Caribbean Property & Investment Review — Edition 89 | March 2019

Publication Date: 3 March 2019  |  Coverage Period: 3 February – 2 March 2019

Morning Briefing

• Trinidad Carnival 2019, celebrated on February 4-5, delivered one of the festival’s strongest economic performances in recent years, with hotel occupancy at capacity across Port of Spain and the wider northwest peninsula and visitor spending well ahead of 2018 levels.
• The Caribbean winter tourism season is reaching its peak, with Jamaica recording its best-ever February visitor arrivals and Barbados’s resort and villa market fully committed through the March period.
• Barbados’s IMF programme implementation is proceeding with the government reporting progress on key structural reform commitments ahead of the first formal programme review.
• ExxonMobil and its Guyana partners confirm that first oil from the Liza Phase 1 development remains on target for 2019, with the Liza Destiny FPSO vessel approaching readiness for deployment to the Stabroek Block.
• The Dominican Republic’s tourism sector posts its seventh consecutive year of record-breaking arrivals, cementing the country’s position as the Caribbean’s single largest tourism destination by visitor volume.
• Jamaica’s NHT mortgage approvals for the January-February period are running ahead of the equivalent period in 2018, reflecting sustained first-home buyer demand in a market supported by stable interest rates and improving household confidence.

Trinidad Carnival 2019: The Culture Economy in Full Swing

Trinidad and Tobago’s Carnival celebration, held on February 4-5 this year, is one of the Caribbean’s most significant single economic events — a festival that generates substantial revenues for the hotel, hospitality, entertainment, and retail sectors in a concentrated two-week period that transforms Port of Spain and the northwest peninsula of Trinidad into one of the world’s most dynamic cultural tourism destinations. The 2019 edition has delivered an economic performance that industry analysts are describing as among the strongest of the post-2015 period, when the oil price collapse significantly dampened domestic consumer spending and visitor numbers.

For the Trinidad property market, Carnival’s economic ripple effects extend well beyond the festival itself. The hospitality and short-term rental sectors have capitalised on the concentrated demand, with properties along the Carnival circuit — the Savannah, Ariapita Avenue, and the western suburbs of Port of Spain — commanding premium short-term rental rates that validate the investment thesis for property owners who have positioned their assets for festival-period letting. The broader message for Trinidad’s property market is that the domestic economy’s gradual recovery, combined with the cultural economy’s consistent international appeal, is creating conditions for modest but genuine improvement in real estate activity in the northwest corridor.

Tobago, while a separate tourism proposition from Trinidad’s Carnival, also benefits from the February-March visitor surge. The island’s beach resort market has been performing steadily, and several boutique hotel and villa projects are in various stages of development. For investors seeking a Caribbean resort property investment at a lower entry price than the most established markets, Tobago offers a genuinely distinctive combination of natural beauty, accessibility from Trinidad, and a growing international reputation for its eco-tourism and diving credentials.

Peak Tourism Season: Jamaica and the Dominican Republic Set Records

The February period marks the absolute peak of the Caribbean winter tourism season, and the data emerging from the region’s major destinations confirms that 2019 is delivering another exceptional year. Jamaica has recorded its best-ever February visitor arrivals, with all major resort corridors operating at capacity and the island’s hotels and short-term rental inventory fully committed. The Jamaica Tourist Board has attributed the performance to a combination of strong North American and UK marketing campaigns, the growing appeal of Jamaica’s non-resort tourism products — cultural experiences, culinary tourism, heritage tourism — and the continuing effect of travel diversion from still-recovering Caribbean destinations.

The Dominican Republic’s tourism sector, which has now strung together seven consecutive years of record-breaking arrival numbers, continues to demonstrate what scale and sustained infrastructure investment can achieve. Punta Cana International Airport processed more than a million passengers in January, making it one of the busiest airports in the Caribbean region. The room inventory additions that have been delivered through new resort openings over the past two years are being absorbed by a visitor demand that continues to grow, and the pipeline of further openings through 2019 suggests that supply and demand will remain broadly in balance. For property investors, the DR’s tourism fundamentals support investment thesis across the full spectrum from individual condominium units to large-scale mixed-use resort development.

Barbados is experiencing a strong winter season despite the backdrop of fiscal adjustment, a result that reflects the enduring loyalty of the island’s repeat visitor community and the sustained appeal of its west and south coast offerings for the luxury travel market. The winter season’s performance is important for the IMF programme’s assumptions about foreign exchange earnings and economic output, and the government has been watching the tourism indicators carefully for signs of any adjustment-related softening in visitor confidence. The data so far is reassuring.

Barbados IMF Programme: Early Signs of Reform Progress

Six months into Barbados’s IMF programme, the Mottley government is delivering a reform narrative that is gaining credibility with both the Fund and the broader international investment community. The government has made measurable progress on several of the programme’s structural benchmarks, including improvements to tax administration efficiency, reforms to a number of state-owned enterprises, and progress on the fiscal consolidation targets for the first half of the fiscal year. The debt restructuring process, which was a critical precondition for the programme, has been largely completed, with the government reaching agreements with the majority of its domestic and external creditors on terms that reduce the debt service burden to a manageable level within the programme framework.

