Caribbean Property & Investment Review — Edition 88 | April 2019

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

Morning Briefing

• Barbados’s IMF programme is approaching its six-month mark, with the Mottley government reported to have met the key performance criteria of the programme’s first formal review and demonstrating consistency of reform purpose.
• Caribbean spring tourism season is opening with strong forward bookings as the region transitions from its exceptional winter peak, with Jamaica and the Dominican Republic maintaining elevated visitor volumes through March.
• Guyana’s ExxonMobil-led Liza Phase 1 project is in the final stages of FPSO deployment preparations, maintaining the 2019 first-oil target and sustaining the extraordinary anticipatory investment climate in Georgetown.
• Jamaica’s fiscal position receives positive assessment from IMF programme monitors, with the government’s continued delivery of primary surpluses and structural reform milestones maintaining the favourable macro backdrop for the property market.
• BVI tourism officials report that the 2018-19 winter season has been the territory’s strongest since Hurricane Irma, with visitor spending and hotel revenues exceeding pre-season projections and validating the reconstruction investment of the preceding eighteen months.
• Trinidad and Tobago’s Carnival aftermath analysis confirms a significant economic performance, with hotel and hospitality revenues for the February period substantially ahead of 2018 levels and short-term rental activity at record levels in the Port of Spain market.

Barbados at Six Months: IMF Reform Showing Early Results

Six months into its IMF Extended Fund Facility, Barbados’s reform programme is generating early signals that the Mottley government’s commitment to structural adjustment is genuine and consistent. The programme’s first formal review, completed in the first quarter of 2019, is understood to have been broadly positive, with the government having met the key quantitative performance criteria on fiscal balances and the structural benchmarks on public enterprise reform. This early success is significant not only for the mechanics of programme continuation — positive reviews unlock subsequent tranches of programme financing — but for the broader narrative of reform credibility that is essential to rebuilding investor confidence in Barbados as a destination for medium-term property investment.

The property market response to six months of programme implementation is, as anticipated, bifurcated. At the international end, the improvement in confidence is visible: the enquiry pipeline for west coast luxury properties has strengthened materially compared with the six months preceding the October 2018 programme signing, and several significant transactions have moved from enquiry to completion. Estate agents operating in the St James and St Peter luxury corridors report that the volume and quality of buyer enquiries is now approaching the levels seen in 2015-2016, before Barbados’s fiscal situation became acute. The typical international buyer — a UK or North American purchaser with substantial personal wealth, looking for a combination of lifestyle value and capital preservation — appears increasingly satisfied that the programme provides sufficient political and institutional certainty to support a buying decision.

The domestic residential market tells a different story. The fiscal adjustment measures implemented through the programme’s first six months — the reduction in certain public sector allowances, higher import duties, and the tightening of government expenditure — have created a household income environment that is challenging for first and second-home buyers dependent on domestic mortgage finance. Commercial banks remain cautious in their lending, reflecting both their own balance sheet management priorities and the uncertain employment outlook in some sectors of the economy. The result is a domestic market that is functioning but subdued, with transaction volumes in the mid-market segment meaningfully below their pre-crisis levels. This situation is expected to persist through much of 2019 as the adjustment programme reaches its peak intensity.

Caribbean Spring Tourism: The Extended Season

The Caribbean spring tourism season — the period from late March through June that bridges the peak winter season and the summer months — has historically been one of the more variable segments of the regional tourism calendar. In years of strong global economic confidence and positive Caribbean sentiment, the spring can sustain visitor volumes at levels approaching the winter peak; in weaker years, the seasonal drop is more pronounced. The early data from the 2019 spring season suggests a continuation of the strong visitor trend that has characterised the past two years, though the pace of growth is moderating somewhat from the exceptional levels of the post-Irma diversion peak.

Jamaica is among the destinations managing the spring season transition most effectively, with the island’s tourism product — now genuinely diverse across heritage, culinary, adventure, and resort segments — attracting visitors whose travel motivations extend beyond the beach-and-sunshine imperative that drives the purely seasonal visitor pattern. The development of Kingston’s cultural tourism offering, combined with the sustained appeal of the north-coast resort corridor and the growing international profile of Jamaican gastronomy, is supporting visitor volumes through the spring that would have been unusual a decade ago. For property investors, this extension of the tourism season is a meaningful development: it broadens the income-generating window for short-term rental properties and supports the business case for hospitality-linked real estate investment beyond the traditional December-April window.

The Dominican Republic’s spring season is similarly performing above regional norms, reflecting the destination’s success in attracting European visitors — particularly from Spain, Germany, and the UK — whose travel patterns are less concentrated in the traditional North American winter season. The DR’s position as the Caribbean’s largest tourism destination by visitor volume gives it a resilience to seasonal variation that smaller destinations cannot match: when one source market softens, others tend to compensate. This structural characteristic is one of the most attractive features of the DR as a property investment destination, providing a broader demand base for hotel and short-term rental investment than is available in more mono-source markets.

Guyana: The Defining Moment Approaches

The Guyana first-oil story is entering its most consequential phase. With the Liza Destiny FPSO approaching deployment readiness and the production wells drilled and ready, the technical prerequisites for first oil are in place. What remains is the final sequence of operational preparations that will transition the Liza Phase 1 development from construction to production — a process that is expected to complete within the 2019 calendar year. The implications of this transition for Guyana’s economy, public finances, and property market have been extensively discussed in these pages; what is increasingly apparent is that the anticipatory market has run its course and the moment of actual realisation is approaching.

