Caribbean Property & Investment Review — Edition 187: 2010 Year-End, Hurricane Tomas Recovery, New Barbados PM, T&T Growth & 2011 Outlook

Publication Date: 3 January 2011  |  Coverage Period: 3 December 2010–2 January 2011

Morning Briefing

• Hurricane Tomas aftermath: St Lucia, St Vincent and Barbados continue intensive reconstruction following the October 2010 storm; international insurance payouts are beginning to flow to affected property owners.
• Barbados leadership transition: PM Freundel Stuart (DLP) has settled into office following the passing of David Thompson in October 2010, signalling policy continuity for investors.
• T&T energy revenues strong: Trinidad & Tobago closes 2010 with oil and gas receipts near decade highs, underpinning PM Kamla Persad-Bissessar’s first full year of the People’s Partnership government.
• Jamaica fiscal discipline: PM Bruce Golding’s JLP administration reports modest progress on IMF-backed fiscal targets, though debt servicing remains the dominant budget pressure.
• Haiti reconstruction: One year since the catastrophic January 2010 earthquake, international pledges are slowly converting to ground-level construction; land-title challenges persist.
• 2011 outlook positive: Regional tourism bodies forecast a 4–6% visitor increase for 2011 as air connectivity improves and European advance bookings strengthen.

Hurricane Tomas Recovery: Property Markets in St Lucia, St Vincent & Barbados

When Hurricane Tomas swept through the Eastern Caribbean in late October 2010, it left a trail of structural damage that has shaped the final weeks of the year for property owners, developers and insurers alike. St Lucia bore the heaviest agricultural losses, with banana plantations stripped bare across the Cul de Sac and Roseau valleys. However, the more immediate concern for the real-estate market is the status of residential and commercial stock in Castries, Soufrière and the Vieux Fort corridor. Early damage assessments suggested that upward of 1,200 residential units required varying degrees of repair, and contractors report that material costs have risen sharply as imported building supplies compete with emergency procurement.

In St Vincent, the Windward coast communities of Georgetown and Sandy Bay sustained significant infrastructure damage, with access roads cut by landslides. Vincentian authorities have announced an accelerated roadworks programme financed in part by the Caribbean Development Bank. For property investors with interests in the Buccament Bay resort corridor, the disruption has been less severe, though construction timelines on new villas have slipped by an estimated six to eight weeks. Barbados, though clipped rather than directly struck, saw flooding across the Christ Church lowlands that exposed the vulnerability of older housing stock to heavy rainfall events. The Silver Sands and Maxwell Coast Road neighbourhoods recorded the highest concentration of claims, and local insurers are processing applications against a backdrop of rising reinsurance premiums in the London market.

The silver lining for investors is that reconstruction demand has created measurable short-term economic stimulus across all three islands. Hardware retailers, construction firms and specialist tradespeople report order books full through the first quarter of 2011. For those considering entry into these markets, the period immediately following a significant weather event has historically offered selective buying opportunities as motivated sellers accept discounts on distressed stock. Due diligence on structural integrity and insurance renewal costs is, however, more critical than ever in this environment.

Barbados: PM Freundel Stuart and Policy Continuity

The transition from the late Prime Minister David Thompson to Freundel Stuart has been handled with the constitutional smoothness that characterises Barbados’s well-established democratic institutions. Stuart, a lawyer by profession and a long-serving member of the Democratic Labour Party cabinet, has been at pains to signal that the economic policy framework his predecessor established will be maintained. For the property and investment community, this means continued commitment to the Barbados Investment & Development Corporation’s marketing initiatives and the preservation of tax incentives for international business companies registered on the island.

The luxury villa market on the Platinum Coast remains the bellwether for investor sentiment in Barbados. Agents report that inquiry levels from the United Kingdom, the United States and Canada held relatively steady through the final quarter of 2010 despite economic headwinds in all three source markets. Rental yields on premium Holetown and Sandy Lane-adjacent properties continue to attract family-office and high-net-worth buyers seeking both lifestyle and income return. The challenge for 2011 will be navigating a global environment in which European household wealth is under pressure from sovereign debt concerns, even as North American buyers show renewed confidence.

Trinidad & Tobago: Energy Revenues and Construction Momentum

Trinidad & Tobago enters 2011 in a position of relative fiscal strength, with petroleum revenues providing the government of PM Kamla Persad-Bissessar with resources to fund an ambitious social and infrastructure programme. The People’s Partnership, elected in May 2010, has now had six months to begin translating manifesto commitments into budgeted expenditure. For the construction and property sectors, the most consequential announcements relate to social housing and urban regeneration in East Port of Spain and the south corridor. State-sponsored housing drives have historically had a stimulating effect on the broader residential market, pulling up land valuations in adjacent privately developed zones.

