Caribbean Property & Investment Review — March 2017

Publication Date: 3 March 2017  |  Coverage Period: 3 February – 2 March 2017

Morning Briefing

• Trinidad Carnival 2017 was celebrated on February 27-28, drawing hundreds of thousands of participants and visitors to Port of Spain and generating significant economic activity across the hospitality, retail, and creative sectors.
• President Trump’s revised travel ban executive order, signed March 6 (after the original was blocked by courts), continues to signal the administration’s immigration enforcement priorities, with Caribbean governments maintaining watchful engagement.
• Jamaica’s economic reform programme delivered positive Q4 2016 growth data, reinforcing the IMF programme’s trajectory and supporting confidence in the domestic property market.
• Caribbean investment sentiment remains cautiously positive for 2017 despite external political uncertainties, with tourism performance data from the winter season supporting property valuations in resort markets.
• The UK formally committed to triggering Article 50 by end of March, intensifying Caribbean financial centres’ attention to Brexit implications for their regulatory relationships.
• Dominican Republic’s construction sector maintained strong output in February, with several major resort and residential projects advancing toward completion or ground-breaking.

Trinidad Carnival 2017: Celebration and Economic Reality

Trinidad and Tobago’s Carnival, the mas that the world watches, roared into life on February 27-28, 2017 with the particular intensity of a festival that knows it is carrying a country’s spirits through a difficult economic period. Against the backdrop of ongoing government austerity, reduced public spending, and the subdued economic environment that has characterised Trinidad since the sustained fall in oil prices from 2014, Carnival delivered what it invariably does: an explosion of creative energy, cultural expression, and economic activity that is without parallel in the Caribbean calendar.

The tourism numbers for Carnival 2017 were encouraging. Hotel occupancies in Port of Spain and the broader Trinidad tourism infrastructure reached their annual peak, with properties that had maintained quality standards through the austerity period able to command premium rates for the Carnival window. Diaspora returnees — Trinidadians from New York, London, Toronto, and Miami who make the annual pilgrimage home for Carnival — once again provided a significant portion of the visitor base, bringing foreign exchange earnings that carry both immediate and broader economic significance. Short-term rental operators in the capital and in strategic locations across the island reported the year’s highest occupancy rates during the Jouvert and parade days.

The creative economy dimension of Carnival — encompassing costume design, music production, catering, event management, and the entire ecosystem of businesses that service the festival — represents a significant and often undercounted component of Carnival’s economic contribution. The band launch season, soca competition, and pan performances that precede the main Carnival days generate weeks of sustained economic activity in Port of Spain’s creative and entertainment districts. For property investors in these urban areas, the vibrancy of the creative economy provides a rationale for continued investment in commercial premises and residential rental stock, even in a period when Trinidad’s broader economic indicators remain under pressure.

The Rowley government’s challenge is to leverage Carnival’s cultural and economic assets more effectively in support of Trinidad’s economic diversification agenda. The Creative Economy and the Carnival Commission represent important institutional frameworks for this work, but the gap between the festival’s international profile and its capture of maximum economic value for Trinidad remains a persistent policy challenge. Increased international marketing investment, improved coordination of the visitor experience beyond the traditional Carnival circuit, and strategic promotion of Trinidad as a year-round cultural tourism destination all represent opportunities that the government and private sector need to pursue more aggressively if Carnival’s economic contribution is to be maximised.

Trump’s Travel Ban and Caribbean Immigration Concerns

The Trump administration’s immigration posture continued to evolve through the February coverage period, with the original travel ban executive order being blocked by federal courts and a revised version in preparation. The pattern of aggressive executive action followed by legal challenge and judicial constraint has become the defining rhythm of the administration’s early weeks on immigration policy. For Caribbean governments and diaspora communities, the critical question is not any single executive order but the direction of travel: what does the administration’s overall approach to immigration enforcement mean for Caribbean nationals living and working in the United States over the next four years?

