Caribbean Property & Investment Review — Edition 108, August 2017

Publication Date: 3 August 2017  |  Coverage Period: 3 July – 2 August 2017

Morning Briefing

• The Caribbean’s peak summer tourism season is delivering outstanding results, with July hotel occupancy and revenue data across major destinations tracking at record or near-record levels and confirming 2017’s trajectory as a landmark year for regional tourism.
• The 2017 Atlantic hurricane season remains active, with meteorological agencies continuing to monitor tropical development closely; conditions in the Atlantic remain conducive to storm formation as the season enters its historically most active period.
• Jamaica’s property market continues its strongest run in a decade, with residential construction, resort development, and commercial property all maintaining elevated activity through July.
• Dominican Republic investment pipeline remained at peak levels through July, with several major hotel and branded residence projects completing construction phases and new development applications advancing through planning.
• Guyana’s oil development continues on schedule, with Georgetown experiencing sustained property market pressure from the growing international oil services community; the Liza Phase 1 first oil countdown advances.
• Caribbean property insurance market conditions remain firm as the active hurricane season sustains reinsurer attention to Caribbean catastrophe risk accumulations and pricing adequacy.

Peak Summer 2017: A Caribbean Tourism Landmark

The Caribbean’s 2017 tourism season has arrived at its annual zenith, and the July performance data now becoming available across the region’s major destinations confirms what the industry’s forward booking indicators had promised: this is a landmark year for Caribbean tourism. From the expansive all-inclusive resort corridors of the Dominican Republic to the boutique hotel clusters of Barbados’s west coast, from Jamaica’s vibrant north coast resort strip to the quiet luxury of the Eastern Caribbean’s private island retreats, the region’s hospitality infrastructure is delivering performance that will feature prominently in the Caribbean Tourism Organisation’s annual review when it is published in early 2018.

Jamaica’s July performance is the story of the summer. The north coast resort corridor from Montego Bay through Ocho Rios is achieving occupancy rates and average daily rates that are setting new benchmarks for the island’s summer season performance. The Jamaica Tourist Board’s multi-year investment in North American market development, the improvement of the island’s tourism product through sustained hotel refurbishment and new development, and the growing international recognition of Jamaica as a culturally rich, authentic destination have combined to produce a demand environment that is qualitatively different from the summer patterns of even five years ago. Hotels that a decade ago would have relied on deeply discounted rates to drive summer volume are now achieving meaningful rates at strong occupancy — a transformation that has profound implications for the economics of hotel ownership and resort corridor real estate investment.

The diaspora dimension of Caribbean summer tourism is at its annual peak through July and early August. The school holiday period in the United States, Canada, and the United Kingdom generates the year’s highest volumes of diaspora visitor travel, with Caribbean-Americans, Caribbean-Canadians, and Caribbean-Britons returning to their islands of origin or their family’s homeland for holidays that combine leisure, family reunion, and the recharging of cultural connection. This visitor segment generates economic activity that is somewhat different in its character from conventional leisure tourism: it is distributed more broadly across communities rather than concentrated in resort zones; it flows more through local restaurants, markets, and family celebrations rather than hotel food and beverage outlets; and it supports short-term rental demand in communities that do not benefit significantly from mainstream hotel tourism.

For Caribbean short-term rental property owners, the July-August diaspora travel peak represents the year’s most important demand period after the December-January winter peak. Well-managed short-term rental properties in locations attractive to diaspora visitors — communities with family connections, cultural significance, or proximity to beaches and nature that resonate with diaspora travellers seeking authentic experiences — are achieving strong occupancy and rates through the summer peak. The growth of platforms like Airbnb and VRBO has significantly improved the ability of Caribbean property owners to reach this diaspora market, enabling small-scale operators to achieve bookings that would previously have required expensive travel agency relationships. The democratisation of distribution that these platforms represent has been one of the most consequential structural changes in Caribbean tourism economics over the past decade.

Hurricane Season: Active Monitoring as Peak Period Approaches

The 2017 Atlantic hurricane season is entering the most statistically active period of the year — the window from August through October when the combination of peak Atlantic sea surface temperatures, reduced wind shear, and the moisture-rich environment of the tropical Atlantic creates the most favourable conditions for tropical cyclone development and intensification. The season has already demonstrated its above-normal character through the June-July period, with meteorological agencies tracking multiple systems and noting the persistently conducive environmental conditions across the main development region of the tropical Atlantic.

