Caribbean Property & Investment Review — Edition 136 | April 2015

Publication Date: 3 April 2015  |  Coverage Period: 3 March – 2 April 2015

Morning Briefing

• WTI crude oil edged back toward US$48 per barrel in late March, maintaining pressure on Trinidad & Tobago’s energy revenues and prompting accelerated discussions around expenditure rationalisation within the Ministry of Finance.
• Jamaica successfully completed its latest IMF EFF programme review in March, unlocking a further disbursement tranche and reinforcing international confidence in the reform trajectory under Prime Minister Portia Simpson Miller’s government.
• The Dominican Republic’s Central Bank reported that construction sector growth reached 8.4 percent year-on-year in Q1 2015, driven by a surge in resort-residential development in the Punta Cana corridor.
• Barbados launched a new foreign investment facilitation framework in March, designed to streamline approvals for tourism and real estate projects and reduce the bureaucratic friction that has historically deterred international capital.
• Eastern Caribbean citizenship-by-investment programmes attracted a combined estimated US$180 million in real estate-linked investment in Q1 2015, with the Antiguan and Kittitian programmes accounting for the lion’s share.
• Guyana’s offshore exploration activity continued at pace, with ExxonMobil’s drilling programme on the Stabroek Block attracting intense regional attention as results from the Liza-1 well were eagerly anticipated by the industry.

T&T Energy Sector: Adapting to the New Oil Price Reality

The sustained decline in global oil prices since mid-2014 has forced Trinidad & Tobago’s government and its energy sector partners into a period of intensive strategic recalibration. With WTI hovering in the US$45–55 range through the first quarter of 2015 — less than half the levels that underpinned the country’s budget assumptions in recent years — the pressure on the fiscal framework is acute. Energy revenues, which fund the lion’s share of government expenditure including housing subsidies and infrastructure investment, are contracting in real terms even as the cost base of public services remains largely fixed.

Within the property market, the signal most watched by analysts is the behaviour of energy company employees — a high-earning cohort that has historically underpinned demand for premium residential property in the Port of Spain metropolitan area and the western suburbs. So far, the premium residential market has shown resilience, with agents in Westmoorings and St Clair reporting that transaction volumes in Q1 2015 were only marginally below the prior year. However, the pipeline of new listings is growing as households exposed to the energy sector begin to adopt precautionary savings behaviour.

For the longer term, T&T’s energy sector holds structural advantages that should not be obscured by the current price environment. The country’s mature LNG export infrastructure, its skilled technical workforce, and the ongoing development potential of its deepwater blocks mean that the sector remains fundamentally competitive. The question is one of timing: investors able to take a three-to-five-year horizon on T&T property may find that the current period of uncertainty represents an entry opportunity that a price recovery will subsequently reward.

Jamaica’s Reform Dividend: Credit and the Housing Market

Jamaica’s IMF Extended Fund Facility programme reached a significant milestone in March 2015 with the successful completion of the latest quarterly review, unlocking a further disbursement and sending a clear signal to international markets that PM Portia Simpson Miller’s government is maintaining reform discipline. The significance of this for the property market extends beyond macroeconomics: IMF programme compliance has a direct bearing on Jamaica’s sovereign credit rating, the cost of borrowing for commercial banks, and ultimately the interest rates available to mortgage borrowers.

The National Housing Trust continues to play the central role in making homeownership viable for the working and middle classes. NHT’s interest rates — ranging from 2 to 6 percent depending on income band — are far below commercial mortgage rates of 10 to 13 percent, creating a meaningful affordability bridge. The Trust’s March announcement of an expanded contributor loan programme, with higher loan ceilings for certain income bands, was well received by the market and is expected to drive further increases in application volumes through Q2 2015.

Private developers are beginning to align their project specifications with NHT’s evolving requirements. Several Kingston-based developers have entered preliminary discussions with the Trust about bulk purchase arrangements — where NHT would commit to purchasing a defined number of units within a new development on behalf of eligible contributors. These arrangements, when they materialise, de-risk the development pipeline and allow projects to proceed with greater certainty of uptake. The pipeline of NHT-eligible residential projects in the Kingston Metropolitan Area and St Andrew is expected to expand significantly over the next 12 months.

Dominican Republic: The Resort-Residential Boom

The Dominican Republic’s construction sector is firing on all cylinders in early 2015, with the Punta Cana and Cap Cana corridors emerging as the most dynamic resort-residential property markets in the Caribbean. The 8.4 percent year-on-year construction growth recorded in Q1 2015 is not an aberration — it is the continuation of a trend driven by a confluence of favourable factors: strong US and European tourist arrivals, a government committed to infrastructure investment, a competitive cost base relative to other Caribbean destinations, and a growing diaspora investor community.

