Caribbean Property & Investment Review — Edition 92 | December 2018

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

Morning Briefing

• Barbados has formally signed a four-year Extended Fund Facility arrangement with the International Monetary Fund, a landmark development that provides a credibility anchor for the Mottley government’s fiscal reform programme.
• The Caribbean’s holiday tourism season is underway, with Jamaica, Barbados, and the Dominican Republic all reporting record advance booking levels for the December and early January period.
• Dominica, fourteen months after Hurricane Maria’s devastation, continues its difficult reconstruction journey, with significant portions of rural housing stock still awaiting repair and donor disbursements running behind schedule.
• Jamaica’s property market is on course for its strongest annual transaction volume since 2014, with tourism sector revenues, NHT lending, and diaspora investment all contributing to robust activity.
• The US Federal Reserve raises rates for a fourth time in 2018, bringing the federal funds rate to 2.5% and completing what has been the most consequential year of monetary tightening for Caribbean dollar-linked economies in over a decade.
• ExxonMobil’s Guyana operations report continued milestones in the Liza Phase 1 development, with the FPSO vessel conversion on schedule and first oil remaining on target for 2019.

Barbados IMF Programme: A Landmark for Regional Confidence

The formal signing of Barbados’s Extended Fund Facility arrangement with the International Monetary Fund in October 2018 was one of the most significant developments in Caribbean economic governance in recent years. The four-year programme, which involves substantial financial support from the Fund alongside a comprehensive structural adjustment framework, provides the Mottley government’s reform agenda with a credibility anchor that domestic policy commitments alone could not supply. For investors, creditors, and rating agencies, the IMF programme transforms Barbados’s economic trajectory from an uncertain political promise into a monitored, quantified reform path with clear performance benchmarks.

The programme’s terms reflect the severity of the fiscal challenge that Barbados entered with. The government inherited foreign exchange reserves that had fallen to critically low levels, a debt-to-GDP ratio above 175 percent by some measures, and a fiscal deficit that was structurally incompatible with debt sustainability. The programme requires meaningful fiscal consolidation over its four-year duration, with primary surpluses rising to levels that will enable a gradual reduction in the debt burden. These are demanding targets, and their achievement will require sustained political will and the maintenance of public support for a period of genuine austerity.

For the Barbados property market, the programme’s signing marks the end of the period of maximum uncertainty and the beginning of what will be a difficult but defined adjustment journey. Several international investors who had been holding enquiries open pending programme conclusion are understood to have moved to active acquisition discussions in the weeks since the announcement. The west coast luxury market has received renewed interest, with buyers from the United Kingdom and North America attracted by the prospect of acquiring assets in a jurisdiction that is now following a credible stabilisation path. Domestic transaction activity, by contrast, remains constrained by the fiscal adjustment’s impact on household incomes, and this divergence between the international and domestic segments of the market is likely to persist through much of 2019.

Holiday Tourism Season: Record Bookings Across the Region

The Caribbean’s holiday tourism season is unfolding against a backdrop of exceptional advance booking levels. Jamaica’s north-coast resort corridor has entered December with occupancy levels across major properties running at or near 100 percent for the Christmas and New Year weeks — a phenomenon that hoteliers attribute partly to the continuing diversion of visitor flows from still-recovering territories and partly to the strong underlying appeal of Jamaica’s increasingly diversified tourism product. The island’s ability to attract luxury, heritage, and adventure-seeking visitors alongside the traditional all-inclusive market is broadening its visitor base in ways that have long-term structural implications for property investment alongside the north-coast hotel corridor.

Barbados’s holiday season is performing creditably despite the fiscal adjustment backdrop. The island’s December tourism sector — historically its most important revenue period — is benefiting from the loyalty of its regular visitor community, many of whom regard Barbados as irreplaceable for its combination of climate, cuisine, lifestyle, and cultural richness. Hotel occupancy on the west and south coasts is strong, and the rental villa market is fully booked through the early January period. The tourism sector’s resilience through the fiscal adjustment provides some basis for optimism that Barbados’s external revenue streams will remain intact even as the domestic economy navigates a difficult adjustment.

The Dominican Republic continues to demonstrate that it has emerged from 2017’s hurricane season with its tourism momentum not just intact but accelerated. December arrivals at Punta Cana International Airport are running ahead of 2017 levels, and the pipeline of new resort openings that will add significant room inventory over the next twelve to eighteen months suggests that the capacity to receive even more visitors is being actively built. For property investors, the DR’s combination of strong tourism fundamentals, regulatory accessibility for foreign buyers, and relatively lower entry prices than its Caribbean peer markets continues to make it one of the region’s most compelling destinations.

Dominica: Fourteen Months After Maria

Fourteen months after Hurricane Maria devastated Dominica, the island’s reconstruction journey remains the most challenging in the Caribbean. The scale of Maria’s destruction — an estimated 90 percent of buildings damaged or destroyed, with the agricultural sector almost completely wiped out — was simply beyond what Dominica’s limited fiscal and institutional resources could address without sustained external support. That support has been forthcoming from the Caribbean Development Bank, the European Union, Venezuela’s ALBA fund, and a number of bilateral donors, but the gap between pledges and actual disbursements has been a persistent frustration for the government and the communities most in need of assistance.

