Caribbean Property & Investment Review — November 2016

Publication Date: 3 November 2016  |  Coverage Period: 3 October – 2 November 2016

Morning Briefing

• Hurricane Matthew made landfall in Haiti on October 4 as a Category 4/5 storm, killing over 1,000 people and devastating the southern peninsula’s housing stock and infrastructure.
• Jamaica experienced serious wind and rain impacts on October 5, with significant property damage reported across Kingston, St. Elizabeth, and coastal parishes.
• The Bahamas and eastern Cuba sustained storm surge and wind damage; early property loss estimates across the region run into hundreds of millions of US dollars.
• Caribbean tourism operators scrambled to reassure travellers as Matthew disrupted the critical autumn shoulder season, with some resorts sustaining structural damage.
• Reconstruction financing discussions are already underway at the CDB and IDB level, with donor pledges beginning to flow toward Haiti’s hardest-hit communities.
• The US presidential election on November 8 is days away; Caribbean governments and diaspora communities are watching closely given potential policy shifts on immigration and trade.

Hurricane Matthew: The Caribbean Property Reckoning

The Caribbean has weathered Atlantic hurricanes for centuries, but the ferocity and track of Hurricane Matthew served as a sharp reminder of the existential risk that storm events pose to property values, insurance markets, and community livelihoods across the region. Forming in the southwestern Caribbean on September 29, Matthew rapidly intensified into a Category 5 storm before making its catastrophic landfall on the southern tip of Haiti’s Tiburon Peninsula on October 4, 2016.

Haiti bore the brunt of Matthew’s worst fury. The storm’s 145-mph winds and catastrophic storm surge swept through communities in Grand’Anse and Sud departments that were still carrying scars from the 2010 earthquake. Preliminary damage assessments from the United Nations and Haitian government suggest that tens of thousands of homes were either destroyed or rendered uninhabitable. Agricultural infrastructure, already fragile, was devastated. For a country where the vast majority of property transactions are informal and title records are incomplete, the human and economic accounting will take months to complete. International reconstruction financing will be essential, but mobilising it in an environment of donor fatigue and governance challenges represents a formidable task.

Jamaica’s experience with Matthew was serious, though far less catastrophic than Haiti’s. The island took a direct hit from the storm’s outer bands on October 5 as Matthew tracked northward, bringing sustained winds, torrential rainfall, and coastal flooding to parishes including St. Elizabeth, Westmoreland, Manchester, and sections of Kingston and St. Andrew. The National Works Agency mobilised crews rapidly, and the government declared a state of disaster in affected parishes. Property damage — to both residential stock and small commercial premises — was meaningful, and some coastal hotel properties sustained infrastructure damage that will require weeks of remediation before full reopening. Jamaica’s building standards, shaped by decades of hurricane preparedness, moderated the damage compared to what less code-compliant stock would have suffered, but the insurance sector will face a meaningful claims cycle.

The Bahamas’ southeastern islands, particularly Long Island and Acklins, sustained significant storm surge and wind damage. For communities whose economic base is a blend of small-scale tourism, fishing, and remittance income, recovering damaged property without the benefit of comprehensive insurance coverage is an acute challenge. In Cuba’s eastern provinces, wind and flooding caused damage to agricultural structures and some residential property. Early Cuban government assessments pointed to significant losses in Guantánamo and Holguín provinces, though the full picture took time to emerge given limitations in external access to detailed data.

Insurance Gaps and the Reconstruction Finance Challenge

Matthew’s passage has once again thrown a spotlight on the Caribbean’s structural under-insurance problem. Across much of the region, particularly in lower-income communities and in smaller, more remote islands, comprehensive property and catastrophe insurance coverage rates remain far below what the risk environment demands. The Caribbean Catastrophe Risk Insurance Facility (CCRIF) has been an important innovation — providing governments with rapid parametric payouts following qualifying disaster events — but its coverage does not reach household level, and the gap between government-level payouts and individual property-owner protection remains vast.

