Caribbean Property & Investment Review — Edition 105

Publication Date: 3 November 2017  |  Coverage Period: 3 October – 2 November 2017

Morning Briefing

• Puerto Rico’s power restoration effort continues at a desperately slow pace, with reports indicating that more than 80 percent of the island’s 3.4 million residents remain without electricity nearly six weeks after Hurricane Maria’s landfall on 20 September. Hospitals, elderly care facilities and individuals dependent on powered medical equipment face acute risk.
• Dominica’s reconstruction has barely begun: international aid is arriving but the scale of destruction — 90 percent of buildings damaged or destroyed — means the island will require sustained external support for years. Prime Minister Roosevelt Skerrit has appealed directly to international donors and bilateral partners.
• The British Virgin Islands, two months on from Irma’s catastrophic 6 September strike, are in the early stages of heavy construction activity as the territory begins a multi-year rebuilding programme. Road Town and Tortola’s infrastructure is partially restored, but the marina and charter boat industry remains crippled.
• Barbuda remains essentially uninhabited following the evacuation of its entire population to Antigua after Irma’s 95-percent-structural-destruction strike on 6 September. The question of when and how repopulation can occur is subject to intense political and practical debate within the Antigua and Barbuda government.
• Caribbean property insurance premiums are being revised sharply upward as the full scale of Irma and Maria claims becomes clearer, with some insurers signalling withdrawal from the most hurricane-exposed Eastern Caribbean markets.
• Unaffected islands — Jamaica, Barbados, Dominican Republic, Trinidad & Tobago — are reporting strong early winter bookings as travellers seek alternatives to the devastated northern Caribbean destinations, offering those markets an unexpected demand boost heading into the high season.

Puerto Rico: A Humanitarian and Economic Crisis Deepens

The situation in Puerto Rico as November opens is grim in ways that are difficult to fully convey. Six weeks after Hurricane Maria made its Category 4 landfall on 20 September, the island’s power grid — comprehensively destroyed by the storm — is being restored at a pace that falls far short of both official targets and the population’s urgent need. Reports from across the island indicate that more than 80 percent of residents remain without electricity, with the restoration effort hampered by the scale of infrastructure destruction, the difficulty of accessing remote communities, and logistical challenges that have exposed deep vulnerabilities in the island’s pre-storm infrastructure management.

The economic consequences for Puerto Rico’s property market are severe and will be long-lasting. Commercial properties across San Juan, Ponce, Bayamón and other urban centres are operating at diminished capacity or not at all, with power unavailability making normal business operations impossible. The residential market, already under structural pressure from years of population decline driven by economic emigration to the US mainland, now faces the additional weight of storm damage affecting hundreds of thousands of housing units. Federal damage assessments indicate that property losses from Maria alone may exceed $90 billion — a figure that places this disaster among the costliest in US history.

For external investors who had been cautiously re-examining Puerto Rico as a potential real estate opportunity — the island’s Act 20 and Act 22 tax incentive programmes had attracted some interest from the financial and technology communities — Maria has definitively reset the clock. Recovery from this scale of destruction will take not months but years, and the island’s underlying fiscal crisis, which predated the storm and remains unresolved, provides no fiscal cushion for the rebuilding effort. Federal FEMA funding will be essential, but the political dynamics of that funding relationship have been complicated by a public dispute between Puerto Rican officials and the federal administration over the adequacy of the response.

Dominica’s Long Road to Reconstruction

Dominica’s position in October and November 2017 is uniquely difficult among the storm-affected territories. The island of approximately 72,000 people — which had been developing a promising ecotourism and citizenship-by-investment economy on the back of its extraordinary natural environment — suffered the most devastating single hurricane strike of any Caribbean island in living memory when Maria made landfall on 18 September. The 90 percent building damage figure is not a statistical abstraction: it means that almost every family on the island is living in a damaged structure, has lost their home entirely, or is dependent on emergency shelter.

Prime Minister Roosevelt Skerrit, who famously sheltered in place during Maria and shared real-time accounts of the storm’s destructive passage via social media, has been leading a determined international appeal for reconstruction support. The government has formally committed to rebuilding Dominica as the world’s first ‘climate-resilient nation’ — a framing that has resonated with international development partners and climate-focused donors. The Caribbean Development Bank, the European Union and bilateral partners including France and the United Kingdom have pledged assistance, but the gap between what has been committed and what the full reconstruction will require is enormous.

For the property market, the situation is stark. No meaningful transaction activity is occurring in Dominica at present, and it is unrealistic to expect that the investment environment will recover on a timescale that matters to most commercial property investors. The citizenship-by-investment programme, which had been one of the more innovative in the Eastern Caribbean, is technically still operational but the real estate components that underpin it are either destroyed or inaccessible. The government has indicated its intention to use CBI revenues — which can now be directed to a relief fund rather than solely to approved projects — as a financing mechanism for reconstruction, a pragmatic response to an extraordinary situation.

BVI, USVI and Anguilla: Heavy Construction Begins

The British Virgin Islands, US Virgin Islands and Anguilla are two months into their recovery from Irma’s 6 September strike, and the picture across these territories is one of intensive reconstruction activity combined with ongoing economic disruption. The BVI’s territorial government has been coordinating a reconstruction effort that is unprecedented in the territory’s history: thousands of workers have arrived to begin rebuilding homes, businesses and infrastructure, and the construction sector is essentially the only functioning economic sector in the territory at present.