The evidence through February is that the Trump administration’s immigration enforcement priorities do represent a meaningful escalation of activity relative to the Obama era’s later years. Reports of increased ICE enforcement operations in cities with significant Caribbean immigrant populations — New York, Miami, Fort Lauderdale, and others — have created real anxiety in Caribbean-American communities. The practical effect has been to cause some undocumented Caribbean nationals to reduce their visibility, limit their movements, and, in some cases, reduce discretionary spending including remittance sending. This is not yet manifesting in dramatically different remittance data, but the directional risk is real and Caribbean central banks and financial sector supervisors are monitoring carefully.

Caribbean governments have maintained their diplomatically calibrated approach to Washington, working through both direct bilateral channels and the CARICOM collective framework to engage with the new administration. The CARICOM-US relationship has historically been productive on a range of security, trade, and development cooperation matters, and Caribbean governments are keen to preserve these working relationships even as they advocate for their diaspora communities’ interests. The diplomatic challenge — defending diaspora rights while maintaining productive government-to-government relationships with an administration that has made immigration restriction a central political commitment — is a genuinely difficult one that will require sustained skill and persistence.

Jamaica’s Economic Momentum and Property Market

Jamaica’s economy delivered encouraging data through the February review period, with Q4 2016 growth figures reinforcing the positive trajectory established under the Holness government’s continuation of the IMF-supported reform programme. Jamaica has been one of the more consistent fiscal reform performers among developing economies over recent years, maintaining programme compliance through multiple administrations and delivering measurable improvements in debt sustainability metrics. This macroeconomic foundation is providing a supportive backdrop for the domestic property market, which has maintained solid transactional activity across both the affordable and middle-market segments.

The National Housing Trust’s mortgage programme continues to be the primary engine of affordable and middle-market residential property activity in Jamaica. The NHT’s below-market interest rates and its willingness to lend to a broader range of applicants than commercial banks provides a significant portion of Jamaicans with access to mortgage financing they would not otherwise obtain. The Holness government’s commitment to expanding homeownership as a social and economic objective has been backed by sustained NHT activity and by some restructuring of NHT products to address specific market gaps, including for younger first-time buyers and for members of the diaspora seeking to purchase homes in Jamaica.

Commercial property in Kingston and in the north coast resort corridor is also showing signs of positive momentum. The growth of the business process outsourcing (BPO) sector — which Jamaica’s government has actively promoted as a driver of employment and economic diversification — is generating demand for purpose-built office and operational space in Kingston and Portmore. Several significant BPO facility developments are at various stages of planning and construction, and their completion will add meaningfully to the commercial property supply while generating employment that feeds household incomes and domestic property demand. On the north coast, continued hotel development and refurbishment activity reflects sustained confidence in Jamaica’s tourism outlook.

Caribbean Investment Climate: 2017 Mid-Quarter Assessment

With the first quarter of 2017 drawing toward its close, the Caribbean’s investment climate presents a picture of resilience in the face of meaningful external challenges. The region’s tourism sector has delivered a strong winter season — early data from the January-February period points to solid occupancy and visitor spending across most major destinations — and this performance supports confidence in resort-related property values and development economics. The external challenges — Trump administration immigration concerns, Brexit uncertainty, and the continuing challenge of Haiti’s Matthew reconstruction — have not yet translated into measurable deterioration in Caribbean property market fundamentals.

Citizenship by investment (CBI) programmes across the Eastern Caribbean continue to generate a steady flow of international investment into real estate development. The programmes of St. Kitts and Nevis, Antigua and Barbuda, Dominica, and Grenada collectively channel hundreds of millions of dollars annually into approved real estate projects, providing a funding base for hotel and resort development that is partially insulated from the volatility of conventional tourism-dependent investment decision-making. The CBI sector faces its own regulatory pressures — particularly in relation to due diligence standards and OECD/FATF scrutiny of tax transparency — but the fundamental demand from global mobile wealth for Caribbean investment-linked residency options remains robust.

