Caribbean Property & Investment Review — Edition 153, November 2013

Publication Date: 3 November 2013  |  Coverage Period: 3 October – 2 November 2013

Morning Briefing

• Caribbean real estate investment activity is picking up as the winter tourism season gets underway — North American and European buyers are beginning to arrive in the region, generating property inquiry that typically precedes transaction activity through the high season.
• Trinidad & Tobago’s energy-sector property boom continues unabated — oil prices remain robust near US$100 per barrel, construction activity is high across residential and commercial segments, and the professional workforce associated with the petroleum industry maintains strong property demand.
• The Dominican Republic has registered a landmark month for luxury hospitality openings, with new international hotel brands entering the market and established operators completing major renovation projects across the Punta Cana corridor.
• Jamaica’s IMF Extended Fund Facility quarterly review process has proceeded without major disruption — compliance with programme conditions has been maintained, a significant confidence signal for the investment community and Jamaica’s external creditors.
• Barbados is entering its winter tourism season with cautious optimism: forward bookings are modestly improved over last year, though the overall level of activity remains below the pre-2008 peak, and the island’s property market continues to track the tourism sector closely.
• Sargassum seaweed management has become an operational priority for Caribbean coastal hotel and resort operators heading into the high season — several properties have invested in mechanical removal equipment and modified beach management protocols to mitigate the impact on guest experience.

Trinidad & Tobago: Energy Economy, Property Boom

Trinidad & Tobago’s property market in the October coverage period reflects the sustained health of an economy that has, by Caribbean standards, an extraordinary degree of insulation from the external demand shocks that periodically destabilise tourism-dependent island economies. With oil production continuing at solid levels and the Atlantic LNG plant at Point Fortin operating efficiently and delivering export revenues that support substantial government spending, the macroeconomic foundation for property demand remains as solid as at any point in recent years.

The residential development pipeline across greater Port of Spain and the east-west corridor continues to be impressive. Several new apartment and townhouse developments are under active construction, and pre-sale programmes for projects not yet broken ground are generating strong take-up from buyers who have the confidence — backed by sustained employment and income in the energy sector — to commit to off-plan purchases. The housing market has been supported by accessible mortgage financing from commercial banks operating in a low-rate environment by historical T&T standards, though rates remain somewhat above the near-zero levels prevailing in the United States.

The commercial real estate market continues to evolve. The retail property sector — anchored by established shopping centres such as Gulf City, Long Circular Mall, and the C3 Centre in Chaguanas — is supported by a relatively prosperous consumer base that has benefited from energy-related employment and public sector salaries that, unlike Jamaica’s frozen wage environment, continue to be adjusted. Office accommodation in the capital faces a more nuanced picture: demand from the energy sector remains, but efficiency improvements and some rationalisation in corporate footprints mean that net absorption of new Grade A space has moderated. The industrial property market around Point Lisas remains firmly underpinned by the downstream petrochemical sector.

Dominican Republic: The Luxury Hotel Moment

November 2013 marks something of a watershed moment for the Dominican Republic’s luxury hospitality and associated property market. After years of planning and construction, several significant new hotel properties are either opening or completing their latest major refurbishments in the weeks surrounding the coverage period, a clustering of activity that underscores the scale of international capital commitment to the country’s tourism sector and the confidence that global hotel operators and investors have in the Dominican Republic as a destination.

The Punta Cana corridor — stretching from Bavaro through Punta Cana village to Cap Cana — remains the primary focus of new luxury development. Cap Cana in particular, a master-planned resort community covering some 30,000 acres at the eastern tip of the island, is advancing with a mix of hotel, villa, golf, and marina development that represents one of the most ambitious integrated resort projects in the wider Caribbean. International hotel brands including Sanctuary Cap Cana and other premium operators are choosing the project as a showcase for luxury Caribbean hospitality, reinforcing the perception that the Dominican Republic has graduated from a purely all-inclusive mass-market destination to a multi-segment market that can accommodate genuine luxury product.

The real estate investment implications of this luxury hotel moment are significant. Branded residence programmes associated with new luxury hotels — where buyers can purchase an apartment or villa that is managed by a hotel brand and made available for rental when not in private use — are generating strong interest from international investors. These products offer buyers the appeal of Caribbean lifestyle combined with the operational infrastructure, brand recognition, and revenue potential of a professional hotel management framework. The DR’s fiscal incentives for qualifying tourism investments under Law 158-01 remain among the most competitive in the Caribbean, making the economics of these investment structures particularly attractive.

Jamaica: IMF Compliance and Market Signals

Jamaica’s IMF programme has passed through its second quarterly review period without a crisis — a significant achievement given the demands that the Extended Fund Facility places on a government managing a complex social and political environment. The programme’s fiscal targets — requiring Jamaica to maintain a meaningful primary surplus to service its debt while simultaneously implementing structural reforms — have been met, and the IMF’s assessment of programme performance has been broadly positive. This is the most important signal available to external investors and creditors about Jamaica’s economic trajectory, and the positive programme performance is having tangible effects on investor sentiment.

In the property market, the signal from IMF compliance translates most directly into confidence among investors with a medium-to-long-term perspective. Hotel groups that have existing Jamaica commitments are maintaining their development plans. The international luxury villa market — particularly in the Montego Bay area, where North American buyers represent the dominant source of external demand — is seeing modest but real inquiry activity, supported by a combination of improved macroeconomic narrative and the persistent value proposition created by the Jamaican dollar’s weaker exchange rate against the US dollar.