For property owners in the BVI, the insurance claims process is underway but progress is slow. The territory’s property insurance market, served by a combination of local carriers, regional reinsurers and international Lloyd’s syndicates, is processing claims at a scale it has never previously encountered. Anecdotal reports from property owners suggest that claims assessments are taking longer than expected and that some policyholders are encountering disputes about the scope of their coverage — a preview of what is likely to be a prolonged period of insurance market friction across the storm-affected Caribbean.

The USVI faces a compounded challenge: Irma struck on 6 September, and before meaningful recovery could begin, Maria struck again on 20 September. The double blow to the territory’s infrastructure, residential housing stock and tourism economy has left the USVI in an extremely difficult position. Federal funding through FEMA and the Department of Housing and Urban Development will be the primary drivers of recovery, but even with federal support, the territory’s tourism-led economy — centred on St Thomas’s cruise ship and duty-free retail hub — will not recover quickly.

The Insurance Market Crisis

The Caribbean property insurance market is undergoing its most significant structural stress test in decades. The combined claims from Hurricanes Irma and Maria — which struck multiple high-value insurance markets within the space of two weeks — have placed extraordinary pressure on primary insurers, their reinsurers, and the global capital markets that ultimately bear a significant portion of catastrophe insurance risk through instruments such as catastrophe bonds.

For property owners across the wider Caribbean, the immediate consequence is clear: insurance premiums will rise, in some cases dramatically. Insurers covering properties in hurricane-exposed Eastern Caribbean markets are already in discussions with their reinsurance partners about both pricing and capacity for the 2018 renewal season, and the signals are unambiguous — coverage will be more expensive and, in some locations, harder to obtain. Properties in Barbuda, the BVI and the USVI that are being rebuilt will face significantly higher insurance costs when they seek new coverage, and lenders considering mortgage finance for reconstruction projects will factor this into their credit assessments.

The Caribbean Catastrophe Risk Insurance Facility, the regional parametric insurance pool that provides rapid post-disaster payouts to participating governments, made payments to several affected territories following both storms. These payments, while significant, cover government response costs rather than private property losses, and the scale of private property loss from Irma and Maria vastly exceeds what public parametric instruments can address. The fundamental question of how to make adequate hurricane insurance both available and affordable in the Eastern Caribbean is one that will occupy market participants, regulators and policymakers for years to come.

Caribbean Leaders This Month

Jamaica is recording strong early winter season bookings, with tourism operators across the north coast reporting that inquiry and reservation volumes are running significantly ahead of the prior year. The island is benefiting from the reallocation of demand from storm-affected destinations, and the property market continues to function normally with steady transactional activity across both residential and commercial segments.

Dominican Republic is similarly well-positioned to absorb diverted Caribbean tourism demand. The country’s large-scale all-inclusive resort sector is operating at full capacity, and several major new resort developments that had been under construction before the storms are pressing ahead on their original timelines, confident in the demand outlook.

Barbados is seeing early evidence of a winter season bookings uplift, with luxury villa and boutique hotel operators reporting strong forward demand. The island’s position as an unaffected, high-quality Caribbean destination is being reinforced in international media coverage that distinguishes between the devastated northern Caribbean and the functioning southern Caribbean.

Trinidad & Tobago is approaching the Carnival season planning cycle — the February 2018 Carnival is already generating significant advance interest from diaspora and international visitors — with its tourism and property markets unaffected by the storms and in reasonable operational shape despite the ongoing energy revenue challenges.

Guyana continues its oil-sector-driven investment build-up, with Georgetown’s commercial and residential property markets experiencing sustained upward pressure from expatriate and oil-services demand. The storms had no impact on Guyana, and the country’s investment story remains firmly positive.

Grenada is another unaffected Eastern Caribbean market that is recording increased visitor interest as travellers look for alternatives to the devastated northern islands. The island’s citizenship-by-investment programme continues to generate real estate investment activity, and the government has capitalised on Grenada’s unscathed status in its international destination marketing.

Antigua deserves recognition for the extraordinary burden it is bearing as the host island for Barbuda’s evacuated population. Managing the integration and welfare of 1,800 displaced Barbudans while simultaneously trying to maintain its own tourism and property economy is a significant challenge, and the government has handled the situation with commendable pragmatism.

Overall regional performer: Jamaica — for strong pre-winter tourism performance, steady property market activity and its role as a regional logistics hub in the disaster response.

Looking Ahead

The Caribbean enters November 2017 in a deeply bifurcated state: the unaffected southern and western islands are performing well and anticipating a strong winter season, while the storm-affected northern Leeward Islands, the Virgin Islands territories and Dominica and Puerto Rico face recovery timelines measured in years rather than months. This bifurcation will be one of the defining characteristics of the Caribbean property market for the foreseeable future.

The insurance market restructuring now underway will have profound consequences for property investment across the entire region, not just the storm-affected islands. Higher premiums, tighter coverage terms and reduced insurer appetite for hurricane-exposed properties will affect investment returns and financing calculations for developers and buyers alike. The industry conference season beginning in late November will be dominated by discussion of how the Caribbean property insurance market rebuilds itself for the post-Irma and Maria environment.

For the reconstruction territories, the critical question over the coming months is whether international support commitments translate into actual disbursements at the pace needed to prevent prolonged human suffering and permanent economic contraction. Dominica and Barbuda in particular require immediate, sustained and generous international engagement — and the Caribbean community’s solidarity with these islands must be matched by the broader international donor community.

The Caribbean Property & Investment Review is published monthly. All market data reflect conditions during the stated coverage period. This publication does not constitute financial, legal or investment advice. Readers should seek independent professional guidance before making property or investment decisions.