Caribbean Property & Investment Review — Edition 93 | November 2018

Publication Date: 3 November 2018  |  Coverage Period: 3 October – 2 November 2018

Morning Briefing

• Hurricane Michael strikes the Florida panhandle on October 10 as a powerful category-four storm, causing catastrophic damage to parts of the US Gulf Coast while largely sparing the Caribbean island territories.
• The 2018 Atlantic hurricane season is moving toward its statistical conclusion having dealt the Caribbean a far milder blow than 2017, with none of the Eastern Caribbean island chain sustaining significant storm impacts.
• Barbados’s IMF programme negotiations are reported to be in advanced stages, with Prime Minister Mottley’s administration expected to announce a formal programme arrangement before the close of 2018.
• Caribbean winter tourism season opens with advance booking levels across Jamaica, Barbados, and the Dominican Republic running substantially ahead of the comparable period in 2017.
• Jamaica’s National Housing Trust announces expanded lending limits and enhanced incentives for first-time buyers as part of a broader government initiative to accelerate affordable housing access.
• The US Federal Reserve raises its benchmark rate for a third time in 2018, bringing the federal funds rate to 2.25% and adding further pressure to Caribbean mortgage markets and dollar-pegged economies.

Hurricane Season 2018: A Region Relieved

The 2018 Atlantic hurricane season has dealt the Caribbean a far more merciful hand than its catastrophic 2017 predecessor. As the season approaches its statistical end in late November, Caribbean territories that spent the summer and early autumn in heightened preparedness mode are beginning to exhale. Hurricane Michael, which struck the Florida panhandle on October 10 with category-four intensity, was the season’s most dramatic story — but its path took it directly into the US Gulf Coast, leaving the Caribbean island chain largely unaffected. Hurricane Florence, which struck the Carolinas in September, similarly tracked away from Caribbean territories. For the islands that endured the full fury of Irma and Maria in 2017, the contrast with this season could hardly be more stark.

The economic significance of the 2018 season’s relative quiescence cannot be overstated. A second consecutive devastating season would have been catastrophic for the recovering territories — BVI, Anguilla, Dominica, and parts of the USVI — where reconstruction is still far from complete. Insurance markets, already significantly stressed by 2017 losses, would have faced an existential challenge in pricing coverage for territories hit twice in succession. The 2018 outcome instead allows reconstruction to continue without interruption and gives the regional insurance market the breathing room needed to develop more sustainable pricing and capacity frameworks.

For property investors, the 2018 season has been an important test of the enhanced preparedness measures that Caribbean governments, businesses, and property owners implemented in the wake of 2017. Early warning systems functioned well, evacuation plans were rehearsed, and the heightened awareness of storm risk among property owners translated into significantly higher insurance uptake and more rigorous building resilience standards for new construction. These improvements represent a genuine reduction in the vulnerability of Caribbean property assets to storm damage, even if the risk of future catastrophic events remains an inherent feature of the regional operating environment.

Barbados: The IMF Programme Takes Shape

The months-long negotiations between the Barbados government and the International Monetary Fund are understood to be in their final stages. Prime Minister Mottley’s administration has demonstrated a consistency of purpose through this process that has impressed both multilateral creditors and private sector observers. The government has moved decisively on several structural reform fronts — rationalising public sector employment, reforming state enterprises, and introducing measures to improve tax collection efficiency — that signal genuine commitment to a sustainable fiscal adjustment path rather than a cosmetic engagement with the IMF’s requirements.

The programme, when formally announced, is expected to run for four years and to involve significant external financing alongside the fiscal adjustment commitments. The debt restructuring process that the government initiated earlier in the year — covering domestic treasury bills and bonds as well as some external obligations — is an essential complement to the IMF programme, reducing the debt-service burden to levels that the adjusted fiscal path can sustain. For Barbados’s creditors and the broader investment community, the combination of the IMF programme and the debt restructuring represents a comprehensive, if painful, reset of the island’s financial position.

Property market implications of the anticipated programme announcement are nuanced. In the immediate term, the clarity that a formal IMF programme provides — replacing open-ended uncertainty with a defined adjustment trajectory — should be net positive for investor confidence. International buyers who have been waiting for greater policy certainty before transacting may be more inclined to proceed. For domestic buyers, the programme’s fiscal consolidation requirements will constrain household incomes over the adjustment period, maintaining pressure on the affordability of residential property. The National Housing Trust will remain the critical mechanism for sustaining middle-income access to home ownership through this period.

Winter Tourism Season: Strong Openings

The Caribbean winter tourism season is opening with indicators that suggest another period of exceptional performance for the region’s leading destinations. In Jamaica, advance bookings for the December-March period are running 15-20 percent ahead of the equivalent period a year ago, supported by strong demand from the North American market and a growing European visitor segment attracted by the island’s diverse offering beyond the traditional all-inclusive resort model. Montego Bay, Ocho Rios, and Negril are all reporting near-full advance occupancy for the peak December and January weeks.

