Caribbean Property & Investment Review — March 2014

Publication Date: 3 March 2014  |  Coverage Period: 3 February – 2 March 2014

Morning Briefing

• Trinidad & Tobago’s Carnival 2014 is today — as this edition publishes on the morning of 3 March, Port of Spain is alive with the opening of the world’s most celebrated street festival. Jouvert — the pre-dawn paint and mud celebration that marks Carnival’s formal beginning — started in the early hours, and the main parade days of March 3 and 4 will see the city at its most spectacular, vibrant, and economically productive.
• The weeks leading to Carnival — the coverage period of this edition — have seen the full machinery of Trinidad’s festival economy in operation: costume bands completing their creations, all-inclusive fetes selling out across Port of Spain and its surrounds, steelbands and calypsonians performing, and the accommodation market generating some of the highest nightly rates of the year.
• Jamaica’s IMF Extended Fund Facility is now ten months into implementation — the government of PM Portia Simpson Miller has maintained programme compliance through what has been a demanding fiscal year, and structural reforms in energy, public bodies, and tax administration are advancing.
• Caribbean spring investment season is opening — buyers who generated property interest during the January-February peak are beginning to move from inquiry to formal offer, and agents in Barbados, the Cayman Islands, the Leeward Islands, and Jamaica are reporting active early-spring transaction pipelines.
• CBI programmes across the Eastern Caribbean are maintaining strong application pipelines through the first quarter, with Grenada’s relaunched programme in particular seeing growing developer and applicant interest driven by its distinctive E-2 treaty positioning.
• Sargassum monitoring continues as Caribbean beach managers prepare for what may be another significant seaweed season — the oceanographic conditions that generated mass strandings in 2013 have not fundamentally changed, and coastal property and hotel operators are maintaining the removal protocols developed in response to last year’s experience.

Trinidad Carnival 2014: The Festival That Defines a Nation — and a Property Market

Today — the morning of 3 March 2014 — Trinidad & Tobago’s Carnival reaches its climax. The coverage period of this edition — 3 February to 2 March — has been entirely defined by the lead-up to this moment: the weeks of fevered preparation, extraordinary spending, and intense cultural activity that make the Carnival season as economically significant as the festival days themselves. This edition publishes at the precise moment when the culmination arrives.

The economic footprint of Carnival 2014 is substantial and well-documented by those who track the festival’s commercial impact. Hotels across Port of Spain, Woodbrook, and the surrounding metropolitan area have been at full occupancy for the past week, with Carnival-period nightly rates that in some cases are three to four times the standard published rack rate. The aggregate hotel room revenue generated by the Carnival fortnight — encompassing the major all-inclusive fete period, Dimanche Gras (the Sunday spectacular), and the two main Carnival days — represents a significant and concentrated injection of spending into the T&T hospitality property sector.

The short-term rental market has been equally spectacular. Apartments and houses in the Savannah corridor, Newtown, St Clair, and Woodbrook — the neighbourhoods that are most walkable to the key Carnival venues and fete locations — have commanded rental rates during the Carnival period that can represent a month’s standard rent in a week or less. Property owners who have made their homes available for short-term rental during Carnival are experiencing the most vivid possible demonstration of their asset’s income potential. For investors evaluating residential property in Port of Spain and its immediate surrounds, the Carnival income event is a genuine financial argument for ownership — a predictable annual income spike that is as reliable as the festival itself.

Beyond the direct accommodation economics, Carnival’s broader economic impact in 2014 reflects the sustained prosperity of the Trinidadian economy. The costume bands — the commercial organisations that produce and sell the elaborate Carnival costumes to tens of thousands of masqueraders — have reported another year of strong sales. Costume prices have increased modestly over prior years, yet demand has remained robust, a reflection of an employed and discretionary-income-positive consumer base that is willing and able to spend on Carnival participation. The all-inclusive fetes — premium ticketed events that combine food, drink, and entertainment throughout the pre-Carnival season — have sold out rapidly, with tickets changing hands on the secondary market at significant premiums. The total consumer spending associated with Trinidad Carnival across costume purchases, fete tickets, hospitality, food, transportation, and retail is estimated in the hundreds of millions of Trinidad and Tobago dollars — a meaningful fraction of annual GDP concentrated into weeks rather than months.

