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

Publication Date: 4 January 2023  |  Coverage Period: 4 July – 3 January 2023  |  Special Edition: Six-Month Review

Morning Briefing: Key Developments, July–December 2022

• Caribbean achieves best tourism year since 2019: The second half of 2022 confirmed what the industry had been hoping for — a full recovery of Caribbean tourism to pre-pandemic levels. The Caribbean Tourism Organisation reported that multiple destinations were on track to surpass their 2019 visitor arrival records. Jamaica, the Dominican Republic, Barbados, and the Bahamas all posted exceptional annual figures, with the winter 2022/23 season looking equally strong.
• Federal Reserve raises rates to 4.25–4.5% by year-end: The Fed continued its aggressive tightening cycle through H2 2022, with four further rate hikes — including three consecutive 75-basis-point increases — pushing the benchmark rate to 4.25–4.50% by December. This was the highest level since 2007, and the pace of increases was having significant implications for Caribbean mortgage affordability and property financing conditions.
• Hurricane Ian devastates southwest Florida: On 28 September 2022, Hurricane Ian made landfall near Fort Myers, Florida as a Category 4 storm with winds of approximately 150 mph. The storm caused catastrophic damage across Lee County and surrounding areas, with insured losses ultimately estimated in the range of USD 60–112 billion — one of the costliest disasters in US history. While the Caribbean islands were largely spared direct impacts, the storm’s implications for regional insurance markets were profound and immediately felt.
• Caribbean construction boom despite cost pressures: The tourism recovery was driving sustained investment in hotel and resort development across the region. Developer appetite remained strong despite elevated construction costs, with the pipeline of projects in the Dominican Republic, Jamaica, and Barbados representing the most active development environment in years.
• Guyana oil production ramping toward 200,000 bpd: Liza Phase 2 achieved first oil at the Stabroek Block during H2 2022, adding production capacity alongside Phase 1. Guyana was now firmly on the trajectory toward 400,000–500,000 barrels per day and beyond, and the economic transformation of Georgetown was accelerating accordingly.
• Caribbean housing costs surging: The combination of global inflation, elevated construction material prices, and rising mortgage rates was creating unprecedented housing affordability pressure across Caribbean domestic property markets. Entry-level homeownership was becoming increasingly difficult for working families, testing the capacity of government housing programmes and development finance institutions.
• Dominican Republic property market at historic highs: The DR’s residential and commercial property market was experiencing the strongest transactional volumes in the country’s modern history. Punta Cana, Cap Cana, and Santo Domingo’s premium residential zones were all reporting strong demand from domestic, Latin American, and North American buyers.
• Caribbean short-term rental market matures: The Airbnb and VRBO-driven short-term rental economy had become a firmly established feature of Caribbean property markets. In the most popular tourist destinations, short-term rental revenue was providing property owners with returns that in many cases exceeded traditional long-term leasing, prompting continued investment in rental-ready residential properties.

Hurricane Ian and Caribbean Insurance: The Florida Shock Wave

Hurricane Ian’s catastrophic landfall on 28 September 2022 near Fort Myers, Florida was not a Caribbean event in any direct physical sense — the storm spared the islands, making landfall on the US mainland after crossing Cuba. But for Caribbean property owners, developers, insurers, and investors, Ian’s aftermath was felt swiftly and significantly through the regional insurance market.

With insured losses from Ian expected to run to tens of billions of dollars, global reinsurers — the companies that provide financial backing to the primary insurance carriers that write Caribbean property policies — faced one of the largest single loss events in their industry’s history. The reinsurance market had already been tightening through 2022 as the cumulative cost of climate-related disasters in recent years had strained the capital positions of major reinsurers. Ian’s losses accelerated that tightening dramatically.

For Caribbean property owners, the practical consequence was felt in the January 2023 insurance renewal season. Reinsurers communicated sharply higher pricing to their primary insurance company clients, and those cost increases were passed through to policyholders in the form of higher premiums, reduced coverage limits, and in some cases the withdrawal of coverage availability for certain property categories or locations. Coastal properties, vacation rentals, and older building stock were particularly affected.

