Caribbean Property & Investment Review — Edition 156, August 2013

Publication Date: 3 August 2013  |  Coverage Period: 3 July – 2 August 2013

Morning Briefing

• Caribbean summer tourism is at its seasonal peak across the region — cruise arrivals, stayover visitors, and hotel occupancy rates are broadly positive, delivering crucial foreign exchange to island economies and supporting hospitality real estate valuations.
• Jamaica’s IMF Extended Fund Facility is now three months into implementation; the government of PM Portia Simpson Miller has maintained programme compliance and the first quarterly review is approaching, a milestone that will be closely watched by bond markets and property investors alike.
• Trinidad & Tobago’s construction sector is running at full capacity — the combination of government infrastructure projects, private residential development, and commercial office construction is creating significant labour and materials demand, with Port of Spain seeing its most active building period in years.
• Citizenship by investment programmes in St Kitts & Nevis, Antigua & Barbuda, Dominica, and newly relaunched Grenada are generating an expanding pipeline of qualifying real estate investment, with agents reporting increased inquiry volumes from international buyers through the summer months.
• The Dominican Republic continues to attract high levels of foreign direct investment; Punta Cana resort developments are reporting strong pre-sales and international hotel brands are announcing new project commitments on the north coast.
• The Atlantic hurricane season remains quiet through the coverage period — no significant Caribbean impacts have materialised — though forecasters note that the statistical peak of the season runs through August and September, and vigilance is warranted.

Jamaica: Building Credibility Through Compliance

Three months into its IMF Extended Fund Facility, Jamaica’s fiscal reform programme is advancing, though the human cost of adjustment is being felt across the public sector. The wage freeze on government employees — affecting nurses, teachers, police officers, and a vast army of civil servants — has compressed disposable incomes for a large segment of the formal workforce. The impact on residential property demand at the middle and lower-middle market is visible: agents in Kingston and Montego Bay report that would-be buyers are taking longer to commit, and the proportion of approved National Housing Trust mortgage applications translating into completed transactions has slipped compared to the equivalent period of 2012.

Nevertheless, the macro-level reform narrative is gaining traction with international creditors. Jamaica’s successful compliance with programme conditions through the first quarter will be evaluated in the upcoming IMF quarterly review, and expectations are cautiously positive that the targets will have been met. A clean review would strengthen the government’s hand in managing its external debt burden and could modestly improve the cost of international borrowing — an important consideration for government-backed affordable housing programmes including the NHT. The Trust continues to approve mortgages for qualifying applicants, and its construction and land development activities are providing some stimulus to the residential sector even as private-sector activity cools.

Jamaica’s energy cost challenge remains acute. Electricity tariffs for commercial and industrial users are among the highest in the hemisphere, a direct consequence of the island’s dependence on imported oil for power generation. The government has initiated conversations with prospective LNG suppliers and is examining renewable energy options, but structural energy reform is a multi-year endeavour. In the interim, energy costs are a meaningful drag on the competitiveness of Jamaican-based businesses and a significant operating expense for commercial property owners. Tourism, though, is providing a bright spot — summer arrivals to Jamaica are solid, and the foreign exchange from visitor spending is materially supporting the macroeconomic picture.

Trinidad & Tobago: The Construction Boom Reshapes the Landscape

Port of Spain and its surrounding metropolitan area are in the midst of a construction boom of a scale that is redefining the physical character of the capital. Government infrastructure projects — road upgrades, the Brian Lara Cricket Academy in Tarouba, public housing schemes, and institutional buildings — are proceeding simultaneously with a wave of private residential and commercial development. The construction industry is reporting near-full capacity utilisation, with skilled tradespeople and project managers in high demand and some projects experiencing delays due to labour and materials availability.

The residential market remains buoyant. New apartment developments in the capital’s upscale districts — Westmoorings, St Clair, and Cascade — are attracting buyers from the energy sector’s professional class. Developers are reporting strong forward sales, with some projects sold out before construction completion. The TT dollar’s stability against the US dollar, maintained through the Central Bank of Trinidad and Tobago’s managed exchange rate regime, gives buyers and developers confidence in the pricing environment and reduces currency risk for internationally-funded projects.

The commercial real estate market in Port of Spain is also seeing continued activity. The energy sector’s office space requirements — for both international oil companies and the growing ecosystem of service providers, law firms, and financial advisers that orbit the petroleum industry — are sustaining demand for well-located Grade A accommodation. The retail sector, underpinned by strong consumer spending from an employed and relatively well-paid population, is supporting shopping centre and mixed-use development projects in suburban locations across the east-west corridor. Tobago continues to attract tourism investment, with several small boutique hotel and villa projects advancing through the planning and construction pipeline.

CBI Programmes: Transforming Caribbean Property Markets

The summer months have seen a notable uptick in inquiries to Caribbean citizenship by investment programmes, a pattern consistent with the period when high-net-worth individuals from northern hemisphere jurisdictions are evaluating year-end financial planning strategies and considering investment options. St Kitts & Nevis, the pioneer of the concept, continues to operate the most established and respected programme, with its Sugar Industry Diversification Foundation (SIDF) contribution route and its real estate investment option (minimum US$400,000 in approved developments) both attracting applicants.

