Caribbean Property & Investment Review: Mid-Year 2023 Six-Month Special Edition

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

Morning Briefing: Key Developments, January–June 2023

• Caribbean tourism boom continues at full force: The post-COVID tourism surge showed no sign of abating in H1 2023. Caribbean destinations across the board reported visitor numbers at or above pre-pandemic records, with the winter 2022/23 season delivering exceptional results and forward bookings for summer 2023 looking equally strong. Revenue per available room metrics were running well above historical averages as occupancy remained high and room rates held firm.
• Federal Reserve continues hiking — but inflation is falling: The Fed raised its benchmark rate three more times in H1 2023, reaching 5.00–5.25% by May. However, the news was not all negative: US CPI had fallen from its peak of 9.1% in June 2022 to approximately 4% by June 2023, and core inflation was also trending lower. Markets were beginning to debate when the rate-hiking cycle would end and whether cuts might come in late 2023 or 2024. No cuts had yet occurred.
• Caribbean cost-of-living squeeze easing but not resolved: As US and global inflation moderated through H1 2023, Caribbean households experienced some relief from the acute cost pressures of 2022. However, food prices, housing costs, and fuel costs remained elevated by historical standards, and the squeeze on working-class Caribbean families had not fully resolved. Housing affordability remained a serious structural challenge.
• Guyana oil approaching 300,000–350,000 bpd: Production at the Stabroek Block continued to ramp strongly, with Liza Phase 2 operating alongside Phase 1 and the Payara development (Yellowtail) advancing toward sanction and first oil. Georgetown’s property market was experiencing demand conditions unlike anything in the country’s prior history.
• Dominican Republic construction sector at peak activity: The DR’s construction sector was operating at near-capacity, with the Punta Cana, Cap Cana, and La Romana resort corridors hosting dozens of simultaneous hotel, branded residences, and residential development projects. Property prices in prime DR locations were at historic highs.
• Hurricane season 2023 opens — forecasters warn of active period: The 2023 Atlantic hurricane season began on 1 June. NOAA and other forecasting agencies were predicting a above-normal season, with conditions in the Atlantic — including warm sea surface temperatures — suggesting elevated activity potential. Caribbean governments and property insurers were on heightened alert.
• Jamaica strong GDP growth: Jamaica’s economy posted solid GDP growth in the period, driven by the booming tourism sector and improving performance in the services economy. The government’s IMF-supervised fiscal consolidation programme had been successfully completed, leaving the country’s public finances in significantly better shape than at the start of the decade.
• Caribbean short-term rental revolution deepens: The penetration of short-term rental platforms into Caribbean property markets continued to deepen in H1 2023. New regulatory frameworks were being debated in several jurisdictions as governments grappled with the housing supply implications of widespread STR conversion and sought to balance property owner rights against the needs of long-term residential communities.

Tourism Boom: From Recovery to Record-Breaking

By mid-2023, the Caribbean tourism industry had moved decisively beyond the recovery narrative that had defined 2021 and 2022. The question was no longer whether arrivals would return to pre-pandemic levels — they had, comprehensively — but whether the structural demand drivers that were propelling the industry would sustain themselves at these elevated levels or prove to be a temporary post-lockdown release of pent-up travel demand.

The evidence from H1 2023 was encouraging. Winter arrivals to Jamaica had beaten prior-year records. Barbados had reported its best-ever January to March quarter in terms of visitor expenditure per arrival, reflecting the island’s successful upmarket positioning strategy. The Dominican Republic, which had already surpassed 9 million visitors in 2022, was on pace to exceed that number again in 2023. The Bahamas was reporting strong occupancy across its Nassau resort corridor. Turks and Caicos was continuing to attract the ultra-high-net-worth North American market that had been its consistent base through and after the pandemic.

The structural factors underpinning this tourism strength were multiple and reinforcing. North American consumer spending had remained resilient despite the interest rate environment, with the labour market strong enough to sustain discretionary travel budgets. The Caribbean’s proximity to the United States — most major destinations are within a three-to-five-hour flight of major US East Coast cities — gave it a structural cost and convenience advantage over more distant international beach destinations. And the Caribbean’s exceptional natural endowment — warm water, white sand, year-round sunshine, accessible culture — made it a reliably attractive proposition for the largest outbound travel market in the world.