The Carnival Property Premium: An Investor’s Analysis

For property investors who have not previously considered Trinidad & Tobago as a primary investment destination, the Carnival income dynamic warrants careful attention. The investment case for well-located Port of Spain residential property rests on several pillars: the year-round demand from energy-sector professionals who require quality accommodation; the stable TT dollar exchange rate; the absence of the hurricane vulnerability that affects more northerly Caribbean markets; and the Carnival premium — the annual income event that provides a predictable uplift to short-term rental revenues for properties in the right locations.

The most relevant locations for maximising the Carnival premium are the districts within easy walking or short taxi distance of the Queen’s Park Savannah — the oval public park that serves as Carnival’s physical and spiritual centre — and the Woodbrook neighbourhood, which hosts many of the major all-inclusive fete venues. Properties in St Clair, Newtown, St James, and parts of Port of Spain itself are well-positioned for the Carnival rental market. Properties further from the Savannah — in Diego Martin, Maraval, or the east-west corridor suburbs — benefit less directly from the Carnival premium, though they still participate in the general economic uplift of the festival period.

The mechanics of managing Carnival-period rentals have evolved significantly with the growth of online short-term rental platforms, which are beginning to make themselves felt even in Caribbean markets that were previously less exposed to the platform economy. Property owners in Port of Spain are increasingly listing on platforms that allow them to manage Carnival-period bookings from visitors around the world — diaspora Trinidadians returning home for the festival, international tourists attracted by Carnival’s global reputation, and visitors from across the Caribbean and Latin America who have added Trinidad Carnival to their cultural calendar. The technology-enabled short-term rental market is amplifying the Carnival property premium and making it more accessible to a wider range of property owners.

Jamaica: Ten Months of Reform — Spring Assessment

As Jamaica approaches the end of its first fiscal year under the IMF Extended Fund Facility, the reform narrative is holding. Ten months of broadly compliant programme performance — maintaining the primary surplus targets, advancing structural benchmarks, managing the fiscal adjustment without triggering a social breakdown or political crisis — represents a genuinely impressive achievement for a government operating in a difficult political economy environment. The upcoming end-of-fiscal-year review, expected in mid-2014, will be a comprehensive assessment of Year One performance, and expectations within the analyst community are cautiously positive.

In the property market, the spring period typically sees the highest volume of completed transactions in the annual cycle — buyers who generated interest during the winter tourism season move through offer, due diligence, and closing in the February to May period. For Jamaica, the spring 2014 transaction market is showing modestly improved activity compared to the equivalent spring period of 2013, particularly in the international buyer segment where US dollar-denominated properties in the tourism corridor represent genuine value for buyers who follow the exchange rate closely. The Jamaican dollar has depreciated to approximately J$110-112 per US dollar in this period, creating real affordability improvement for USD buyers compared to the J$90 rate of 2011.

The domestic market — middle and lower-middle residential — remains more constrained. The wage freeze is now approaching its second year for many public sector workers, and while the private sector has been somewhat less directly affected, the general compression of consumer confidence and the tight mortgage affordability environment have kept domestic transaction volumes below pre-reform levels. The National Housing Trust’s continued lending is a critical support mechanism, and the Trust’s affordable housing construction programme in the Corporate Area and outlying parishes is providing both supply and construction sector activity. The first signs of energy sector reform implementation — including government engagement with LNG suppliers and the progress of the Jamaica Public Service Company’s reform agenda — are being watched closely as potential indicators of when meaningful electricity cost relief might materialise for households and commercial property operators.

Caribbean Spring Investment Season Opens

The Caribbean spring — March through May — is traditionally the season when the property market converts the tourism-season inquiry pipeline into completed transactions. After the intense visitor activity of December through February, the spring is when buyers who have spent time in the region return home and decide to formalise their interest. Real estate agents across the Caribbean report that the ratio of winter inquiries to spring transactions is a reliable leading indicator of annual market performance, and the 2014 inquiry pipeline — generated through what has been a solid winter season — is broadly positive.