The domestic market remains more challenged. The public sector wage freeze continues to constrain household purchasing power for the large proportion of Jamaica’s workforce employed in government. Commercial bank mortgage rates, while partly moderated by a relatively liquid banking system, are substantially above NHT rates and present a challenging affordability threshold for private-sector workers seeking to buy without NHT support. The construction sector is seeing a two-speed market: tourism and hospitality-related construction is reasonably active, while speculative residential development for the local middle market is subdued. Land values in prime locations — the hills above Kingston, the Montego Bay waterfront, the golf villa communities of Tryall and Round Hill — are holding up, while more secondary locations are softer.

Barbados: Winter Season Opens Cautiously

Barbados enters its 2013-14 winter tourism season with a mixture of hope and realism. The island’s tourism sector is fundamentally healthy — the product quality, particularly in the mid-market and luxury segments, is genuinely world-class, and Barbados’s brand as a sophisticated, secure, and beautiful Caribbean destination remains among the strongest in the region. But the demand side has been squeezed by UK economic pressures that have persisted longer than anticipated, and the island’s premium price positioning means it faces competition from lower-cost Caribbean alternatives for price-sensitive visitors.

The property market on the island’s west coast — the Sandy Lane, Royal Westmoreland, and Holetown corridor — is seeing some renewed buyer interest as the winter season draws wealthy visitors who may transition from being guests to being property owners. Several estate agents report that the number of registered buyer inquiries has improved compared to the equivalent period of 2012, though converting inquiries to offers and offers to completed transactions remains a slow process in a market where sellers have in many cases been reluctant to accept prices at the levels that today’s buyers are offering.

The Barbados government’s economic reform programme, while necessary, is creating headwinds for the local property market. Public sector retrenchment — the government has been reducing headcount in state entities and managing its wage bill carefully — is compressing domestic demand at a time when private sector investment is also constrained. The construction sector has been notably quiet for new local-market residential development, though renovation and refurbishment of existing properties by owner-occupiers continues at a steady pace. The island’s strong legal framework, transparent land registry, and the absence of restrictions on foreign property ownership are structural positives that help maintain international buyer interest even through a difficult economic period.

Caribbean Leaders This Month

Dominican Republic — Luxury Hotel Investment: The opening and refurbishment of major luxury hospitality properties across Punta Cana and Cap Cana signals the DR’s arrival as a genuine luxury resort destination, attracting branded residence investment and elevating the country’s position in the Caribbean market hierarchy.

Trinidad & Tobago — Sustained Momentum: The twin-island republic’s property market continues to benefit from one of the Caribbean’s most stable and prosperous economic foundations, with energy revenues supporting government investment, private employment, and consumer confidence simultaneously.

Jamaica — Reform Credibility: Jamaica’s clean IMF quarterly review is a genuine milestone — demonstrating to external investors that the government has the political will and administrative capacity to maintain a demanding reform programme, which is the essential precondition for the improved macroeconomic environment that would support property market recovery.

St Kitts & Nevis — CBI Leaders: The Federation maintains its position as the Caribbean’s most established CBI jurisdiction, with the programme’s real estate investment component continuing to generate flows that are material for a small island economy.

Barbados — West Coast Inquiry: An uptick in registered buyer inquiries from international visitors arriving for the winter season suggests that the Barbados luxury property market may be approaching a turning point after several years of post-crisis adjustment.

Antigua & Barbuda — CBI Progress: Antigua’s citizenship programme continues to mature, with an expanding approved development roster and growing international marketing reach supporting the programme’s second-year growth trajectory.

Cayman Islands — Stable Performer: The Cayman Islands’ property market — anchored by financial sector employment and maintained by a strong legal and regulatory framework — continues to deliver consistent performance in both residential and commercial segments.

Overall Performer — Dominican Republic: The Dominican Republic’s combination of luxury hotel openings, sustained FDI, strong tourist arrivals, and competitive fiscal incentives for property investment makes it November’s standout market and the Caribbean’s most dynamic property story of 2013.

Looking Ahead

December brings the Caribbean’s peak tourism season into full swing — Christmas and New Year represent the single most important fortnight for many island economies, and the combination of maximum hotel occupancy, peak rental rates, and intensive international visitor activity creates the most fertile conditions of the year for property inquiry and deal-making. Agents and developers across the Caribbean are anticipating a busy period, and the improving US economic backdrop is lending additional confidence to the outlook.

The year-end period also typically sees international investors taking stock of their portfolios and making decisions about capital allocation for the following year. Caribbean property — with its combination of lifestyle appeal, US dollar-denominated income potential, and improving macroeconomic narrative in several territories — will be competing for a share of that allocation alongside other global real estate markets. The territories and products that perform best in this environment are those that offer genuine transparency, credible market infrastructure, and product quality that justifies Caribbean pricing relative to alternatives in southern Europe, Southeast Asia, and elsewhere.

Jamaica’s reform programme will continue to develop through November and December, with government attention focused on maintaining fiscal discipline while managing the approaching 2014 budget cycle and the political pressures that the public sector wage freeze continues to generate. The IMF’s constructive assessment of programme performance is valuable political capital for the Simpson Miller administration, but the social cost of sustained austerity is real and the government will need to demonstrate that the reform path is delivering tangible improvements in the economic environment — not just for creditors and investors, but for ordinary Jamaicans.

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 October to 2 November 2013. All market observations reflect conditions during the coverage period.