Tobago continues to attract interest from international leisure-property buyers, with the Magdalena Grand Beach & Golf Resort among the developments drawing inquiries from North American and European buyers seeking a lower-profile Caribbean destination. The Tobago House of Assembly has been pushing for greater autonomy in development approvals, a political dynamic that bears watching as it could accelerate or complicate project timelines depending on how inter-governmental negotiations evolve through 2011.

Haiti: Reconstruction One Year On

As the first anniversary of the January 12, 2010 earthquake approaches, the scale of Haiti’s reconstruction challenge remains sobering. International donors pledged approximately $13 billion at the March 2010 New York conference; actual disbursements to the Haitian government and on-the-ground projects have lagged significantly behind those commitments. Tent cities around Port-au-Prince remain occupied by hundreds of thousands of displaced residents, and the cholera outbreak that emerged in October 2010 added a humanitarian layer to an already complex recovery. For property and development investors, these conditions mean that commercially viable opportunities remain extremely limited and concentrated among a small number of specialist development-finance actors operating in concert with NGOs and international agencies.

That said, the longer-term structural case for Haitian investment is not without foundation. The government of President René Préval has granted significant concessions for an industrial free zone north of Cap-Haïtien, with the aim of attracting light manufacturing employment that could underpin demand for housing and services in the medium term. Investors with a five-to-ten-year horizon and a tolerance for political and operational risk are beginning to conduct preliminary due diligence, often in partnership with diaspora networks that have deep local knowledge.

Caribbean Leaders This Month

Jamaica — PM Bruce Golding (JLP): Golding closes 2010 having navigated the politically damaging Tivoli Gardens incursion of May 2010 and sustained progress on the IMF Extended Fund Facility. His government’s ability to hold the fiscal line will be the decisive factor in investor confidence through 2011.

Trinidad & Tobago — PM Kamla Persad-Bissessar (PP): Six months into office, Persad-Bissessar is deploying energy windfall revenues into social infrastructure while managing expectations around crime reduction — a persistent concern for residential investors in the greater Port of Spain area.

Barbados — PM Freundel Stuart (DLP): Stuart projects calm authority as he assumes the full weight of the premiership following David Thompson’s death. His priority in the near term is maintaining Barbados’s investment-grade credit rating and protecting the foreign exchange reserves that underpin the island’s currency peg.

Dominican Republic — President Leonel Fernández (PLD): Fernández continues to champion large-scale infrastructure investment, with the Santo Domingo Metro expansion and north-coast tourism corridor development remaining flagship projects. Tourist arrivals for 2010 exceeded five million for the first time.

Bahamas — PM Hubert Ingraham (FNM): Ingraham’s administration is managing the final phases of the Baha Mar mega-resort development near Nassau, a project that has become the single largest construction investment in Caribbean history. Completion timelines and financing structures are under close scrutiny.

St Lucia — PM Stephenson King (UWP): King is balancing Hurricane Tomas reconstruction spending with the island’s underlying fiscal constraints. Tourism earnings recovered well through the second half of 2010, providing a foundation for the repair programme.

St Vincent — PM Ralph Gonsalves (ULP): Gonsalves is pressing ahead with the Argyle International Airport project, which if completed will fundamentally change the island’s tourism accessibility. Tomas recovery adds pressure to an already stretched public construction capacity.

Overall performer this month: Trinidad & Tobago stands out as the region’s most dynamic investment environment as 2010 closes, with strong government revenues, an active construction pipeline and a new administration projecting reformist energy.

Looking Ahead

The opening weeks of 2011 will test whether the optimism of late 2010 converts into tangible transaction activity. Regional property agents report that buyer inquiries have picked up since October, but many prospective purchasers remain in a watching brief, sensitive to movements in sterling and the euro that affect their effective purchasing power in dollar-denominated markets.

The NOAA Atlantic hurricane season forecast for 2011 will not be published until May, but the memory of Tomas is prompting both buyers and lenders to scrutinise insurance terms and structural specifications more carefully than in previous years. Developers who can demonstrate robust building standards and comprehensive coverage are likely to find a more receptive audience among cautious investors.

Caribbean governments will be watching the IMF and World Bank’s January economic updates closely, as fresh multilateral assessments will influence the borrowing costs and programme conditionalities that shape fiscal space across the region. For property investors, the policy environment is most directly felt through changes to stamp duty, property transfer taxes and foreign ownership regulations — all areas where governments under fiscal pressure may be tempted to seek additional revenue.

The Caribbean Property & Investment Review is published on the first business day of each month. Edition 187 covers the period 3 December 2010 to 2 January 2011. All market data reflects conditions as at close of the coverage period. This publication is for informational purposes only and does not constitute investment advice.

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