Dominica’s citizenship by investment programme has been a crucial revenue stream during the reconstruction period. CBI income — which had been a significant and growing revenue source for the government even before Maria — has been substantially redirected to reconstruction priorities, providing a relatively stable flow of funds that is less subject to the disbursement delays that characterise donor support. The government has worked to maintain the attractiveness of the CBI programme even as it manages reconstruction, recognising that its credibility as a programme destination is itself a valuable economic asset.

For investors with development interests in Dominica, the island’s long-term vision — Prime Minister Skerrit’s ambitious climate-resilient nation concept — remains a compelling strategic framework, even if its realisation requires a timeline measured in years rather than months. Properties built to the climate-resilient standards that the government is promoting are genuinely more durable assets in a region where storm risk is an enduring reality. The challenge is bridging the gap between the vision and the current reality of limited infrastructure, constrained construction capacity, and a community still healing from profound disruption.

Jamaica: Closing 2018 on Strong Footing

Jamaica’s property market is positioned to close 2018 as the region’s standout performer by transaction volume, a reflection of the sustained convergence of positive drivers that has characterised the year. Tourism sector revenues, running at record levels through a second consecutive exceptional season, have generated cash flows that are reinvesting in resort and residential development along the north coast. Diaspora remittances, consistently one of Jamaica’s largest external revenue streams, have maintained their upward trend and continue to fuel residential property acquisitions from the Jamaican community abroad. The National Housing Trust’s expanded lending programme is sustaining middle-income access to homeownership that would otherwise have been eroded by rising construction costs and land prices.

The macroeconomic framework that underpins Jamaica’s property market performance is the result of a multi-year reform programme that has required genuine sacrifice from Jamaican households and businesses. The fiscal primary surpluses that Jamaica has been delivering — among the highest in the Western Hemisphere — have come at the cost of constrained public spending and limited fiscal space for economic stimulus. But the resulting improvement in debt sustainability, sovereign risk perception, and macroeconomic predictability has created conditions that support private investment in ways that the pre-reform environment could not. Jamaica’s property market in 2018 is, in a meaningful sense, the dividend of those painful earlier years.

Caribbean Leaders This Month

Jamaica resort and residential property closes 2018 as the region’s most active market, with the year’s exceptional tourism revenues, diaspora investment, and NHT lending combining to produce the strongest annual transaction performance since 2014.

Barbados international luxury has stabilised and is beginning to show renewed momentum following the IMF programme announcement, with several significant west coast transactions advancing through the November period as buyer confidence gradually returns.

Dominican Republic resort development enters the holiday season with the Caribbean’s most active new hotel construction pipeline, underpinned by international brand confidence and a consistently strong tourism demand base.

Guyana Georgetown commercial maintains its rapid appreciation trajectory as the oil-sector countdown to first oil intensifies, with quality office, hotel, and residential space remaining significantly undersupplied relative to demand.

BVI resort market enters its first fully operational winter season since Irma with advance bookings that are exceeding even optimistic projections, confirming that the territory’s recovery has resonated with its loyal visitor community.

Cayman Islands residential completes another year of consistent premium pricing, with the territory’s unique combination of political stability, financial services infrastructure, and lifestyle quality maintaining its position as the Caribbean’s most secure high-end real estate market.

Trinidad commercial shows improving fundamentals as the energy sector’s gradual recovery supports modest growth in office leasing and industrial property activity around Port of Spain and the Point Lisas industrial estate.

Overall regional performer this month: Jamaica, which closes 2018 as the indisputable leader of Caribbean real estate activity by transaction volume, tourism revenue contribution, and the breadth of investor participation across diaspora, domestic, and institutional buyer segments.

Looking Ahead

As 2018 draws to a close, the Caribbean property and investment landscape is in a meaningfully better position than it was twelve months ago, even accounting for the enormous challenges that remain in reconstruction territories and the ongoing adjustment demands facing economies like Barbados. The 2018 hurricane season’s relative mercy, the signing of Barbados’s IMF programme, Jamaica’s continued fiscal success, and Guyana’s advancing oil timeline are all reasons for measured optimism as the region enters 2019.

The year ahead will be defined by several key themes: the implementation of Barbados’s IMF programme and its impact on the domestic property market; the momentum of Caribbean winter and spring tourism and its flow-through into real estate activity; and the countdown to Guyana’s first oil — an event that carries transformative implications for that country’s property and investment markets and, by extension, for the broader regional investment narrative.

The US rate cycle, having delivered four increases in 2018, will continue to shape financing conditions for Caribbean property across the year, and developers and buyers with dollar-linked debt obligations will need to manage their interest rate exposure carefully. The structural challenges of Caribbean housing affordability, insurance market hardening, and post-hurricane resilience investment will remain in focus throughout 2019. The editors look forward to tracking these stories as the new year unfolds.

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.