Caribbean Property & Investment Review: Mid-Year 2022 Six-Month Special Edition

Publication Date: 4 July 2022  |  Coverage Period: 4 January – 3 July 2022  |  Special Edition: Six-Month Review

Morning Briefing: Key Developments, January–June 2022

• Russia invades Ukraine: On 24 February 2022, Russian forces launched a full-scale invasion of Ukraine. The geopolitical shock sent energy prices surging, disrupted global food supply chains, and triggered a wave of economic uncertainty that reverberated across commodity-dependent economies worldwide, including the Caribbean. Oil briefly touched USD 130 per barrel in early March before pulling back.
• Federal Reserve begins aggressive rate hikes: The US Federal Reserve raised its benchmark federal funds rate for the first time since 2018 in March 2022, beginning what would become the most aggressive monetary tightening cycle in decades. By late June 2022 the rate had reached 1.50–1.75%, and markets were pricing in further sharp increases in the second half of the year. The implications for Caribbean mortgage markets and property financing were significant.
• US inflation at four-decade highs: The US Consumer Price Index reached 8.5% year-on-year in March 2022 before climbing further to 8.6% in May — the highest reading since December 1981. Imported inflation was filtering through Caribbean economies via higher fuel costs, food prices, and construction material costs, squeezing household budgets and developers alike.
• Caribbean tourism recovery at full force: Despite global headwinds, the Caribbean’s first fully open post-COVID tourism season delivered exceptionally strong results. Jamaica, the Dominican Republic, Barbados, and the Bahamas all posted visitor arrival numbers at or above pre-pandemic levels in Q1 2022, and the summer season was shaping up to be among the strongest in the region’s recent history.
• Guyana oil production approaching 110,000 bpd: ExxonMobil’s Liza Phase 1 was producing approximately 110,000 barrels per day, and Liza Phase 2 — which would add a further 220,000 bpd at peak — was advancing toward first oil. Georgetown’s commercial property market was experiencing acute supply shortages, and residential rents continued to escalate rapidly.
• Caribbean food import costs surging: As a region that imports a substantial proportion of its food, the Caribbean was acutely exposed to the global food price crisis triggered in part by the disruption of Ukrainian grain exports. Several governments introduced temporary price controls or subsidy measures on staple foods as household cost-of-living pressures intensified.
• Hurricane season opens amid heightened concern: The 2022 Atlantic hurricane season officially began on 1 June. After the relatively benign 2021 season for Caribbean islands (though not for the US), forecasters were warning of an above-normal 2022 season, keeping property insurance markets and disaster risk planners on alert.
• Dominican Republic tourism boom continues: The DR consolidated its position as the Caribbean’s dominant tourism economy, reporting record arrival numbers and continued strong investment in hotel development. The Punta Cana and Cap Cana resort corridors remained the most active property investment zones in the Spanish-speaking Caribbean.

Russia, Ukraine, and the Caribbean Economy: Unexpected Connections

Russia’s invasion of Ukraine on 24 February 2022 arrived as a profound geopolitical shock for a world still navigating the aftermath of a global pandemic. For the Caribbean, a region with no direct military or political stake in the conflict, the war’s economic consequences were nonetheless felt swiftly and painfully. The Caribbean’s dependence on imported fuel and food — structural vulnerabilities that had been present for decades — was suddenly thrown into sharp relief by the commodity price spikes that followed the invasion.

Oil prices, which had already been recovering strongly from their pandemic-era lows, surged further in the weeks following February 24. Brent crude briefly touched USD 130 per barrel in early March 2022 before retreating somewhat as markets assessed the sanctions landscape and potential supply responses. For Caribbean economies that import the vast majority of their petroleum — virtually every island nation except Trinidad and Tobago, and to a lesser extent Guyana — the impact on fuel costs was immediate and material. Power generation costs rose, transportation costs rose, and those price increases filtered through the entire supply chain of goods and services.