The structural issue underlying this dynamic was longstanding: the Caribbean sits in one of the world’s most active hurricane tracks, and the losses generated by major storms — from Hugo (1989) to Gilbert (1988) to Ivan (2004) to Maria (2017) — had repeatedly demonstrated the catastrophic downside scenarios that reinsurers were pricing against. Ian’s scale as a US-mainland event added a new dimension, demonstrating that the wealthiest property markets on the planet were not immune to extreme weather losses. For Caribbean insurers who had been arguing for adequate risk-based pricing for years, Ian provided a stark validation of their actuarial models — at significant cost to their policyholders.

The Caribbean Catastrophe Risk Insurance Facility (CCRIF), which provides parametric insurance coverage to Caribbean governments for hurricane, earthquake, and excess rainfall events, offered some comfort at the sovereign level. But the CCRIF does not provide coverage to individual property owners, and the household and small business insurance market was where the hardening was most painfully felt. Barbados, Jamaica, and the Eastern Caribbean states all faced a challenging insurance renewal environment as 2022 gave way to 2023.

The Rate Hike Cycle at Full Intensity: Caribbean Mortgage Markets Under Pressure

The Federal Reserve’s rate-hiking campaign, which had begun in March 2022, intensified dramatically in the second half of the year. The July, September, November, and December meetings all produced significant rate increases — with three consecutive 75-basis-point hikes in July, September, and November representing the most aggressive consecutive tightening moves since the early 1980s under Paul Volcker. By year-end, the federal funds rate stood at 4.25–4.50%, up from near zero just nine months earlier.

For Caribbean property markets, this rapid rise in US rates rippled through in several ways. US-based buyers of Caribbean second homes and investment properties faced sharply higher mortgage costs on any debt-financed purchases. The 30-year US fixed mortgage rate, which had been below 3% in early 2022, climbed above 7% by late October 2022 before pulling back slightly toward year-end. This was the highest US mortgage rate in more than two decades, and it was affecting buyer psychology as well as financing affordability.

Within Caribbean domestic mortgage markets, the picture varied by jurisdiction. In Jamaica, commercial banks began incrementally adjusting their lending rates in response to global cost of funding pressures. The National Housing Trust maintained its concessionary rates for contributors, providing a critical buffer for working Jamaicans — but the gap between NHT rates and commercial mortgage rates widened through H2 2022, and demand for NHT loans grew accordingly. The Trust’s management was being tested to allocate its finite lending capacity equitably among a growing queue of applicants.

In Barbados, where the local dollar is pegged to the US dollar at a fixed rate, the transmission of US monetary conditions into the domestic financial system is more direct than in floating-rate Caribbean economies. The Central Bank of Barbados was monitoring inflationary pressures closely, and the domestic banking system was beginning to see some movement in lending rates that had been remarkably stable for several years. First-time homebuyers in Barbados faced a significantly more challenging financing environment in late 2022 than they had encountered even a year earlier.

Caribbean Tourism: The Best Year Since Before COVID

Against the backdrop of rate hikes, inflation, and insurance market turbulence, the Caribbean tourism sector in H2 2022 was a genuine bright spot. The region’s major destinations posted visitor arrival and revenue statistics that in many cases surpassed their pre-pandemic peaks, confirming that the structural demand for Caribbean travel had not only survived the COVID-19 years but emerged stronger.

Jamaica’s tourism sector reported one of its strongest years in history in 2022. The island surpassed four million visitor arrivals for the year, with the winter season buoyed by robust North American demand. Resort occupancy was high, average daily rates for hotel rooms were elevated, and the resulting uplift for resort-adjacent property was visible in renewed construction activity and investor interest. The corridor from Montego Bay through Runaway Bay to Ocho Rios was seeing its most active hotel development environment in more than a decade.