Georgetown’s property market continues to operate in a state of extreme supply constraint relative to oil-sector demand. Quality office space, hotel rooms, and residential accommodation in the desirable inner-city areas are all trading at premiums that reflect not just current demand but the expectation of significantly higher demand once oil revenues begin to flow and the development of the sector accelerates. For developers with projects currently under construction or in the advanced planning stages, the timing of completion relative to the first-oil moment is a critical variable: properties that come to market in the second half of 2019, coinciding with the initial production phase, may be particularly well positioned.

The governance and institutional quality question continues to be the most important analytical overlay for Guyana investment. The David Granger government’s management of the oil transition — its engagement with civil society on revenue transparency, its progress on sovereign wealth fund legislation, and its management of the political dynamics around elections that are expected in the coming year — will be closely watched by serious investors. Guyana’s oil opportunity is genuine and substantial; the country’s institutional capacity to manage that opportunity in a way that sustains the investment climate is the critical risk factor.

BVI: A Recovery Validated

The British Virgin Islands’ 2018-19 winter season results represent one of the Caribbean recovery story’s most conclusive data points. The territory has not merely functioned as a tourism destination in the eighteen months since Hurricane Irma; it has delivered a winter season that local operators are describing as one of the best in the territory’s recent history. Visitor spending, hotel revenues, marina activity, and charter boat operations have all performed above the projections that even optimistic recovery planners were using eighteen months ago. The BVI’s rapid and comprehensive recovery — a function of strong governance, significant insurance coverage, UK government support, and a private sector that moved quickly and decisively — validates the thesis that premium Caribbean real estate markets, given the right institutional and financial conditions, can recover from even catastrophic events within a property-investment-relevant timeframe.

For the BVI property market specifically, the strong winter season has translated into renewed buyer interest in the villa and resort segments. Several properties that came to market in late 2018, after completing post-Irma reconstruction, have transacted at prices that represent a meaningful step toward pre-Irma benchmarks. The market is not yet fully recovered to pre-storm pricing across all property types — there remain pockets where sellers are accepting discounts to attract buyers who remain cautious about storm risk — but the trajectory is clearly positive, and the 2018-19 season’s performance provides a strong foundation for the 2019-20 development cycle.

Caribbean Leaders This Month

Jamaica property market continues its exceptional performance through the spring transition, with the island’s tourism season extension, active diaspora investment, and NHT-supported homeownership combining to maintain the Caribbean’s most consistently active real estate market.

BVI villa and resort completes its strongest winter season since Irma, with transaction activity in reconstructed properties picking up meaningfully as buyer confidence in the territory’s recovery and resilience returns to pre-2017 levels.

Barbados international luxury continues its gradual post-IMF recovery, with the improving enquiry-to-transaction conversion rate suggesting that the market is moving from stabilisation to a genuine, if modest, recovery trajectory.

Guyana Georgetown all sectors maintains the Caribbean’s most extreme supply-demand imbalance as the first-oil countdown enters its final phase, with quality property across commercial and residential segments commanding premiums that reflect the extraordinary economic transformation underway.

Dominican Republic spring tourism is outperforming regional seasonal norms, with European visitor arrivals providing a counterweight to any North American seasonal softening and sustaining resort property performance through the spring transition period.

Trinidad post-Carnival economy shows improved momentum, with the festival’s strong economic performance translating into better-than-expected consumer confidence indicators and a modestly improved outlook for the northwest corridor’s commercial property market.

Cayman Islands prime residential maintains its long-established role as the Caribbean’s most stable high-value property market, with consistent demand and very limited new supply sustaining prices at their historical ceiling.

Overall regional performer this month: Jamaica, which sustains its long-running position at the top of the Caribbean property market performance table through the spring transition, combining the region’s best macroeconomic fundamentals with exceptional tourism revenues, active diaspora investment, and consistent NHT-supported housing demand.

Looking Ahead

The Caribbean’s investment landscape through the spring and summer of 2019 will be shaped by three principal storylines. First, Barbados’s continued IMF programme implementation will provide a quarterly test of whether the reform trajectory is being maintained and whether the early confidence that the programme signing generated is being converted into sustained market improvement. The second review, expected in the second quarter, will be an important benchmark.

Second, Guyana’s first oil — which could come at any point through the second half of 2019 if the current operational timeline holds — will be the most consequential single event for the Caribbean investment community in years. The editors will cover this milestone with the depth and context that its significance demands, examining both the immediate market implications and the longer-term structural changes that first production revenues will set in motion.

Third, the trajectory of Caribbean tourism through the summer will be watched closely, particularly in the recovering territories where summer visitor volumes — typically more dependent on diaspora and inter-Caribbean travel than the winter peak’s North American and European visitors — will provide an important read on the completeness of the destination recovery. For Jamaica, the Dominican Republic, and Barbados, the summer will test whether the exceptional performance of the past two years reflects a durable structural improvement in the Caribbean’s tourism fundamentals or a temporary elevation driven by the post-Irma diversion effect.

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.