Caribbean Property & Investment Review — Edition 167 | September 2012

Publication Date: 3 September 2012  |  Coverage Period: 3 August – 2 September 2012

Morning Briefing

• Dominican Republic luxury resort pipeline expands as foreign developers accelerate land acquisition along the northern coast.
• Trinidad & Tobago’s energy sector posts another strong quarter, with oil prices holding above US$90 per barrel and natural gas exports robust.
• Jamaica’s newly elected PNP government under Prime Minister Portia Simpson Miller continues fiscal consolidation discussions with international creditors.
• St Kitts & Nevis Citizenship by Investment programme reports sustained high demand as the summer season draws to a close.
• Barbados tourism arrivals for August 2012 show modest improvement year-on-year despite sluggish UK visitor numbers.
• Caribbean hotel occupancy rates across the region averaged 68% over the August peak, with the Dominican Republic and Turks & Caicos leading the index.

Dominican Republic: Luxury Investment in Full Stride

The Dominican Republic’s luxury property market continued its upward trajectory through the late summer of 2012, underpinned by strong fundamentals: stable government under President Danilo Medina, who took office in August 2012 following his May election victory, improving infrastructure, and a growing reputation among North American and European buyers seeking value at the upper end of the Caribbean market.

In the Cap Cana and Punta Cana corridors, developers reported that inventory at the US$500,000–$1.5 million price point was moving steadily, with enquiries tracking well ahead of the equivalent period in 2011. Several international hotel brands confirmed new resort projects in the pipeline, bringing an estimated 2,400 additional rooms to the market over the next three years. This hotel expansion is driving ancillary residential development as investors seek properties within branded resort communities.

Construction activity in Santo Domingo’s upper residential districts also remained brisk, as domestic upper-middle-class buyers competed with diaspora purchasers for new condominium product. Mortgage availability from local banks, while still constrained by regional standards, improved marginally through mid-2012, lending additional momentum to the owner-occupier segment.

Trinidad & Tobago: Energy Wealth Sustains Property Demand

With oil prices holding in the US$90–$100 range through the summer, Trinidad & Tobago’s economy continued to generate the high household incomes that sustain one of the Caribbean’s most active domestic property markets. Prime Minister Kamla Persad-Bissessar’s People’s Partnership government has maintained public expenditure, supporting construction activity and employment in the building trades.

In Port of Spain, demand for executive apartment rentals from energy sector expatriates remained elevated, with monthly rents for well-appointed two-bedroom units in the Westmoorings and Valsayn corridors holding above TT$8,000. The commercial property market also reflected energy sector confidence, with several new office developments breaking ground in the Q3 period.

Tobago, meanwhile, saw continued interest from overseas buyers seeking holiday retreats, with villa transactions in the Buccoo and Crown Point areas providing a steady flow of investment. The island’s relative seclusion and proximity to Trinidad’s economic activity make it a consistently attractive proposition for the upper-middle Caribbean buyer.

Jamaica: Fiscal Reform and Property Market Implications

Jamaica’s property market navigated a period of heightened fiscal uncertainty through the August 2012 coverage window. Prime Minister Portia Simpson Miller’s PNP government, elected in December 2011, has been working to stabilise public finances and open formal dialogue with the International Monetary Fund toward a new programme to replace the expired 2010 arrangement. The prospect of an IMF-supervised fiscal framework, while bringing short-term austerity, is widely seen in the investment community as a prerequisite for restoring macroeconomic confidence.

Kingston’s commercial property sector remained subdued, with several large office transactions delayed as corporate occupiers awaited greater policy clarity. In contrast, the upper residential market in areas such as Cherry Gardens and Norbrook showed resilience, driven by diaspora buyers and returning residents seeking to acquire ahead of any currency-driven price adjustments. The Jamaican dollar’s gradual depreciation over the past twelve months has made USD-denominated buyers incrementally more competitive.

Citizenship by Investment: Demand Sustained into Autumn

The St Kitts & Nevis CBI programme, the Caribbean’s longest-established economic citizenship scheme, continued to attract applications at a healthy rate as the summer of 2012 closed. The programme’s Sugar Industry Diversification Foundation donation route and the real estate investment route both remained active, with enquiries from the Middle East and Asia Pacific supplementing the traditional North American and European applicant pools.

Dominica’s Commonwealth CBI programme, offering the region’s most accessible entry price point, similarly reported strong enquiry volumes. Industry observers noted that the combination of global economic uncertainty and increasing complexity of Western residency schemes was driving sustained interest in Caribbean citizenship options. Speculation continued to mount that at least one additional Caribbean jurisdiction was advancing plans to enter the CBI market in the coming months.

Caribbean Leaders This Month

Danilo Medina (Dominican Republic): The newly inaugurated president, who took office on 16 August 2012, moved quickly to signal continuity with pro-investment policies while announcing targeted social spending increases. His first weeks in office were closely watched by the real estate and tourism investment community.

Kamla Persad-Bissessar (Trinidad & Tobago): The Prime Minister’s administration continued to manage the distribution of energy revenues across social programmes and infrastructure investment, maintaining the consumption-led economic model that underpins T&T property demand.

Portia Simpson Miller (Jamaica): Prime Minister Simpson Miller’s government pressed ahead with fiscal discussions while managing domestic expectations around public sector wages and subsidy reform. The IMF engagement remains the defining economic narrative for Jamaica heading into Q4 2012.

Freundel Stuart (Barbados): The Prime Minister’s administration faced continued pressure from sluggish economic growth and weak tourist arrivals from the UK market, Barbados’s single largest source. The government maintained its commitment to the fixed exchange rate peg to the US dollar.

Timothy Harris (St Kitts & Nevis, CBI context): Opposition political commentary in St Kitts focused on the management and transparency of the CBI programme, with both government and opposition acknowledging the programme’s central importance to the federation’s fiscal position.

Roosevelt Skerrit (Dominica): Prime Minister Skerrit’s government continued to promote the Commonwealth CBI programme as a vehicle for financing public infrastructure, with new approvals tracking ahead of the prior year.

Perry Christie (Bahamas): The recently returned Prime Minister, who won the May 2012 general election, focused attention on Baha Mar resort’s construction progress — a project that promises to transform Nassau’s hotel landscape and carry significant property market implications for New Providence.

Looking Ahead

The opening of the 2012–13 Caribbean tourism season in October and November will set the tone for property enquiry volumes through the winter. Destinations with airlift improvements and new resort openings — notably the Dominican Republic and Turks & Caicos — are positioned to capture a disproportionate share of visitor growth.

Jamaica’s fiscal programme negotiations will remain a central theme for regional investors. A successful IMF agreement, when concluded, would represent a significant shift in the island’s creditworthiness narrative and could catalyse a renewed cycle of commercial and residential investment.

The CBI market is poised for further expansion, with industry sources indicating that announcements from additional jurisdictions may arrive before year-end. Investors holding Caribbean real estate that qualifies under existing CBI frameworks are well positioned to benefit from any broadening of the eligible destination pool.

The Caribbean Property & Investment Review is published monthly. All market data referenced reflects conditions within the stated coverage period. This publication is for informational purposes only and does not constitute investment advice.