For Caribbean property owners, investors, and insurance markets, the opening of the season’s peak period is the moment at which preparedness planning translates from abstract prudence into operational urgency. The memories of Hurricane Matthew — which struck the Caribbean in early October 2016, devastating Haiti’s southern peninsula and causing serious damage in Jamaica and the Bahamas — remain fresh, and the above-normal seasonal forecast has maintained an elevated awareness of hurricane risk throughout the 2017 season. Property owners who have not yet completed their pre-season preparedness reviews are behind the curve; the August-to-October window demands that risk management frameworks be fully in place before, not during, the period of elevated threat.

Caribbean property insurers have been experiencing firm market conditions through 2017, with the above-normal seasonal forecast supporting reinsurer scrutiny of Caribbean catastrophe risk accumulations. The June-July reinsurance renewal discussions have in several cases resulted in adjustments to coverage terms and pricing that reflect the elevated seasonal risk environment. For primary insurers across the region — in Jamaica, Barbados, Trinidad, and the Eastern Caribbean — managing their reinsurance relationships through this active season requires careful balance between maintaining competitive primary rates for policyholders and securing the reinsurance protection that underpins their financial stability in a loss event. Property investors and owners should not assume that their existing coverage terms are automatically renewed on equivalent terms — direct engagement with their insurance advisors to confirm coverage adequacy is essential before the season’s peak period advances.

The meteorological community’s ability to track and forecast tropical systems has improved dramatically over recent decades, and Caribbean governments now have access to track and intensity forecasts with reasonable lead times that allow for meaningful emergency preparation before a storm’s arrival. National disaster management agencies across the region have conducted their pre-season exercises and are maintaining monitoring protocols through the peak period. For property investors and developers, the existence of these institutional preparedness frameworks provides some assurance that the worst of a storm’s consequences can be mitigated through effective government response, though the experience of Haiti’s Matthew recovery is a reminder that institutional capacity varies enormously across the region and that individual preparedness cannot be outsourced to government systems.

Jamaica Property Market: Mid-Year Assessment

Jamaica’s property market at the midpoint of 2017 is in genuinely excellent condition across multiple dimensions, justifying the growing interest from both domestic and international investors that the market has been generating through the year. The macroeconomic foundation — fiscal reform on track, IMF programme compliant, GDP growth positive and strengthening, inflation contained, and the exchange rate managed within acceptable parameters — provides a stability that the Jamaican property market has not consistently enjoyed in recent decades, and which experienced property market participants recognise as the enabling condition for sustained investment confidence.

The residential market is performing across multiple price points, with NHT-financed affordable housing schemes in St. Catherine, St. Andrew, and several other parishes providing a consistent base of transactional activity. Private sector developers have calibrated their residential product pipeline to the NHT financing parameters, enabling them to serve the large affordable and middle-market buyer segments effectively. In the upper-market residential segment — the gated communities of Cherry Gardens, Norbrook, Jack’s Hill, and the emerging luxury housing nodes along the north coast — demand from successful professionals, business owners, returnee diaspora members, and foreign buyers attracted by Jamaica’s tourism prominence maintains premium values and development economics.

The resort corridor property market along Jamaica’s north coast remains the most internationally visible segment of the Jamaica property investment market. The continued growth of the hotel infrastructure — with brands including Royalton, Hard Rock, Palace Resorts, and others all maintaining significant Jamaica development programmes — creates a rising-tide effect for all property values in the resort zones. Villa and short-term rental property in proximity to the resort clusters benefits from the tourism infrastructure, airlift, and visitor profile that the hotels attract. Land values along the north coast — particularly for beachfront and near-beachfront sites with development potential — have appreciated materially over the past three years as the pipeline of hotel investment has made north coast tourism real estate development competitive with the best opportunities elsewhere in the Caribbean.

Guyana Oil Development: The Countdown Continues

ExxonMobil’s Liza Phase 1 development in Guyana’s Stabroek Block is now more than a year into its active construction and procurement phase, and the programme’s methodical advance toward the late 2019 first oil target continues to underpin the Georgetown property market’s elevated activity. The FPSO vessel — the Liza Destiny — is progressing through its construction and outfitting programme, while subsea infrastructure procurement and installation planning is advancing across the array of wells and infrastructure components that will constitute the producing field.

The property market implications in Georgetown are now well established enough to be characterised with reasonable confidence. Quality residential accommodation for expatriate oil sector professionals commands rental premiums of 50-100 percent above equivalent domestic-grade accommodation. New residential development in established Georgetown neighbourhoods targeting the expatriate standard — with the mechanical, electrical, and security specifications that international professionals require — is achieving pre-leasing that validates the development economics. Commercial property — office space, retail, and service industry premises — is seeing meaningful new development interest as the service company ecosystem around the oil sector’s Georgetown base expands.