The Dominican Republic, which had hosted more than 7 million visitors in 2021 despite the global travel environment, was on course to significantly exceed that number in 2022. The Punta Cana International Airport had become one of the busiest aviation hubs in the Caribbean and Latin America, and the resort corridor east of the airport was experiencing an extraordinary density of hotel and branded residential development. Several international luxury brands completed new property openings or announced new projects in H2 2022, further reinforcing the DR’s position as the most dynamic hotel market in the region.

The Caribbean short-term rental market — through platforms including Airbnb, VRBO, and Booking.com — had matured into a significant and mainstream component of the region’s accommodation economy. Entire neighbourhoods in Barbados, Jamaica’s north coast, and Nassau/Nassau Bahamas had seen substantial proportions of their residential stock shift from owner-occupation or traditional tenancy toward short-term rental operation. This was generating strong returns for many property owners but was also being identified by housing researchers and government officials as a contributing factor in the reduction of available long-term rental stock for local residents.

Guyana: From Oil Frontier to Regional Powerhouse

The achievement of first oil from Liza Phase 2 during H2 2022 represented a major milestone in Guyana’s extraordinary oil story. With Phase 2’s Prosperity FPSO vessel adding production capacity to Phase 1’s Destiny FPSO, Guyana was now producing in the range of 200,000 or more barrels per day — a figure that would have seemed extraordinary just three years earlier. The trajectory toward the government’s stated ambition of 400,000–500,000 barrels per day by the mid-2020s was looking increasingly credible.

Georgetown’s property market continued to operate in a different dimension from the rest of the Caribbean. Commercial rents for Class A office space were at levels that would not look out of place in a mid-tier North American city, despite Guyana’s relatively modest income levels among its domestic population. The shortage of quality commercial space was so acute that several oil sector operators had resorted to occupying converted residential properties or older commercial buildings while waiting for purpose-built office developments to complete.

Residential demand in Georgetown’s executive neighbourhoods continued to be driven primarily by the expatriate workforce and the growing cohort of prosperous local professionals and business owners emerging from the oil service economy. Guyanese investors who had bet on Georgetown real estate in the pre-oil era were sitting on very substantial unrealised gains. New residential developments targeting the premium market were selling quickly, and the government’s ambitions for new residential communities on the East Bank and East Coast Demerara corridors were gaining commercial interest from developers.

The question of whether Guyana’s oil wealth would reach the broader population was becoming a significant political and social issue. The government’s Natural Resource Fund, established to hold a portion of oil revenues for long-term national benefit, was receiving its first meaningful inflows. Housing, healthcare, and education infrastructure were being cited by the government as priority spending areas. For property market observers, the pace at which affordable residential development could be scaled up across Georgetown and secondary towns would be a key indicator of whether the oil boom was delivering genuinely broad-based development.

Caribbean Housing Affordability: A Widening Crisis

The combination of surging construction costs, rising mortgage rates, elevated land prices, and inadequate housing supply was creating a housing affordability crisis across Caribbean domestic property markets that was without precedent in the modern era. For working families across the region — in Jamaica, Barbados, Trinidad, the Eastern Caribbean states, and beyond — the prospect of achieving homeownership through their own efforts and savings was becoming increasingly remote.

In Jamaica, the housing deficit — the gap between the number of households that needed adequate housing and the available supply of decent, affordable homes — was estimated to be in the range of 200,000 units. The National Housing Trust continued to be the primary institutional mechanism for addressing this deficit, but the scale of the challenge vastly exceeded the Trust’s annual lending and construction capacity. The government’s Housing, Opportunity, Production and Employment (HOPE) programme and related initiatives were delivering units, but not at the pace required to close the deficit meaningfully.

Barbados faced similar pressures, with the government’s housing programmes managing long waiting lists of families seeking to access affordable units. The cost of constructing new social housing had risen sharply through the pandemic and inflation cycle, meaning that the same budgetary allocation now built fewer homes. The Barbadian government was exploring public-private partnership models and alternative construction technologies — including modular and prefabricated approaches — as potential routes to improving delivery efficiency.

