Caribbean Property & Investment Review — Edition 131 | September 2015

Publication Date: 3 September 2015  |  Coverage Period: 3 August – 2 September 2015

Morning Briefing

• Trinidad & Tobago heads to the polls on 7 September 2015 in a general election that will determine the country’s economic direction at a moment of significant fiscal challenge; the outcome carries direct implications for T&T’s property and energy investment landscape.
• The 2015 Atlantic hurricane season reached its statistical peak period in August without a major Caribbean strike, though meteorologists continue to monitor several active systems as September — historically the most active month — begins.
• ExxonMobil’s Guyana appraisal programme has advanced further, with the company signalling increased confidence in the Liza field’s commercial development potential and beginning preliminary engagement with the Guyanese government on a production-sharing agreement framework.
• Jamaica’s tourism sector continued its record-breaking trajectory through August, with hotel occupancy in Montego Bay and Negril averaging above 85 percent during the peak summer weeks and short-term rental platforms reporting booking volumes 30 percent ahead of August 2014.
• Global financial markets experienced significant volatility in mid-August, driven by concerns about China’s economic slowdown and its currency devaluation; Caribbean luxury and investment property markets showed resilience, with no significant repricing observed.
• Barbados’s Prime Minister Freundel Stuart confirmed that the government’s fiscal consolidation programme remains on track, with the deficit reduction path agreed with creditors intact despite the challenging global environment.

Trinidad & Tobago General Election: The Property Market Stakes

Trinidad & Tobago goes to the polls on 7 September 2015 in a general election that is widely regarded as the most consequential in the country’s recent history. The governing People’s Partnership coalition under Prime Minister Kamla Persad-Bissessar faces a strong challenge from the People’s National Movement led by Dr Keith Rowley, with opinion polling suggesting a closely contested race. For property investors and the broader business community, the election’s outcome will determine the direction of economic policy at a moment when T&T’s energy-dependent economy faces its most significant external headwinds in years.

The central economic challenge confronting the next government is straightforward but daunting: WTI oil prices have fallen from above US$100 per barrel in mid-2014 to approximately US$45 as this edition goes to press, and the fiscal framework that funds T&T’s public services, infrastructure investment, and social programmes was built on assumptions that are no longer valid. Both the PP and PNM have acknowledged the need for fiscal adjustment, though they differ on the mix of expenditure reduction, revenue enhancement, and asset monetisation through which that adjustment should be achieved.

For the T&T property market, the election outcome matters in several respects. First, the new government’s approach to public sector employment and wages will determine whether the large cohort of public sector workers — who constitute a significant segment of the residential property demand base — faces income pressure or stability. Second, the new government’s infrastructure spending programme will directly affect construction sector activity and housing supply. Third, and perhaps most importantly for international investors, the incoming government’s posture on foreign direct investment, ease of doing business reforms, and economic diversification will signal whether T&T is committed to developing the alternative economic foundations that reduced oil dependency will require.

The commercial property market in Port of Spain is in a holding pattern ahead of the election. Several major office and retail development decisions have been deferred pending clarity on the fiscal and regulatory outlook, and institutional investors with exposure to T&T commercial assets are monitoring the political calendar closely. The outcome of the 7 September vote will be closely analysed by this publication, and we will provide a comprehensive assessment of the implications for T&T’s property market in our October edition.

Hurricane Season Peak: Caribbean Property Risk in Focus

August 2015 passed without a major hurricane strike on the Caribbean, and the El Niño pattern that has moderated Atlantic storm formation through the season continued to provide a degree of protection. However, the statistical record is clear: September is the most active month of the Atlantic hurricane season, and history demonstrates that the season’s most impactful storms have frequently developed and intensified rapidly, providing little warning to coastal communities and property owners. The Caribbean property market cannot afford complacency.

The meteorological picture as September opens is mixed. Several areas of disturbed weather in the Atlantic and Caribbean basin are being monitored, and while none has yet developed into a named storm, the atmospheric conditions — including sea surface temperatures that remain elevated in the Caribbean Sea despite the moderating influence of El Niño — mean that rapid development remains possible. Property owners and investors across the region are urged to verify that insurance cover is current, that structural preparations have been completed, and that emergency protocols are activated.

The Caribbean property insurance market has continued to evolve in response to the region’s storm risk profile. The leading reinsurers have maintained their Caribbean exposure limits, but the pricing of coverage for properties in high-risk coastal zones — particularly those without storm-rated construction features — has continued to rise. Investors acquiring property in the Caribbean should regard storm-resistant construction standards not merely as a regulatory requirement but as a core value driver: properties built to or above current hurricane building codes command premium pricing in both the sale and rental markets, and their insurance costs are proportionally lower.

Guyana: From Discovery to Development Planning

The three months since ExxonMobil’s landmark Liza discovery announcement have seen the Guyanese oil story move from the initial euphoria of discovery into the more demanding phase of development planning and institutional capacity building. ExxonMobil’s appraisal drilling programme has been progressing steadily, and the company’s public communications have maintained a consistently positive tone regarding the field’s commercial potential. Industry analysts following the programme closely have noted that the appraisal results appear to be confirming and potentially extending the initial resource estimate.