The food price dimension was equally challenging. Ukraine is one of the world’s major exporters of wheat, corn, and sunflower oil. The disruption of Ukrainian agricultural exports — compounded by sanctions on Russia, another major grain exporter — contributed to a global food price crisis that the United Nations Food and Agriculture Organisation tracked with alarm. Caribbean nations that import a high proportion of their caloric needs from global commodity markets faced sharp increases in food import costs. Jamaica, the Dominican Republic, and the smaller Eastern Caribbean states all reported rising grocery prices that were squeezing lower and middle-income households.

For the Caribbean property market, the war’s indirect effects were complex and varied. Construction costs were already elevated by pandemic-era supply chain disruptions; the energy price spike added further pressure on cement, steel, and transport costs. Several developers reported delays or budget overruns on projects that had been planned before the inflationary environment had become so severe. At the same time, the rush of wealthy Europeans and Americans seeking to diversify their assets and lifestyles in the face of geopolitical uncertainty was generating some incremental interest in Caribbean property as a haven destination — a partially offsetting dynamic, though one that benefited only the luxury end of the market.

The Federal Reserve’s Rate Hike Cycle: Caribbean Property in the Crosshairs

The Federal Reserve’s pivot from near-zero interest rates to aggressive monetary tightening was the most consequential macro development for Caribbean property markets in the first half of 2022. After years of historically cheap dollar financing that had supported asset prices globally — including Caribbean luxury real estate purchased by North American buyers — the cost of borrowing was rising sharply. The Fed’s 25-basis-point hike in March 2022 was followed by a 50-basis-point hike in May and a 75-basis-point hike in June, bringing the federal funds rate to 1.50–1.75% by the end of H1 2022.

For Caribbean mortgage markets — which in most jurisdictions operate independently of the US Federal Reserve but are nonetheless influenced by global financing cost trends — the direction of travel was concerning. Local commercial banks in Jamaica, Barbados, Trinidad, and elsewhere had been operating in a period of relatively low domestic interest rates, and any upward movement in their own lending rates would add to the affordability pressures already being felt by first-home buyers and property upgraders.

Jamaica’s National Housing Trust, which provides subsidised mortgage financing to NHT contributors, found its role becoming more important as private sector mortgage rates inched upward. The NHT’s concessionary rates represented an increasingly significant advantage relative to commercial mortgage products, and demand for NHT loans was correspondingly strong. However, the Trust’s lending capacity was not unlimited, and the queue of eligible applicants waiting for mortgage approvals remained lengthy.

For US-based buyers of Caribbean investment property — a critical demand segment for the luxury markets in Jamaica, Barbados, the Bahamas, and Turks and Caicos — rising US mortgage rates were beginning to alter the calculus of second-home financing. The 30-year US fixed mortgage rate, which had been below 3.5% at the start of 2022, had climbed above 5.5% by late June. This did not eliminate buyer demand from this cohort — many luxury buyers transact in cash or with significant equity — but it was expected to moderate the pace of transactions in the mid-market investment property range.

Caribbean Tourism’s Strongest Recovery Season

Against the backdrop of inflation, geopolitical tension, and rising interest rates, the Caribbean’s tourism sector delivered what was shaping up to be its strongest performance since the pre-pandemic era. The first half of 2022 represented the Caribbean’s first truly open tourist season since COVID-19 had shuttered borders and grounded flights in early 2020. Vaccination rates had reached levels sufficient to allow most Caribbean governments to remove the PCR testing and quarantine requirements that had depressed visitor arrivals through 2021, and the response from travellers was enthusiastic.

Jamaica reported stopover visitor arrivals for the first quarter of 2022 that matched or exceeded the equivalent periods from 2019, the last full pre-pandemic year. The island’s hotel sector — led by the major all-inclusive resort groups concentrated in the Montego Bay, Negril, and Ocho Rios corridors — was reporting occupancy levels that had hoteliers feeling genuinely optimistic for the first time in two years. The ripple effect on the north coast property market was visible in renewed developer activity, with several stalled condominium and villa projects resuming construction.