The product mix within the DR’s resort-residential market is evolving in response to international investor demand. The traditional model of standalone villa development is being supplemented by branded residences — private apartments and townhouses within full-service resort communities, typically managed by international hotel operators. This model offers buyers a combination of lifestyle use, professionally managed rental income, and the brand equity of a recognised hospitality name. Several major international hotel groups have announced or are in advanced discussions about branded residence components within their DR expansion plans.

For investors considering the DR market, the key variables to assess are location relative to the Punta Cana International Airport, the quality of resort infrastructure (golf, marina, beach club), and the credibility of the rental management operator. The gap between well-positioned, professionally managed resort residences and the broader residential market in terms of rental yield and capital appreciation prospects is substantial and widening. Investors who choose carefully within this market stand to benefit from one of the Caribbean’s most compelling long-term growth stories.

Citizenship by Investment: Q1 2015 in Review

The Caribbean’s citizenship-by-investment programmes collectively generated an estimated US$180 million in real estate-linked investment in Q1 2015, confirming that demand from international high-net-worth individuals remains robust despite broader global economic uncertainties. The Eastern Caribbean programmes — in Antigua & Barbuda, St Kitts & Nevis, Dominica, and Grenada — account for the bulk of volume, with each jurisdiction competing on the basis of processing speed, minimum investment thresholds, and the quality of the underlying real estate product.

The competitive dynamic among the CBI programmes is intensifying. Grenada’s programme, which offers US visa interview access through the E-2 Treaty Investor route, continues to attract US-focused applicants for whom that visa optionality is a differentiating factor. Dominica, offering the lowest minimum investment threshold in the region, appeals to a cost-sensitive segment of the market. Antigua and St Kitts compete on the basis of developed tourism infrastructure and a track record of successful programme administration.

Caribbean Leaders This Month

Dominican Republic — Construction Growth: The DR’s 8.4 percent construction sector expansion in Q1 2015 led the regional table, with Punta Cana and Cap Cana driving a resort-residential development cycle that is attracting international capital at scale.

Jamaica — IMF Programme Compliance: The successful completion of Jamaica’s March IMF review was the most significant financial governance milestone of the month, reinforcing the credibility of the reform programme and supporting the macro conditions underpinning property market recovery.

Antigua & Barbuda — CBI Real Estate: Antigua led the Eastern Caribbean CBI field in Q1 2015 by volume of real estate investment, with the programme’s combination of competitive processing and quality resort product proving a compelling proposition for international applicants.

Barbados — Investment Framework: The launch of Barbados’s new foreign investment facilitation framework signalled a policy shift toward greater openness to external capital, with the tourism and real estate sectors identified as priority beneficiaries.

Trinidad & Tobago — Resilient Premium Market: Despite energy sector headwinds, Port of Spain’s premium residential market held its value through Q1 2015, demonstrating the structural depth of demand in the upper segments and the resilience of the expatriate professional tenant base.

Grenada — CBI Programme Differentiation: Grenada’s Citizenship by Investment Programme continued to attract US-focused applicants leveraging the E-2 Treaty Investor pathway, a unique differentiating feature that sets the island’s programme apart from regional competitors.

Guyana — Anticipation Building: While Guyana’s property market remains early-stage relative to its Caribbean neighbours, the ongoing ExxonMobil drilling programme on the Stabroek Block is generating investor curiosity and early positioning activity in Georgetown’s commercial and residential sectors.

Overall Performer — Dominican Republic: The DR’s combination of construction growth, resort-residential momentum, and improving tourism fundamentals made it the most comprehensively positive property market story in the Caribbean during March 2015. Its scale, accessibility, and product diversity give it a breadth of appeal unmatched elsewhere in the region.

Looking Ahead

The second quarter of 2015 will test whether the Caribbean’s early-year momentum can be sustained against the backdrop of a global economy navigating the aftermath of diverging monetary policy — Federal Reserve tapering in the US and continued quantitative easing in Europe. For Caribbean property markets with significant exposure to North American buyers, the strengthening US dollar is a double-edged sword: it increases purchasing power for US-dollar investors but can compress returns when assets are denominated in local currencies.

In Guyana, the market’s attention will be firmly on ExxonMobil’s Stabroek Block exploration results. The Liza-1 well, which has been drilled over recent months, is expected to yield data that will materially inform the regional investment community’s view of Guyana’s oil potential. A significant discovery would be transformative not only for the Guyanese economy but for the broader perception of the Caribbean as a frontier energy investment destination.

Jamaica’s Q2 economic data — particularly on inflation, remittances, and tourist arrivals — will be closely monitored as indicators of whether the macro recovery is feeding through to household incomes and consumer confidence. A positive Q2 report would strengthen the case for accelerated private sector investment in residential development, particularly in the affordable and mid-market segments where the supply deficit is most acute.

The Caribbean Property & Investment Review is published monthly and provides analysis of real estate, economic, and investment developments across the Caribbean region. This edition covers the period 3 March to 2 April 2015. All market data reflects conditions prevailing during the stated coverage period.