On the governance side, the Guyanese government — which faces its own election in the near term — has been engaged in complex negotiations with ExxonMobil and its partners on the terms of the production-sharing agreement that will govern the Liza field’s development. The existing PSA framework, which was negotiated when Guyana was considered a frontier exploration territory with uncertain commercial prospects, is under scrutiny from commentators who argue that its terms should be renegotiated in light of the discovery’s scale. ExxonMobil has indicated willingness to discuss modifications within the existing contractual framework, but the outcome of these discussions will have significant implications for the Guyanese government’s revenue expectations and for the pace of development investment.

Georgetown’s property market continues to price in the anticipation of oil-driven economic transformation. Land values in the city’s upscale residential neighbourhoods — Bel Air, Queenstown, and Prashad Nagar — have risen by an estimated 15 to 25 percent since the May discovery announcement, reflecting the premium that early-mover investors are prepared to pay for positions in a market that is widely expected to appreciate substantially as the development programme advances. Commercial rents in the central business district are also moving higher, as the small pool of Grade-A office space is increasingly competed for by energy sector and professional services firms expanding their Georgetown footprints.

Jamaica: Record Season, Rising Rental Yields

Jamaica’s August tourism data has confirmed what the H1 trend was already suggesting: 2015 is likely to be the strongest tourism year in the island’s history. Hotel occupancy above 85 percent in the peak weeks, short-term rental bookings 30 percent ahead of the prior year, and record throughput at Sangster International Airport have combined to create a property rental market environment of exceptional dynamism. For owners of well-positioned short-term rental properties in the main visitor corridors, the summer of 2015 has been a benchmark against which future performance will be measured.

The sustainability of these rental yield levels into the shoulder season (October–November) and the winter season (December–April) will be the critical test of whether Jamaica’s tourism recovery is structural or cyclical. The indicators are encouraging: forward bookings for the December–February period are running ahead of the equivalent point in 2014, and the growing pipeline of direct flights from North American secondary markets that were introduced for the summer season are being maintained on a year-round basis by their operating airlines — a commercial vote of confidence in Jamaica’s year-round demand profile.

Caribbean Leaders This Month

Guyana — Georgetown Property Appreciation: An estimated 15–25 percent increase in prime residential land values in Georgetown since the May Liza discovery confirmed the intensity of early-mover investor interest and the property market’s rapid repricing in anticipation of oil-driven economic transformation.

Jamaica — Record Summer Tourism: August hotel occupancy above 85 percent and short-term rental bookings 30 percent ahead of the prior year established new benchmarks for Jamaica’s tourism performance, directly supporting rental yield expansion and property investor confidence.

Cayman Islands — Market Resilience: Despite the mid-August global financial market volatility triggered by China concerns, Cayman’s premium residential market showed no significant repricing, demonstrating the characteristic resilience of ultra-high-net-worth property markets to short-term financial turbulence.

Dominican Republic — Sustained Construction: The DR’s construction sector maintained its pace through August, with resort-residential developments at Cap Cana and Punta Cana continuing to attract pre-sales from North American and European buyers undeterred by global market uncertainty.

Barbados — Fiscal Credibility: PM Stuart’s confirmation that Barbados’s fiscal consolidation programme remains on track provided a degree of macroeconomic stability that supported continued confidence in the island’s premium property market, particularly among British and North American buyers.

Trinidad & Tobago — Election Anticipation: The T&T property market is holding steady ahead of the 7 September vote, with significant commercial and investment decisions deferred pending the election outcome. The clarity that the vote will provide is itself a market catalyst, and the post-election period is expected to see a release of pent-up transaction activity.

Turks & Caicos — Ultra-Premium Pipeline: Turks & Caicos continued to develop its ultra-premium residential pipeline through August, with several beachfront development sites on Providenciales attracting interest from North American and European developers targeting the top decile of the Caribbean luxury market.

Overall Performer — Jamaica: Jamaica’s record summer tourism performance, combined with its stable macro backdrop and improving mortgage market conditions, made it the most compelling investment story in the Caribbean for August 2015. The island’s trajectory — from IMF programme stabilisation to genuine economic recovery — is one of the most positive stories in the wider Caribbean, and property investors who have positioned ahead of this recovery are beginning to see tangible returns.

Looking Ahead

The Trinidad & Tobago general election on 7 September is the most important near-term political event in the Caribbean property investment calendar. Regardless of the outcome, the election will provide the policy clarity that the market has been waiting for. The next government will face difficult but navigable choices on energy sector reform, fiscal adjustment, and economic diversification — and the quality of those choices will determine T&T’s property market trajectory for the next five years. Our October edition will provide a comprehensive post-election analysis.

September’s hurricane activity will be watched with close attention. The statistical peak of the season falls in the second week of September, and the active basin conditions — particularly elevated Caribbean Sea temperatures — mean that the risk of a significant storm developing and tracking through the island chain cannot be dismissed. Property investors are reminded that the cost of adequate insurance is trivial compared to the potential uninsured loss from a major storm event, and that pre-season preparation of physical assets is far more effective than post-storm remediation.

Guyana’s development planning process will be advanced further in September, with ExxonMobil expected to make additional public statements about the Liza field’s commercial parameters. The company’s appraisal programme results, when synthesised with the initial discovery data, will provide the basis for a formal field development plan submission — a milestone that will further anchor investor confidence in Georgetown’s long-term property market prospects and accelerate the pipeline of commercial and residential development projects currently in early planning stages.

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 August to 2 September 2015. All market data reflects conditions prevailing during the stated coverage period.