way this limitation hampers both their operations and the long-term prospects of the nation. In an exclusive interview with TBY, Delroy Alcott, Managing Director of WIHCON, explained the ways in which inadequate spending on infrastructure can impact the private sector’s ability and interest in investing in much-needed development projects, noting that the lack of pre-built infrastructure requires developers to build it themselves. This is a significant outlay and one that incentivizes developers to focus on mid to higher-end developments, because these projects offer more bang for their buck. While firms like WIHCON still develop projects for lower income housing groups, they could do more if the government engaged the private sector in a way that stimulated growth for these segments of the market. Moving forward, partnerships between the government and private industry will be essential if Jamaica intends to correct its housing shortage. If the government can continue to provide a clear vision for the real estate and construction sector, then observers are confident that these industries are positioned to flourish in 2018.