For property investors and developers, Matthew reinforces the imperative of rigorous due diligence on construction standards, storm surge exposure mapping, and insurance adequacy before committing capital. Properties in low-lying coastal zones without modern reinforced construction represent a category of risk that is increasingly difficult to underwrite at acceptable premiums. The reinsurance market’s ongoing repricing of Caribbean hurricane risk — a process underway since 2004–2005 — will continue to push primary premiums upward. Developers who ignore this reality in their project feasibility models do so at significant financial peril.

Reconstruction financing from multilateral development banks including the IDB, World Bank, and Caribbean Development Bank has begun to mobilise. For Haiti, the challenge is not merely financial but institutional: channelling reconstruction resources through accountable mechanisms in a fragile state environment is enormously difficult. For Jamaica, reconstruction is expected to proceed more efficiently through established national institutions and the existing insurance market, though the full claims picture will take several more weeks to crystallise.

Tourism Season Disruption and the Road to Recovery

October represents a transitional period in Caribbean tourism — the shoulder season between the summer and the critical winter high season that begins to ramp up through November. Matthew’s timing was therefore not the worst possible scenario from a tourism revenue standpoint, but it was far from inconsequential. Several resort properties in Jamaica’s south coast and some Bahamian Out Islands sustained damage requiring closure for repairs. Cancellations and booking hesitancy in the weeks immediately following the storm will have depressed October revenues at some properties.

Caribbean tourism boards and the Caribbean Tourism Organisation (CTO) moved quickly to counter negative media impressions of the region by emphasising that the vast majority of resort areas — particularly Jamaica’s north coast hotel strip from Montego Bay to Ocho Rios, and Nassau and the major Bahamian resort islands — were either unaffected or had returned to normal operations within days. This communication effort is important: the risk of a storm affecting one part of the Caribbean causing booking cancellations across unaffected destinations is a persistent industry concern, and proactive marketing response is the standard playbook.

Looking beyond immediate recovery, the 2016–2017 winter tourism season remains on track to be a strong one across the region. Advance booking data for December through April had been encouraging before Matthew struck, and the fundamental demand drivers — the US and Canadian markets seeking warm-weather winter escapes, the continued growth of European arrivals — remain intact. For property investors with hotel, villa, or short-term rental exposure in the Caribbean, the medium-term tourism outlook continues to support reasonable asset valuations.

The Approaching US Election: Caribbean Stakes

With the US presidential election scheduled for November 8 — just days after this edition’s publication — Caribbean governments, businesses, and diaspora communities are monitoring the contest with considerable interest. The Caribbean’s economic relationship with the United States is profound and multidimensional: tourism arrivals, foreign direct investment, remittances, trade preferences, and immigration policy all intersect with the outcome of Washington’s political cycles.

The Caribbean diaspora in the United States — particularly the large Jamaican, Haitian, Trinidadian, and Barbadian communities in New York, Florida, and other states — has a direct personal stake in US immigration policy, which has featured prominently in the election campaign. The prospect of significant changes to immigration enforcement, to the treatment of undocumented Caribbean nationals in the US, or to the legal immigration pathways that Caribbean professionals and workers use to reach the United States represents a material concern. Remittances from Caribbean diaspora communities to their home islands constitute a significant share of GDP for many territories; any policy environment that reduces the flow of remittances would have direct consequences for household purchasing power and, by extension, for domestic property markets.

From a trade and investment perspective, Caribbean governments will also be watching closely. The Caribbean Basin Initiative and related trade preferences that give Caribbean goods preferential access to the US market have broad bipartisan support but could face uncertainty in a period of US trade policy recalibration. The robust US-Caribbean tourism relationship, which is less dependent on formal trade agreements, is likely to be more resilient to political change, but investor confidence in long-term Caribbean-US economic ties is sensitive to Washington’s signals.