The Dominican Republic, which had never fully closed its tourism borders even during the depths of the pandemic, was now reaping the reputational and structural rewards of that strategy. International hotel chains that had been impressed by the DR’s pandemic management were now accelerating their investment in new properties, particularly in the Punta Cana and La Romana resort zones. The branded residences segment — luxury residential units sold under internationally recognised hotel brand names and managed by those brands — was particularly active, attracting buyers from the United States, Canada, Europe, and Latin America.

Barbados enjoyed a strong H1 2022 despite the headwinds of global inflation. Its premium positioning as a luxury destination meant that its visitor base skewed toward high-spending travellers less affected by cost-of-living pressures. The island’s private villa rental market — already benefiting from digital nomad demand — was seeing strong booking volumes, and occupancy rates at quality accommodation were providing landlords with comfortable returns.

Guyana: The Oil Boom Reshapes a Property Landscape

With Liza Phase 1 at the Stabroek Block producing approximately 110,000 barrels per day, and Liza Phase 2 advancing through its development phase, Guyana’s oil sector was generating a level of economic activity that was fundamentally transforming Georgetown’s commercial and residential property landscape. The question for the first half of 2022 was no longer whether Guyana would become a significant oil economy — that was already established fact — but how quickly the infrastructure, governance, and institutional capacity of the country could keep pace with the pace of change.

Commercial property demand in Georgetown continued to outstrip supply by a wide margin. International oil service companies, consulting firms, legal practices, and logistics operators had all established or expanded their Georgetown presences, driving demand for Class A office space that simply did not exist in sufficient quantity. Rents in the upper tier of Georgetown’s commercial property market had increased by multiples of their pre-oil levels, and several new commercial developments were under construction or in the planning pipeline.

Residential property presented a similar picture. Executive rental accommodation for the expatriate oil sector workforce commanded premium rents that were dramatically elevated compared to pre-oil benchmarks. Guyanese investors who had purchased residential properties in Georgetown’s better neighbourhoods in the years before the oil boom were finding that their assets had appreciated substantially and generated strong rental income. New residential developments targeting the executive market were underway, though construction timelines were being extended by the same material cost pressures affecting the broader Caribbean.

The broader question for Guyana’s property market was one of wealth distribution. The oil revenues accruing to the government through its royalty and profit-sharing arrangements with ExxonMobil and its partners were substantial. Whether those revenues would be channelled into the housing infrastructure — affordable homes, utilities, roads — that ordinary Guyanese needed was a critical policy question. The government’s Low Carbon Development Strategy articulated ambitions for a diversified and equitable development path, but translating those ambitions into bricks and mortar for working Guyanese families would require sustained political commitment.

Inflation, Construction Costs, and Caribbean Housing Affordability

The global inflation crisis that had been building since the pandemic supply chain disruptions of 2020 and 2021 reached its acute phase in H1 2022. For Caribbean households, the combination of higher food prices, higher fuel costs, and rising construction material prices was creating genuine cost-of-living hardship across income brackets. The Caribbean’s import-dependent economies were particularly exposed to these global price pressures, which were being amplified by the disruptions flowing from the Ukraine conflict.

Construction costs across the region had escalated sharply. Steel reinforcing bar, cement, lumber, roofing materials, plumbing fixtures, and electrical components had all become significantly more expensive over the preceding eighteen months. For developers of affordable and social housing, this cost escalation was threatening project viability. Several government housing programmes found that the budgets allocated to them in 2020 or 2021 planning cycles were insufficient to build the same number of units when construction actually commenced.

For private homebuyers at the entry level of the market, the situation was doubly challenging. Not only were construction costs making new homes more expensive, but rising interest rates threatened to increase the monthly mortgage payments on those more expensive homes. Caribbean governments and their development finance institutions were being called upon to deploy innovative financing tools — interest rate subsidies, shared equity schemes, and extended mortgage tenors — to keep homeownership within reach for working families.

Caribbean Leaders This Half

Dominican Republic was the standout regional performer in H1 2022, combining record tourism recovery with the most active hotel and branded residences development pipeline in the Caribbean. The DR’s openness during the pandemic had translated into structural market share gains that were showing up in foreign direct investment data and property transaction volumes.

