Caribbean Property & Investment Review — Edition 101

Publication Date: 3 March 2018  |  Coverage Period: 3 February – 2 March 2018

Morning Briefing

• Trinidad Carnival 2018 took place on 12–13 February and delivered a record-breaking economic performance, with visitor arrivals and tourism revenues substantially exceeding prior-year comparisons as the festival’s global profile continues to grow and diaspora visitors returned in strong numbers.
• The Dominican Republic’s property market is registering its strongest foreign buyer interest in years, as investors and second-home buyers diverted from storm-affected northern Caribbean destinations focus their attention on the DR’s mature, large-scale resort and villa inventory.
• Five months on from Hurricane Maria’s 18 September 2017 Dominica strike, international reconstruction support is accelerating, with EU and bilateral donor funding beginning to flow at meaningful scale into housing and infrastructure rebuilding programmes.
• Caribbean central banks and monetary authorities are monitoring global interest rate signals carefully, as the US Federal Reserve’s rate-rising cycle begins to transmit to regional borrowing costs — with implications for Caribbean mortgage markets and property affordability.
• Jamaica’s spring tourism season is maintaining the momentum established during the exceptional December–February peak period, with north-coast hotels and villas reporting continued strong bookings into March and April.
• Puerto Rico’s power restoration has now reached approximately 80 percent of the island, but the remaining communities without power — concentrated in remote rural areas — continue to face severe humanitarian hardship five months after Maria’s landfall.

Trinidad Carnival 2018: Economic Festival in Full Flow

Trinidad and Tobago’s Carnival — held on 12 and 13 February 2018, the two days before Ash Wednesday — delivered a performance that has energised the twin-island state’s hospitality and property communities. The festival, which is widely regarded as the jewel of Caribbean cultural events and the most authentic expression of the region’s creative and social spirit, drew visitor numbers that the tourism authority reports as significantly ahead of 2017. Diaspora Trinidadians and Tobagonians returned from the UK, US, Canada and elsewhere in strong numbers, and international visitors — attracted by Carnival’s growing global reputation as a world-class cultural experience — added to the volume in ways that stretched Port of Spain’s accommodation inventory.

For the property market, Carnival delivers benefits that extend beyond the immediate festival economy. The annual return of the diaspora — many of whom maintain family properties in Trinidad or have aspirations to acquire investment or retirement homes — generates a consistent cycle of real estate interest that the festival season catalyses. Property agents and developers across Port of Spain, the south coast and Tobago have learned to treat the Carnival period as a valuable prospecting opportunity, arranging viewings for returning visitors who combine family obligations with property reconnaissance. This year, the Carnival crowd included a notable contingent of investors specifically interested in Tobago’s tourist accommodation sector, driven by the island’s profile as an authentic alternative to the northern Caribbean destinations now under reconstruction.

The energy sector context for Trinidad’s property market remains mixed. LNG prices have improved on 2016–2017 lows, providing some relief to the government budget that had been significantly stressed by lower energy revenues since 2014. The improvement is welcome but not yet transformative: Port of Spain’s commercial real estate market continues to experience relatively soft demand from energy-sector tenants who are maintaining rationalised footprints, and the full restoration of pre-2014 energy revenue levels remains dependent on both commodity price trajectories and LNG contract renegotiations. The domestic residential market, however, is holding up reasonably well across Diego Martin, Westmoorings and the mid-range suburban corridors that serve middle-class owner-occupier demand.

Dominican Republic: Storm Diversion Boosts Already Strong Market

The Dominican Republic’s property and tourism market is experiencing a pronounced demand uplift in early 2018, driven by the combination of its own strong underlying fundamentals and the significant diversion of Caribbean visitor and buyer traffic from the storm-affected northern island destinations. Punta Cana’s resort corridor — which had already been the Caribbean’s highest-volume tourism market — is registering occupancy and rate performance in February and March that exceeds prior-year comparisons by meaningful margins, and the real estate market is reflecting this increased international attention.

Foreign buyer interest in Dominican Republic real estate is running at its strongest pace in several years. The combination of accessible price points, established legal frameworks for foreign ownership, a mature stock of branded resort condominiums and villas, and the DR’s status as a large-island destination with diversified hurricane risk compared to the smaller northern islands has made it attractive to buyers who were previously considering alternatives in Anguilla, the BVI or Barbuda. Several major developments in the Punta Cana and Cap Cana areas are reporting sales volumes in January and February 2018 that significantly exceed their 2017 comparisons.

The DR’s development pipeline also deserves attention. Several large-scale hotel and mixed-use resort projects that were in planning or pre-construction phases before the September 2017 storms have accelerated their timelines in response to the strengthened demand outlook. The presence of major international hotel brands — including Hyatt, Marriott, Hard Rock and others — in the DR’s development pipeline speaks to the institutional confidence that global hospitality companies have in the destination’s long-term fundamentals. For property investors seeking Caribbean exposure with lower hurricane risk relative to the eastern island chain, the DR’s value proposition has rarely been stronger.