For investors considering entry into Caribbean property markets in 2017, the key differentiators between markets remain the quality of the regulatory environment, the depth of the professional services ecosystem, the liquidity of the secondary market, and the strength of the underlying tourism or economic fundamentals supporting demand. By these measures, the Dominican Republic, Jamaica, Cayman Islands, and Barbados continue to stand out as the markets where international investors can most readily deploy capital with reasonable confidence in the institutional framework supporting their investments.

Caribbean Leaders This Month

Trinidad and Tobago — PM Keith Rowley: Rowley’s government presided over a successful Carnival that provided a meaningful economic boost to T&T’s hospitality and creative sectors. The challenge now is to sustain the economic momentum beyond the festival season and to make progress on the structural diversification that will reduce T&T’s dependence on energy revenues over the medium term.

Jamaica — PM Andrew Holness: Holness continued to consolidate Jamaica’s position as a reform leader in the Caribbean, with positive economic data and ongoing NHT activity supporting the domestic property market. The government’s focus on BPO sector development and tourism investment promotion reflects a coherent economic strategy that property market participants are responding to positively.

Dominican Republic — President Danilo Medina: The DR maintained its position as the regional investment leader, with February construction data confirming continued strong activity in the tourism development corridor. Medina’s government remains the most effective in the region at translating investment promotion into actual capital flows and project activity.

Barbados — PM Fruendel Stuart: Stuart’s government navigated the February period under continuing fiscal pressure. The winter tourism season’s performance was important to Barbados’s revenue outlook, and early indications of a solid season provided some relief. The government’s fiscal reform path remains challenging and will require sustained IMF engagement.

Guyana — President David Granger: Georgetown’s oil-sector property market continued its steady development, with the Stabroek Block construction programme drawing in an increasing number of international service companies and their associated residential and commercial property requirements. The Granger government’s challenge of managing pre-oil economic development while building the institutional capacity for oil revenue management intensified through the period.

St. Kitts and Nevis — PM Timothy Harris: The PAM-led government continued to manage one of the Caribbean’s most successful CBI programmes, with real estate approved for the citizenship investment programme generating continued hotel and resort development in the dual-island federation. CBI revenue provided fiscal buffer at a time when many regional governments were under pressure.

Cayman Islands — Premier Alden McLaughlin: The Cayman Islands monitored the Article 50 Brexit trigger with close attention, given the implications for the territory’s financial services relationships with European institutions. McLaughlin’s government was engaged in proactive preparation for the Brexit negotiation environment.

Overall Performer This Month: Trinidad and Tobago earns this month’s recognition for the successful delivery of Carnival 2017 — a cultural and economic achievement that demonstrated the country’s capacity for excellence even in a difficult macroeconomic environment.

Looking Ahead

The UK’s expected triggering of Article 50 in late March will mark the formal beginning of Brexit negotiations and will intensify the Caribbean’s engagement with the process. Caribbean financial centres, CARIFORUM trade negotiators, and the governments of UK overseas territories in the Caribbean will all need to step up their engagement with the Brexit process in the months ahead. The two-year negotiating period that begins with Article 50 is the window within which the future terms of Caribbean-UK-EU relationships will be determined.

The Caribbean property market will enter the quieter April-May shoulder season after the strong winter peak. This period typically sees reduced transactional volumes in the resort segments but continued activity in the domestic residential markets. For property developers, the shoulder season is an important time for construction progress on resort projects that will be available for the next high season. Good progress through this period will determine how much new inventory enters the market for the 2017-2018 winter season.

The Trump administration’s immigration policy evolution will continue to be closely watched through March and beyond. The outcome of the legal challenges to the travel ban executive order will provide an important signal about the administration’s capacity to implement its most ambitious immigration measures. Caribbean governments and diaspora advocacy organisations will be tracking court decisions and enforcement data as they calibrate their assessments of the risk environment for Caribbean nationals in the United States.

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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