For the property market, the tourism boom’s consequences were both positive and complex. On the positive side, sustained high occupancy in the hotel sector was incentivising new investment in resort development and refurbishment across the region. Branded residences — luxury residential units sold with hotel services and management — were selling strongly in Jamaica, the DR, and the Bahamas, attracting buyers who wanted a Caribbean lifestyle asset with professional management and STR income potential. Hotel real estate investment trusts and private equity funds were actively scanning the Caribbean for acquisition and development opportunities.

The complexity came from the STR dimension. As tourism numbers remained strong, the economics of converting residential property to Airbnb-style short-term rental use remained highly attractive for property owners in tourist-heavy markets. This was visibly reducing the stock of housing available for local long-term rental, contributing to the affordability pressures that were affecting working Caribbean families. The tension between property owner financial incentives and community housing needs was becoming one of the defining policy debates in Caribbean housing policy circles.

Interest Rates, Inflation, and the Caribbean Mortgage Environment

H1 2023 was defined in global financial markets by a gradually clarifying picture around the trajectory of inflation and interest rates. US CPI had peaked at 9.1% in June 2022 and had been falling since. By June 2023 it had declined to approximately 3–4%, a substantial moderation — though still above the Fed’s 2% target. The Federal Reserve, mindful of its credibility and determined not to repeat the mistake of the 1970s when premature easing allowed inflation to re-accelerate, continued to raise rates through H1 2023. Three hikes brought the federal funds rate to 5.00–5.25% by May 2023, and the Fed signalled that further increases were possible.

For Caribbean property markets, this environment was testing. Caribbean domestic mortgage rates — which in most jurisdictions are set by local commercial banks in response to domestic funding costs, risk assessments, and competitive dynamics — had risen from their pandemic-era lows. In Jamaica, commercial mortgage rates for residential properties had moved higher, making the NHT’s concessionary lending even more important as the primary accessible route to homeownership for working Jamaicans. Demand for NHT mortgage loans was intense, and the Trust was under pressure to expand its lending capacity.

The Caribbean’s mortgage market was also grappling with structural issues that went beyond the rate cycle. Loan-to-value ratios, deposit requirements, income documentation standards, and title insurance challenges all contributed to a mortgage environment that was difficult to navigate for many prospective first-time buyers. In markets where property titles remained unclear or disputed — a legacy of colonial-era land registration systems that had not been comprehensively modernised — buyers and their lenders faced legal and administrative hurdles that could delay or derail transactions.

The silver lining in the rate environment was the expectation that the hiking cycle was approaching its end. Futures markets were pricing in the possibility of rate cuts beginning in late 2023 or early 2024 as inflation continued to moderate. If those expectations proved correct, the affordability environment for Caribbean property buyers could begin to ease in the second half of 2023. However, Caribbean central banks and mortgage market participants were urging caution — the experience of the past two years had demonstrated that macroeconomic conditions could shift faster and further than consensus forecasts anticipated.

Guyana’s Oil Output: Racing Toward 350,000 Barrels Per Day

Guyana’s oil production trajectory in H1 2023 was one of the most remarkable economic stories in the Western Hemisphere. With Liza Phase 1 and Phase 2 both operating and production volumes approaching or surpassing 300,000 barrels per day in the most recent data, Guyana had in just a few years transformed itself from one of the hemisphere’s most economically marginalised nations into a significant oil producer whose GDP growth rate was among the fastest in the world.

The Yellowtail development (Phase 3 of the Stabroek Block exploitation) had received government and operator approval and was advancing toward a first oil target that would add a further 250,000 barrels per day at peak. With Yellowtail on stream in the mid-2020s alongside Phases 1 and 2, Guyana was tracking toward total production of 600,000 or more barrels per day — an extraordinary figure for a nation of fewer than 800,000 people. The per-capita oil wealth implications were staggering, and the question of governance and distribution was becoming ever more politically charged.

Georgetown’s property market reflected this extraordinary economic backdrop. Office space demand remained far ahead of supply, with new commercial developments under construction along the East Bank Demerara corridor and in the central business district. Residential rents for executive-standard properties were at levels that would have seemed fantastical ten years earlier. The government’s housing programmes were attempting to scale up the delivery of affordable homes for ordinary Guyanese, but the pace of construction was struggling to keep up with both population growth and the inflationary pressure on construction costs that was common across the region.

Regional investors and developers were watching Guyana with intense interest. Several Caribbean property developers with experience in Jamaica, Trinidad, and Barbados were exploring opportunities in the Guyanese market, recognising that the country’s need for quality residential and commercial stock — across all market segments — was a structural investment opportunity. The challenge was the unfamiliarity of the market, the regulatory environment, and the practical logistics of operating in a country whose property development infrastructure was still maturing rapidly.