Caribbean Interest Rates: Rising Tide Ahead

A development with potentially significant long-term consequences for Caribbean property markets is the gradual but clear upward drift in interest rates that is beginning to transmit through the region’s monetary system. The US Federal Reserve, which began its current rate-rising cycle in 2015, has continued to lift the federal funds rate and has signalled further increases in 2018. For Caribbean economies with currency pegs to the US dollar — including Barbados, the Eastern Caribbean Currency Union members, and the Bahamas — this creates direct pressure on domestic interest rates, as the monetary authorities must broadly follow the Fed to maintain their peg arrangements.

For Jamaica, which operates a managed float rather than a hard peg, the Bank of Jamaica has been managing a domestic rate environment shaped by its own inflation-targeting framework rather than simply following the Fed — but global interest rate signals still transmit to Jamaica’s cost of capital through international capital flows and domestic banking system pricing. Mortgage rates in Jamaica, while still at levels that support active first-time buyer and upgrade demand, are beginning to edge upward from the relatively accommodative levels of the past two years.

For Caribbean property markets more broadly, the trajectory of interest rates is a critical variable. Mortgage markets in Jamaica, Barbados and Trinidad have been an important source of demand support for residential property in the mid-market and affordable segments, and any meaningful increase in the cost of mortgage finance will reduce the pool of buyers able to qualify for or afford home loans. Developers targeting the first-time buyer and affordable housing segments — which represent the highest-volume parts of the Caribbean residential market — are monitoring the rate environment with particular attention.

Caribbean Leaders This Month

Trinidad & Tobago claims a rare top billing this month on the back of its extraordinary Carnival 2018 performance. The festival has demonstrated the twin-island state’s unique position as the custodian of the Caribbean’s most globally recognised cultural event, and the economic benefits — for hospitality, property and retail — are tangible and meaningful.

Dominican Republic continues its outstanding run as the Caribbean’s most active property transaction market, with foreign buyer interest reaching multi-year highs. The storm-diversion tailwind is amplifying an already strong underlying market, and the development pipeline suggests this momentum has structural support beyond the near-term.

Jamaica maintains its strong performance into the later part of the winter season. North-coast tourism has continued at the elevated pace established in December–February, and the residential property market is showing consistent transaction volumes supported by NHT and private mortgage lending.

Barbados is sustaining its exceptional winter season performance and is entering the pre-election period with a property market that is arguably in its healthiest condition in several years. The political uncertainty ahead of the general election — which must be called by May — has not materially dampened either buyer or seller activity.

Dominica is showing meaningful reconstruction progress five months on from Maria, with international funding beginning to translate into physical rebuilding activity. The government’s climate-resilient nation framework continues to attract international technical and financial partners, and the determination of the Dominican people remains an inspiration.

Guyana continues its steady rise as a regional investment destination of increasing significance, with Georgetown’s commercial property market reflecting sustained oil-sector demand. The country’s macroeconomic story is one of the Caribbean’s most compelling, even if the full realisation of oil revenues remains a 2020-and-beyond story.

St Kitts and Nevis maintains its strong citizenship-by-investment real estate performance, with the programme continuing to generate consistent foreign direct investment into the island’s approved resort and residential developments.

Overall regional performer: Dominican Republic — for the most dynamic combination of tourism demand, real estate transaction activity and investor confidence of any Caribbean market in February 2018.

Looking Ahead

The Caribbean property market enters March 2018 with the seasonal transition from winter high season to spring shoulder period beginning in most markets. The critical question for the coming weeks is whether the exceptional demand momentum that has characterised the winter season — powered significantly by storm-diversion effects — can be sustained as the seasonal cycle shifts, or whether there will be a more marked pullback in visitor and buyer activity than in prior years.

The Barbados general election remains the most significant near-term political event in the regional calendar. Both major parties are in active campaign mode, and the economic policy debate — centred on the island’s fiscal position, its relationship with the IMF and its approach to foreign investment attraction — has real implications for the investment climate. The property community will be watching the campaign closely and preparing contingency assessments for both a DLP Stuart retention and a BLP Mottley victory.

On the reconstruction front, the critical test for the coming months is whether the pace of physical rebuilding across Dominica, the BVI, the USVI and Barbuda can accelerate to match the urgency of communities waiting for their homes and lives to be restored. Insurance settlements, aid disbursements and reconstruction finance are all moving, but the gap between what has been pledged and what has been delivered remains significant. The Caribbean’s creditors of solidarity — those who suffered in 2017 — deserve faster results from their international partners.

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.