Caribbean Leaders This Half

Dominican Republic again demonstrated its dominance as the Caribbean’s leading property investment destination. Record tourism revenues, the most active hotel development pipeline in the region, and a residential property market operating at historic transactional volumes combined to make the DR the unambiguous standout of H2 2022.

Jamaica delivered its strongest tourism year since before COVID, with direct positive effects on resort property markets along the north coast. The government continued to work on land titling reform and housing programme delivery, and there was cautious optimism about the island’s medium-term economic trajectory.

Barbados maintained premium positioning in the luxury market. The West Coast continued to attract high-net-worth buyers from North America and Europe. Insurance market hardening was a concern, but the island’s overall economic performance and governance narrative remained strong.

Guyana was in a category of its own in terms of economic growth. The achievement of Liza Phase 2 first oil was a transformative milestone. Georgetown’s property market dynamics — very tight supply, very high rents, rapid commercial development — reflected the extraordinary pace of the country’s economic transformation.

Turks and Caicos continued to attract ultra-high-net-worth buyers for whom rising US mortgage rates were largely irrelevant. Grace Bay remained one of the world’s great beachfront addresses, and Providenciales property values continued to set Caribbean records.

Bahamas benefited from strong North American visitor demand and continued investment in Nassau and Paradise Island hotel and residential development. The Family Islands — particularly Exuma and Eleuthera — were attracting growing interest from buyers seeking more off-the-beaten-track Caribbean lifestyle properties.

St. Kitts and Nevis reported continued strong CBI programme performance, with the real estate investment option remaining popular among applicants from Asia, the Middle East, and Europe. The federation’s small scale was an advantage in managing CBI-linked development quality.

Grenada saw increased interest in its own CBI programme, and the island’s agricultural and tourism economy was recovering well. Investors were paying attention to Grenada’s growing reputation as an authentic, less commercialised Caribbean experience — a positioning that commanded price premiums in the boutique hospitality and villa market.

Trinidad and Tobago continued to benefit from elevated energy prices that were improving the republic’s fiscal position. Investment in Tobago’s tourism infrastructure remained a stated government priority, and there were signs of growing hospitality investor interest in the sister isle.

The overall performer for H2 2022 was the Dominican Republic, which combined tourism dominance, the most active hotel development market, and the strongest residential property investment environment in the Caribbean into a performance that was simply without regional peer.

Looking Ahead: 2023 and the Caribbean’s Next Chapter

As we enter 2023, the Caribbean property and investment landscape carries both genuine strengths and real uncertainties. The tourism recovery is now complete — the question is no longer whether the industry will return to pre-COVID performance but whether it can exceed it. The indications for early 2023 are positive, with forward booking data pointing to another strong winter season for major Caribbean destinations.

The interest rate environment is the dominant financial uncertainty for the year ahead. The Federal Reserve has signalled that it expects to continue raising rates into 2023, though the pace of increases is expected to moderate from the unprecedented speed of 2022. Markets are debating where the terminal rate will land and how long it will remain elevated — with most expectations suggesting rates above 5% at some point in 2023. The duration and severity of that high-rate environment will have significant implications for the financing of Caribbean property purchases, both by North American buyers and by local Caribbean households.

The insurance market hardening that followed Hurricane Ian is likely to persist through 2023. Caribbean property owners face another challenging renewal cycle, and the structural question of how to make adequate property insurance affordable and accessible to working Caribbean families — particularly in the most hurricane-exposed jurisdictions — is one that policymakers need to address with urgency. The alternative — a growing cohort of uninsured or underinsured properties facing a major hurricane — is a catastrophic risk scenario that governments and communities cannot afford to ignore.

Guyana’s continued oil production ramp-up will be one of the most important Caribbean economic stories of 2023. With Phase 3 and other Stabroek Block developments advancing through planning and development, the country’s production trajectory is pointing toward levels that will make it a significant player in global oil markets. The question of how that wealth is allocated — and how quickly it translates into the housing, infrastructure, and public services that ordinary Guyanese need — will be the defining policy challenge of the year.

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 July 2022 to 3 January 2023. 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.