Barbados presents a more complex picture. The island’s west coast luxury sector continues to attract high-spending international visitors who are less price-sensitive and less deterred by the island’s fiscal adjustment narrative than domestic commentary might suggest. However, the broader middle-market segment of Barbados tourism has been somewhat softer, reflecting both the domestic income compression of the adjustment period and some traveller uncertainty about the island’s economic trajectory. The government is keenly aware that tourism’s vitality is essential to financing the adjustment itself, and is maintaining promotional investment even as it tightens spending in other areas.

In the recovering territories, the 2018-19 winter season represents the first real test of reconstruction-era tourism capacity. The BVI, which has been the recovery success story of the post-2017 period, is entering the season with several major resort properties open and a confident marketing posture. Anguilla is similarly positioned. For these territories, a strong winter season would validate the reconstruction investment of the past year and provide the cash flows needed to sustain the remaining recovery work. Early booking data is cautiously encouraging.

Jamaica Housing: NHT Expands Its Role

Jamaica’s National Housing Trust has announced enhanced lending terms for first-time buyers, including increased loan limits and a new incentive structure designed to assist younger Jamaicans in navigating the gap between their savings capacity and the capital required to enter the housing market. The announcement reflects the government’s recognition that housing affordability has emerged as a significant social and economic challenge as Jamaica’s economy improves — a rising tide that is pushing property prices beyond the reach of many first-time buyers even as overall macro conditions improve.

The NHT’s expanded mandate is a positive development for Jamaica’s middle-income residential market, providing additional demand support that helps sustain transaction volumes even as private mortgage rates reflect the upward pressure of the global rate cycle. For developers targeting the middle-income segment, NHT’s participation as a co-financier remains essential to project viability — and the Trust’s willingness to expand its role is a signal of confidence in the long-term health of the Jamaican housing market.

Caribbean Leaders This Month

Jamaica tourism and residential property leads the region heading into the winter season, combining the Caribbean’s strongest macroeconomic fundamentals with exceptional tourism demand and an expanding NHT-supported housing market.

Dominican Republic resort development continues to set the pace for new hotel construction in the Caribbean, with several major international brand commitments announced for the Cap Cana and Las Terrenas corridors in the October period.

BVI resort market is entering its first full winter season since Irma with cautious confidence, as properties reopen, bookings accumulate, and the territory’s natural appeal reasserts itself for sailing and diving visitors.

Guyana commercial and residential maintains the Caribbean’s fastest property appreciation rate as oil-sector growth drives demand that the market cannot satisfy at the required quality and volume.

Cayman Islands prime residential remains at its historical price ceiling, with demand from the financial services professional community sustaining a market that has now delivered consistent appreciation for a decade.

Barbados luxury international holds its position as the Eastern Caribbean’s premier address for UK and European luxury buyers, with transactions proceeding at top-of-market prices despite the island’s ongoing fiscal adjustment.

Anguilla villa sector is re-emerging as one of the Eastern Caribbean’s most sought-after ultra-luxury markets, with reconstructed and upgraded properties attracting premium prices from repeat visitors committed to the island’s singular appeal.

Overall regional performer this month: Jamaica, which enters the 2018-19 winter season with the strongest combination of macro stability, tourism momentum, diaspora investment, and institutional housing support of any English-speaking Caribbean destination.

Looking Ahead

The formal announcement of Barbados’s IMF programme — which the market anticipates before the end of 2018 — will be the most significant single event for the regional investment community in the December quarter. Its conclusion will represent an important milestone not only for Barbados but for the broader Caribbean, demonstrating that the region’s crisis management mechanisms are functional and that multilateral support is available to small island economies navigating fiscal adjustment. The editors will be covering the programme terms and their property market implications in detail when the announcement is made.

The winter tourism season’s performance will be closely watched, particularly in the recovering territories where the revenue environment of the next five months will be critical to sustaining reconstruction momentum. A strong season for the BVI, Anguilla, and the recovering USVI would validate the investment in rebuilding and provide a more optimistic basis for 2019 investment planning across the Eastern Caribbean.

Looking further ahead, Guyana’s oil development timeline is advancing, and 2019 is increasingly being regarded as the year when the conceptual becomes concrete — when actual oil revenues begin to flow and the theoretical transformation of Guyana’s economy begins to manifest in measurable ways. For property and investment markets in Georgetown and beyond, the countdown to first oil is accelerating, and with it the urgency of positioning ahead of the revenue inflection point.

Caribbean Property & Investment Review is an independent publication. All market commentary reflects conditions as observed during the coverage period and should not be construed as investment advice.