The broader Guyana economy is beginning to feel the pre-oil transformation in ways that extend beyond the oil service community’s direct property requirements. Government revenues, though not yet boosted by oil production, are receiving preparatory support from the development of fiscal frameworks and the management of the pre-oil administrative build-up. Infrastructure investment — in roads, utilities, and port capacity — is proceeding, funded partly through multilateral development bank lending that is supported by Guyana’s strong medium-term fiscal outlook. For property investors willing to accept the challenges of a frontier market environment — with the title, construction quality, and professional services gaps that entails — Guyana’s risk-return profile at this pre-oil stage of development is genuinely attractive by the standards of the wider Caribbean investment universe.

Caribbean Leaders This Month

Jamaica — PM Andrew Holness: Jamaica’s mid-year property market performance represents the most compelling evidence to date that the Holness government’s economic reform strategy is working. Strong tourism, active construction, NHT programme delivery, and commercial sector development combine to create the broadest and deepest Jamaica property market in a generation. Holness enters the second half of 2017 with considerable economic momentum behind him.

Dominican Republic — President Danilo Medina: The DR’s July investment and tourism performance maintained its consistent regional leadership. Another month of record or near-record hotel occupancy, continued construction programme progress, and strong FDI flows confirm the Dominican Republic’s position as the Caribbean’s most dynamic and consistently performing property investment market.

Guyana — President David Granger: Georgetown’s oil-driven property market transformation is the Caribbean’s most consequential long-term investment story, and Granger’s government is managing the pre-oil development period with increasing sophistication. The Liza Phase 1 countdown continues to generate growing commercial property and residential real estate market activity.

Barbados — PM Fruendel Stuart: Despite the excellence of its tourism summer performance, Barbados’s fiscal situation continues to deteriorate, with foreign exchange reserves declining and IMF engagement intensifying. The approaching election is creating political complexity for the structural reform that economists agree is necessary. Property investors in Barbados are watching the fiscal trajectory carefully.

Trinidad and Tobago — PM Keith Rowley: T&T’s property market remained characterised by energy-sector-induced restraint, with the domestic economy still navigating the adjustment to reduced hydrocarbon revenues. Tobago’s tourism development and the petrochemical sector’s continued operation provided activity, but the overall market tone remained well below its pre-austerity peak.

Cayman Islands — Premier Alden McLaughlin: Grand Cayman’s premium residential market continued to attract high-net-worth buyers through the summer period, with the Seven Mile Beach corridor and South Sound residential areas maintaining their appeal. The Cayman Islands’ property market remains one of the Caribbean’s most liquid and professionally supported for investors at the upper end of the market.

St. Kitts and Nevis — PM Timothy Harris: The Park Hyatt St. Kitts and Christophe Harbour developments continued to advance, with CBI-funded investment maintaining the programme’s development pipeline. The federation’s fiscal position, supported by CBI revenues, remained positive relative to most Eastern Caribbean peers.

Overall Performer This Month: Jamaica earns August’s recognition with a rare distinction: an island that is simultaneously delivering its best-ever tourism performance, its most active property construction pipeline in a decade, and a macroeconomic stability that provides the foundation for sustained investment confidence. The convergence of these factors makes Jamaica the Caribbean’s most compelling domestic property market story of 2017.

Looking Ahead

The coming weeks will determine the character of the 2017 hurricane season’s most active period. The meteorological environment — with persistently warm Atlantic sea surface temperatures, reduced wind shear, and active tropical wave activity emerging from West Africa — remains conducive to tropical cyclone development. Caribbean property owners, investors, and government emergency management agencies are maintaining heightened vigilance, and the industry’s preparedness frameworks are as robust as they have been in recent years. The region has navigated active hurricane seasons before, and the institutional capacity that exists today — in forecasting, emergency management, and post-event response — is meaningfully better than it was even a decade ago.

The Caribbean tourism season will begin its transition from the summer peak to the autumn shoulder through August and September, with activity reducing as the school holiday period ends in source markets. This transition period is important for resort operators from a revenue management perspective — the ability to maintain reasonable occupancy through September and October, when the hurricane risk is highest and leisure demand softest, is a significant profitability challenge. Properties that have invested in group and conference business, sports tourism, and other demand segments that are less concentrated in the traditional leisure peaks are better positioned for the shoulder period.

Guyana’s property market will continue its pre-oil development trajectory through the remainder of 2017. The construction and procurement milestones of the Liza Phase 1 programme through the second half of the year will maintain investor attention on Georgetown’s property market transformation. For the Caribbean investment community, Guyana represents the most significant structural opportunity of the decade — a frontier market at the early stages of an oil economy transition whose property market implications will unfold over years and will reward patient, informed investors who have positioned ahead of the main wave of development.

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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