Caribbean Leaders This Month

Jamaica — PM Andrew Holness and the Storm Response: Prime Minister Holness’s government drew measured praise for its management of the Matthew emergency, with rapid mobilisation of the National Disaster Risk Management Council and early declaration of disaster status in affected parishes. The response demonstrated improved institutional capacity relative to some previous events, though calls for sustained investment in drainage infrastructure and coastal protection will intensify in Matthew’s aftermath.

Haiti — President Jovenel Moïse (President-elect): Haiti’s political situation remained complex during the coverage period, with the country approaching a rescheduled presidential election while simultaneously grappling with Matthew’s devastation. The sheer scale of destruction in the south — affecting the same communities hardest hit by the 2010 earthquake — placed enormous pressure on the transitional government and international partners to coordinate an effective response.

Barbados — PM Fruendel Stuart: Barbados escaped Matthew’s direct impact, but the Barbadian government was attentive to the regional response, offering assistance and monitoring implications for the island’s own tourism-dependent economy. Stuart’s government continued to navigate a challenging fiscal environment, with IMF discussions ongoing regarding Barbados’s debt trajectory.

Trinidad and Tobago — PM Keith Rowley: Port of Spain remained focused on its domestic economic challenge: the continued impact of depressed energy prices on government revenues. The PNM government was implementing austerity measures, managing fiscal consolidation in an environment of reduced oil and gas earnings. The property market in Trinidad showed limited transactional activity as consumer confidence remained subdued.

Dominican Republic — President Danilo Medina: The DR weathered Matthew with limited impact to its major tourism zones, and the Medina government was quick to signal that Punta Cana and the north coast resort corridor remained fully operational. The Dominican Republic’s construction and tourism investment pipeline continued to attract regional and international capital attention.

The Bahamas — PM Perry Christie: Christie’s government faced the challenge of managing Matthew’s damage to the Out Islands while reassuring the all-important Nassau and Paradise Island tourism economy — which was largely unaffected — that the Bahamas was open for business. The contrast between the Out Islands’ vulnerability and Nassau’s resilience highlighted ongoing infrastructure investment disparities within the archipelago.

Guyana — President David Granger: Guyana continued to attract investment attention following ExxonMobil’s Final Investment Decision on the Liza Phase 1 oil project earlier in 2016. With construction now underway and first oil targeted for end 2019, the anticipation building around Guyana’s oil revenue transformation was beginning to translate into early real estate and commercial property interest in Georgetown.

Overall Performer This Month: Dominican Republic stands out as this month’s relative outperformer — its major tourism infrastructure emerged from the Matthew period essentially unscathed, its construction pipeline remained active, and President Medina’s government projected confidence that the DR’s investment environment was fully intact and open for business.

Looking Ahead

The immediate priority across affected territories is completing damage assessments and mobilising reconstruction resources. Insurance adjusters, government agencies, and multilateral development bank teams will be active in Haiti, Jamaica, and the Bahamas in the coming weeks, and the pace at which reconstruction finance reaches affected communities will be a critical determinant of how quickly housing markets in those areas stabilise. For Haiti particularly, the reconstruction challenge is immense and will require sustained international engagement over years, not months.

The November 8 US election result will shape the policy context within which Caribbean governments, businesses, and diaspora communities operate for the next four years. Regardless of outcome, Caribbean governments would be well advised to diversify their external economic relationships — deepening ties with Canada, the UK, and emerging market partners — to reduce vulnerability to any single country’s policy shifts. The Caribbean Community (CARICOM) has an opportunity to strengthen its collective voice in Washington at a moment when that voice may be more important than ever.

The 2016–2017 winter tourism season represents the near-term economic test for Caribbean property and hospitality operators. Early booking indicators had been positive before Matthew, and the industry’s rapid recovery messaging should help contain the damage to bookings. Property investors with well-located, structurally sound assets in the region’s established tourism corridors have reason for measured confidence as the high season approaches, though the imperative of adequate catastrophe insurance coverage has rarely been more clearly demonstrated.

The Caribbean Property & Investment Review is published monthly for property professionals, investors, and development practitioners across the Caribbean region. All market assessments reflect conditions as of the coverage period end date. This publication does not constitute investment advice.

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