After a year shaped by high interest rates and inflationary pressures, Newton Johnson, former president of the Real Estate Association of Jamaica, is offering a pragmatic outlook for the real estate market in 2025. His message to stakeholders? “Stay informed, stay flexible, and watch the trends closely.”

Johnson’s cautious optimism is rooted in the interplay of political dynamics and evolving interest rate policies, both of which continue to significantly influence the direction of the market.

In a recent interview with the Jamaica Observer, he said both local and international political factors are expected to influence investment sentiment. Furthermore, local banks have not yet translated into lower borrowing costs in line with the Bank of Jamaica’s recent interest rate reductions. As such, full recovery of the real estate market — particularly the luxury segment in which properties priced are upwards of $40 million — isn’t likely to gain momentum until the latter half of the year, he said.

“Our political climate is very stable, which gives investors confidence. Even with high interest rates, Jamaica remains attractive because of its natural resources and strategic importance. But global uncertainties weigh heavily on decision-making,” Johnson explained.

Diaspora investors, in particular, are closely monitoring US political developments, while others are waiting to see the outcome of Jamaica’s next general election, due by September 2025.

“A couple of months ago, I had some investors who wanted to do some sizable investment in Jamaica, and they were ready to go, hoping that the Democrats would have won, but the Democrats lost. Now they have to rethink their strategy,” Johnson shared. “The question on some people’s mind is, what is [US president-elect Donald Trump] going to come with? Is it going to impact my investment? Is the climate going to change? A lot of people really don’t know,” he explained, underscoring the interconnected nature of international markets.

Meanwhile, domestically, the Bank of Jamaica has reduced its benchmark rates; but the slow pace of commercial banks adjusting their lending terms has created uncertainty, further tempering investor enthusiasm.

“A lot of people are asking, ‘What’s happening with the rates?’ The delay in adjustments is making investors cautious,” Johnson noted.

Interest rates, which began rising in 2021 before easing over the last five months, have led to a noticeable slowdown in the luxury segment of the market, resulting in reduced activity. But even before that, the COVID-19 pandemic had already dampened demand in that segment of the market. Many of these high-value apartments, often purchased for short-term rental ventures or investment purposes, are lingering on the market as prospective buyers hold off, Johnson said.

In contrast, the mid-market segment, encompassing properties in the $10 million to $30 million range, has remained resilient.

He described this segment as “practically immune to economic fluctuations,” driven by steady demand from first-time buyers and families upgrading their homes. Johnson’s advice to sellers in this range is to adopt strategic pricing to capitalize on buyer interest in 2025.

“If you’re realistic about your price, you’ll find buyers. This segment is always active, regardless of broader market conditions,” he said.

Areas of opportunity

The commercial real estate market, meanwhile, is emerging as a focal point, bolstered by Jamaica’s role as a regional transshipment hub, at least according to Johnson.

“A lot of shipping is going to be coming through Jamaica, especially with its growing role as a transshipment hub. That’s my prediction—more shipping, more goods moving through the [Panama] canal, and with that, a greater need for commercial spaces near ports,” he told Sunday Finance.

Developers, he noted, are responding to this demand by focusing more on commercial properties.

“Commercial real estate is a little bit easier to deal with. It costs less… some of the occupants just want a shell, they just want a floor, ceiling, walls, and they’ll take it from there. And it comes at a lower cost than putting in a high-end shower in a residential development. So come 2025, we will see,” he reasoned.

Additionally, a slowdown in the business process outsourcing (BPO) sector has left a surplus of office spaces, creating opportunities for developers to repurpose these for new uses.

“We saw a fall-off towards the latter part of 2024 in the BPO sector. A lot of fall-off… to the point where a lot of commercial space became available. The upshot is that there’s an increase in demand for commercial space,” Johnson said, highlighting the growing need for storage facilities and flexible office spaces, driven by increased shipping activity.

“Jamaica’s geographic position makes it pivotal for global trade. As more goods flow through the island, the demand for commercial spaces near ports is rising rapidly,” he said. Retrofitting former BPO spaces, he added, will be critical to meeting the evolving needs of the market. “Investors need to adapt these spaces—what worked for BPO operations may not meet the requirements of today’s market,” he said.

Beyond Kingston, improved infrastructure is unlocking growth across the island. Parishes like St Thomas, St Ann, and St Catherine are seeing increased activity as better road networks make them more accessible. Johnson highlighted St Thomas as particularly ripe for development, with gated communities and single-family homes gaining traction.

Similarly, St Ann continues to attract buyers with its unique blend of urban convenience and resort-style living, while Old Harbour in St Catherine is solidifying its reputation as a hub for both residential and commercial projects.

“Improved connectivity means people no longer feel tied to Kingston. They’re willing to explore other parishes for the right opportunities,” Johnson said.

Jamaica’s expanding role as a trans-shipment hub has been highlighted, predicting a surge in shipping activity and a corresponding rise in demand for commercial spaces near ports to support the increased flow of goods.