For the Barbados property market, the early reform progress is translating into a cautious improvement in international investor sentiment. The enquiry pipeline for west coast luxury properties has strengthened noticeably since the programme’s signing, and several transactions have advanced from initial interest to active negotiation. The premium end of the Barbados market — properties priced above US$2 million, typically on the west coast of St James and St Peter parishes — is showing the most resilience, reflecting international buyers’ relative insensitivity to domestic fiscal conditions compared with their sensitivity to governance quality and institutional stability. Barbados continues to score well on both dimensions.

The domestic residential market remains under pressure. Barbadian households are managing the impact of fiscal adjustment — reduced public sector wages in some categories, higher prices for imported goods as tax measures take effect, and a more cautious commercial banking sector — and this is reflected in softer demand for middle-income residential property. The housing market for properties in the Bds$300,000-600,000 range — the segment most dependent on domestic mortgage finance — is the most subdued, and developers targeting this segment are reporting extended sales periods and some pressure on pricing. The programme’s fiscal consolidation requirements mean that this domestic demand compression is likely to persist through at least the first year of the adjustment.

Guyana’s First Oil: The Region Watches and Waits

ExxonMobil’s confirmation that first oil from the Liza Phase 1 development remains on target for 2019 has maintained the extraordinary attention that the Caribbean investment community is directing toward Guyana. The Liza Destiny FPSO — the floating production, storage, and offloading vessel that will be the centrepiece of the initial development — is approaching the end of its conversion and commissioning work, and the operational window for first oil in 2019, while narrow, remains intact. For investors and observers in Georgetown and beyond, the countdown has become almost a daily preoccupation.

Georgetown’s property market continues to reflect this extraordinary anticipatory environment. Commercial real estate — particularly quality office space and hotel inventory — remains severely undersupplied relative to oil-sector demand, with international oil companies, service contractors, legal firms, and consultancies all competing for a limited stock of quality accommodation. Residential property in the desirable areas of east Georgetown and the Promenade is appreciating at rates that make Caribbean property investment in other territories look pedestrian by comparison. For investors who positioned early in this market, the returns have been exceptional; for those considering entry now, the question is how much of the pre-oil premium has already been priced in and how much additional upside remains.

Caribbean Leaders This Month

Jamaica resort and residential achieves another record month as February visitor arrivals hit a new peak, keeping the island’s property market at the top of the regional activity table for what is now an extended run of exceptional performance.

Trinidad Carnival economy delivers a strong festival period, validating the hospitality and short-term rental investment thesis for properties in Port of Spain’s Carnival corridor and suggesting a gradual improvement in Trinidad’s consumer and tourism economy.

Dominican Republic tourism property records another month of arrival and spending records, cementing a tourism market performance that is providing an exceptionally strong demand foundation for hotel and resort property investment.

Guyana Georgetown real estate maintains the Caribbean’s most extreme demand-supply imbalance, with the pre-first-oil investment climate driving appreciation rates across commercial and residential segments that are unlike anything elsewhere in the region.

Barbados west coast luxury is continuing its post-IMF recovery trajectory, with an improving enquiry pipeline and several significant transactions moving toward completion as international buyer confidence gradually strengthens.

BVI spring tourism is performing well above pre-season expectations as the territory’s restored capacity attracts visitors whose loyalty to the destination survived the Irma disruption, supporting strong short-term rental yields and renewed interest in villa investment.

Cayman Islands prime residential records another quarter of stable premium pricing, with the territory’s consistent delivery of quality of life and institutional security continuing to support demand at the top of the Caribbean market.

Overall regional performer this month: Jamaica, which records its best-ever February visitor arrivals and maintains its position as the Caribbean’s most active and diversified property investment market through the peak of the 2019 winter tourism season.

Looking Ahead

March brings the close of the peak Caribbean winter tourism season, and the coming weeks will see the final revenue accounting for what has been, by most measures, another exceptional year for the region’s unaffected destinations. The figures that emerge will inform developer and investor planning for the 2019-20 development cycle, and the consensus expectation is that the strong tourism performance will translate into sustained property market activity through the spring and early summer.

Barbados’s first formal IMF programme review is expected in the coming weeks, and its outcome will be an important signal for the trajectory of investor confidence in the island. A positive review — confirming that the government has met its first-quarter performance criteria — would reinforce the narrative of credible reform implementation and support the gradual recovery of the international property market. A stumble at this early stage would be disproportionately damaging to the confidence that the programme signing generated in October.

Guyana’s first oil timeline remains the region’s most watched single indicator. With the Liza Destiny FPSO approaching deployment readiness, the months ahead could see the first actual production revenues flowing to the Guyanese government — an event that will transform, in a very concrete way, the economic context for property investment in Georgetown and set the stage for a new chapter in Guyana’s development trajectory. The editors will cover this milestone in detail when it arrives.

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.