In Barbados, several significant transactions on the Platinum and Gold coasts are understood to be in advanced stages of negotiation, with completions expected through March and April. In the Cayman Islands, which benefits from a highly stable and prosperous local economy anchored by the financial services sector, residential transaction volumes are running ahead of 2013 levels. In the Eastern Caribbean luxury markets — Anguilla, St Barths, Mustique, and Bequia — the spring closure of the rental season typically coincides with the completion of purchase transactions by guests who have transitioned from renters to owners. The Dominican Republic’s spring market is set to be another strong quarter, with hotel project pre-sales and urban residential absorption continuing at pace.

Caribbean Leaders This Month

Trinidad & Tobago — Carnival 2014: There is only one story in the Caribbean on the morning of 3 March 2014 — Carnival. Port of Spain is at its most extraordinary, its most creative, and its most economically powerful. The festival demonstrates, as no spreadsheet can, why Trinidad property has a value proposition that goes beyond bricks, mortar, and rental yield tables.

Dominican Republic — Spring Pipeline: The DR’s Q1 2014 development pipeline is the strongest in the Caribbean, with hotel openings, resort expansions, and branded residence launches generating construction activity and investment interest that sustains the country’s regional leadership position.

Jamaica — Reform Milestone: Approaching the end of its first IMF programme year with compliance broadly intact, Jamaica’s reform narrative is gaining credibility with external investors who are beginning to factor the improving macroeconomic trajectory into their medium-term assessment of the island’s property market.

Barbados — Spring Transactions: Several significant transactions on the west coast are in advanced negotiation, representing the tangible expression of the improved inquiry pipeline that characterised Barbados’s better-than-expected winter season.

Grenada — CBI Growth: Grenada’s programme is continuing to attract developer and applicant interest, with new approved real estate projects preparing to launch marketing campaigns that leverage the island’s unique E-2 treaty advantage.

St Kitts & Nevis — CBI Consistency: The Federation’s programme delivers another strong quarter, with approved developments maintaining sales pipelines that benefit from the programme’s unmatched track record and global brand recognition.

Cayman Islands — Residential Strength: The Cayman Islands residential market is running ahead of 2013 volumes, underpinned by a financial services sector that continues to attract international talent and generate sustained housing demand from a well-compensated professional workforce.

Overall Performer — Trinidad & Tobago: On Carnival morning, there is no question. Trinidad & Tobago’s combination of energy-backed economic stability, unique Carnival income dynamics, and the sustained construction and property market momentum of the past two years makes it March’s standout Caribbean property market by every measure.

Looking Ahead

The days immediately after Carnival — Ash Wednesday marks the return of Port of Spain to its workaday character — will see the post-festival assessment of Carnival 2014’s economic impact. The data on hotel revenues, short-term rental income, retail and hospitality spending, and visitor numbers will be compiled and published in the weeks ahead, providing a formal measure of the festival economy’s scale. Early indications are that 2014 Carnival has been at least as economically significant as recent prior years, reflecting the sustained prosperity of the Trinidadian consumer base and the growing international profile of the festival.

Jamaica will enter April with its IMF first-year review approaching — a comprehensive evaluation of programme performance that will set the tone for Year Two of the facility. The government needs to demonstrate not only fiscal compliance but progress on the structural reform agenda, including energy sector rationalisation and public body consolidation, that is essential to the medium-term growth story on which Jamaica’s property market recovery ultimately depends.

The Caribbean spring transaction season will develop through March, April, and May, with agents and developers across the region focused on converting the solid inquiry pipeline of the winter into completed deals. The global macro environment remains supportive — US near-zero rates, improving European conditions, and recovering consumer confidence in the key source markets all argue for a spring season that is measurably better than 2013’s. Whether that optimism proves justified will be the defining test of the Caribbean property market’s 2014 trajectory.

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 February to 2 March 2014. All market observations reflect conditions during the coverage period. This edition publishes on the opening day of Trinidad Carnival 2014.

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