Antigua & Barbuda’s programme, now approaching its first anniversary, is gaining momentum. The government has been working to expand its roster of approved developments — a key factor in making the real estate route competitive with the National Development Fund contribution — and several new projects have been added to the approved list in recent months. The Antiguan programme’s minimum investment threshold of US$400,000 is in line with St Kitts, and the island’s accessibility (direct flights from London, New York, and Toronto) makes it attractive to European and North American applicants.

Dominica’s programme, long established and known for its competitive pricing (the economic citizenship route requires a contribution to the Economic Diversification Fund of US$100,000 for a single applicant), is maintaining steady volumes. Grenada’s newly relaunched programme is beginning to generate developer interest — the island’s unique position as a Caribbean state with an existing E-2 Treaty Investor relationship with the United States gives Grenadian citizenship a distinctive value proposition for applicants who seek access to the US market. Several real estate developers are actively seeking Grenada programme approval for projects that would be marketed to CBI investors.

Dominican Republic: Punta Cana and Beyond

The Dominican Republic’s property and tourism market continues to fire on all cylinders through the peak summer season. Punta Cana, the country’s pre-eminent resort destination, is reporting exceptional hotel occupancy — several all-inclusive properties have been operating at or near full capacity through July, a strong performance that validates ongoing capital investment by resort operators and villa developers. The Punta Cana International Airport, one of the busiest in the Caribbean by passenger throughput, continues to attract new airlift from European and North American carriers, expanding the catchment of potential property buyers.

Beyond Punta Cana, the Dominican Republic’s property story is broadening geographically. The north coast — anchored by Sosúa and Cabarete and extending towards Puerto Plata — is attracting renewed developer attention after years of relative quiet. Government investment in infrastructure, including road improvements and utilities, is making previously marginal sites commercially viable. Santo Domingo’s residential market, meanwhile, is experiencing sustained demand from a growing urban professional class, with modern apartment developments in upscale districts commanding premium prices and achieving rapid absorption rates. The combination of a large and growing domestic market, strong international tourism demand, and competitive investment incentives makes the DR the most multidimensional property story in the Caribbean at this juncture.

Caribbean Leaders This Month

Dominican Republic — Resort Pre-Sales: Punta Cana resort and villa developers are reporting outstanding pre-sale performance through the peak summer season, with projects in premium locations achieving full subscription ahead of construction completion.

Trinidad & Tobago — Construction Activity: The twin-island republic’s construction sector is at capacity, driven by the simultaneous execution of government infrastructure projects and private residential development — a combination that is creating significant employment and economic multiplier effects.

St Kitts & Nevis — CBI Volumes: The Federation’s mature and well-regarded citizenship programme continues to generate consistent qualifying real estate investment, with approved developers benefiting from a global applicant base that is growing year on year.

Jamaica — Tourism Performance: Summer hotel occupancy in Jamaica’s main resort areas is performing ahead of prior-year levels, providing important support for the hospitality property sector even as the broader economy adjusts to IMF programme constraints.

Antigua & Barbuda — CBI Momentum: Approaching its first anniversary, Antigua’s citizenship programme is showing increasing traction with expanding approved development rosters and rising inquiry volumes from prospective applicants.

Grenada — Programme Positioning: The relaunched Grenada CBI programme is carving out a distinctive niche, with the E-2 treaty advantage proving a compelling differentiator for North American-focused applicants and developers alike.

Barbados — Luxury Stabilisation: After years of post-2008 price correction, Barbados’s Platinum Coast luxury segment is seeing improved inquiry levels and a small number of significant transactions completing — early evidence that the market may be finding a floor.

Overall Performer — Dominican Republic: For the second consecutive month, the Dominican Republic stands as the Caribbean’s most dynamic property and investment market, delivering on multiple fronts — tourism, construction, FDI, and domestic demand — simultaneously.

Looking Ahead

August and September are statistically the most active months of the Atlantic hurricane season, and property owners, developers, and investors across the Caribbean should ensure that insurance coverage is current and that building resilience standards are adequate. The currently quiet season may not persist, and the institutional memory of past destructive storms — Ivan, Dean, Gilbert — provides a sobering context for complacency about tropical weather risk.

Jamaica’s upcoming IMF quarterly review will be a pivotal moment for the island’s reform programme. Meeting the programme’s fiscal targets will signal to international markets that Jamaica is a credible reformer, which over time should translate into lower borrowing costs and improved conditions for private investment. The National Housing Trust will be watching closely, as programme credibility directly affects the government’s ability to support NHT’s affordable housing mandate through budgetary transfers and guarantees.

The continued growth of Caribbean CBI programmes is a structural trend that property market participants should track carefully. The real estate investment components of these programmes are increasingly material — not just for the specialist developers and approved projects that receive CBI-motivated buyers, but for the broader coastal and resort property markets in participating territories. As more territories activate programmes and competition among them intensifies, the quality and transparency of governance will become an increasingly important differentiator in the eyes of sophisticated international applicants and their advisers.

The Caribbean Property & Investment Review is published monthly and provides regional analysis for property investors, developers, and industry professionals. This edition surveys the period 3 July to 2 August 2013. All market observations reflect conditions during the coverage period.