Jamaica delivered a strong tourism recovery and showed resilience in its north coast property market. The National Housing Trust remained the anchor of affordable homeownership aspirations for working Jamaicans, and the government was attempting to address the land titling bottlenecks that had long impeded efficient property transactions across the island.

Barbados maintained its premium market positioning effectively. The luxury residential and villa rental segments continued to outperform, the digital nomad economy provided structural rental demand, and the island’s new republic identity was proving to be a positive brand attribute with international investors and visitors.

Guyana continued its extraordinary economic transformation. The Georgetown property market was among the tightest in the hemisphere, and the country’s GDP growth trajectory — driven by oil revenues — was in a league of its own regionally. The challenge was ensuring that growth translated into broadly shared prosperity and improved living conditions.

Turks and Caicos enjoyed another strong period in its ultra-luxury segment, with Providenciales continuing to attract North American buyers despite the rising rate environment. Cash buyers and very high-net-worth purchasers showed relatively limited sensitivity to mortgage rate increases.

Bahamas showed solid recovery in Nassau and Paradise Island, with the Atlantis resort complex anchoring the high-end tourism economy. New Providence’s residential market saw activity from both domestic and international buyers, with Cable Beach development projects generating interest.

St. Lucia saw its luxury eco-resort market drawing renewed attention. The island’s unique volcanic landscape and the Soufriere/Pitons corridor continued to attract boutique hospitality investment, and real estate around the Marigot Bay area was experiencing increased inquiries.

Antigua and Barbuda sustained activity in its Citizenship by Investment real estate category, with approved resort developments continuing to generate CBI-linked transactions. The sailing and yachting tourism economy showed signs of recovery following the pandemic disruptions.

Trinidad and Tobago benefited from higher energy prices in ways that other Caribbean nations did not. As an oil and gas producer, T&T’s fiscal position improved significantly in H1 2022, creating scope for increased government spending that could support economic activity and, eventually, property market conditions.

The overall performer for H1 2022 was the Dominican Republic, which combined the Caribbean’s strongest tourism recovery, the most active hotel development market, and continued strong foreign direct investment in its property sector in a way that positioned the country for sustained growth regardless of the global macro headwinds.

Looking Ahead: The Second Half of 2022

As the Caribbean enters the second half of 2022, the dominant question for property and investment markets is how the region will navigate the collision between strong structural tailwinds — tourism recovery, digital nomad demand, diaspora buying interest — and significant macro headwinds in the form of rising interest rates, elevated construction costs, and the ongoing cost-of-living pressures flowing from global inflation and the Ukraine conflict.

The Federal Reserve has signalled clearly that its rate-hiking cycle is far from complete. Markets are pricing in a federal funds rate above 3% by year-end 2022, which would represent a dramatic change in the financing environment compared to the near-zero rates of 2020 and 2021. The direct impact on Caribbean luxury property demand from North American buyers will depend on how much of that buyer cohort is cash-financed versus mortgage-dependent, but some moderation in the pace of transactions seems likely.

The 2022 Atlantic hurricane season, which forecasters predicted would be above normal, will be another key variable for Caribbean property markets in H2. The region’s ability to attract and retain both tourism visitors and property investors depends partly on perceptions of climate and weather risk, and a damaging major hurricane strike on a significant island destination would have repercussions for insurance markets, reconstruction timelines, and investor sentiment that would extend well beyond the immediate physical damage.

Guyana’s anticipated progress toward first oil from Liza Phase 2 before year-end will be an important milestone for the country’s property and investment outlook. Higher production volumes will bring higher government revenues, providing increased fiscal resources for the housing and infrastructure investment that Georgetown and the country’s secondary towns urgently require. The pace of that investment, and the institutional capacity to deploy it effectively, will be closely watched by regional and international observers.

The Caribbean Property & Investment Review is an independent editorial publication covering property markets, investment trends, and economic developments across the Caribbean region. This Six-Month Special Edition covers the period 4 January 2022 to 3 July 2022. All analysis reflects information available at the time of publication. This review does not constitute financial or investment advice. Readers should conduct their own due diligence and consult qualified advisers before making investment decisions.

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