Dominican Republic: The Caribbean’s Property Investment Capital

By mid-2023, the Dominican Republic had consolidated its position as the most dynamic property investment market in the Caribbean by a significant margin. The combination of a large domestic population, a 9-million-plus annual tourist inflow, a government that actively courted foreign investment, relatively streamlined property purchase processes for foreign buyers, and a construction industry with deep capacity made the DR uniquely positioned in the region.

The Punta Cana and Cap Cana resort corridor on the island’s eastern tip remained the most active development zone. Dozens of hotel and branded residential projects were in simultaneous construction, with international brands including Marriott, Hilton, Hyatt, and their luxury sub-brands all represented. The branded residences category — apartments and villas within hotel-managed developments, often eligible for hotel room inventory programmes that generated rental income for owners — was attracting buyers from the United States, Canada, Europe, and Latin America. Pre-construction sales rates were high, and developers were reporting that their most desirable units were selling out within weeks of launch.

Santo Domingo’s premium residential market was also active. The Piantini, Naco, and Serralles neighbourhoods continued to attract domestic high-net-worth buyers, and the capital city’s growing population of affluent professionals was generating demand for luxury apartment living that the construction sector was working to satisfy. Office and retail real estate in Santo Domingo was similarly active, as the DR’s growing financial services, technology, and nearshoring sectors generated commercial space demand.

The DR’s property market was not without structural challenges. Affordability for ordinary Dominican families remained a significant issue, with the gap between median household incomes and the cost of a decent home large and, in many cases, widening. The country’s informal settlement stock — barrios lacking formal title, basic services, and adequate building standards — remained a persistent feature of urban landscapes. Government housing programmes were attempting to address the deficit, but the scale of the luxury investment market dwarfed the affordable housing pipeline.

Caribbean Short-Term Rentals: The Regulatory Reckoning

The short-term rental market’s maturation across the Caribbean was generating a policy response in H1 2023. As the proportion of residential housing stock operating as Airbnb or VRBO units grew in tourist-heavy markets, the impact on long-term rental availability and affordability for local residents was becoming impossible for governments to ignore.

Barbados had begun consultations on a framework for regulating short-term rentals, balancing the legitimate income rights of property owners against the community need for available long-term rental housing. Jamaica’s tourism and housing authorities were monitoring the growth of the STR sector and its interaction with housing supply. In Turks and Caicos and the Cayman Islands, where the concentration of STR properties in popular tourist areas was particularly high, local government bodies were wrestling with the appropriate policy balance.

The Caribbean’s STR market had also generated a new category of professional property investor: individuals and companies that purchased residential properties specifically for short-term rental operation, often at price premiums that reflected the anticipated STR income rather than the traditional long-term rental yield. This STR-investor buyer category was adding to demand in markets where supply was already constrained, and the resulting price increases were making the housing market more difficult for local households to access.

For regional investors evaluating the STR opportunity, the emerging regulatory landscape was an important consideration. Markets that were likely to introduce more restrictive STR regulations — limiting the number of nights per year a property could be rented short-term, requiring specific licensing, or restricting STR to designated zones — would see the economics of STR-oriented investment change significantly. Understanding the regulatory direction in each market was becoming as important as understanding the demand dynamics.

Caribbean Leaders This Half

Dominican Republic retained its position as the Caribbean’s dominant property investment market. The combination of scale, development activity, international brand presence, and strong transactional volume made the DR the regional benchmark for property investment performance in H1 2023.

Jamaica delivered another strong period on tourism metrics and showed improving fiscal fundamentals following the completion of its IMF programme. The NHT continued to anchor affordable homeownership, and the north coast hotel development pipeline was the most active the island had seen in a generation. GDP growth was tracking at a healthy rate by regional standards.

Guyana remained the Caribbean’s standout economic growth story, with oil production ramping toward 350,000 barrels per day and Georgetown’s property market tighter than at any point in the country’s history. The governance and distribution challenge was real, but the scale of the economic transformation underway was genuinely historic.

Barbados continued to perform strongly at the premium end of the market. Visitor expenditure per arrival was among the highest in the Caribbean, and the island’s luxury villa and high-end residential market was sustained by continued demand from North American and European high-net-worth buyers. The digital nomad economy provided structural rental demand that traditional seasonal holiday lets could not.

Bahamas showed continued strength in Nassau/Paradise Island and growing interest in the Family Islands. Exuma’s real estate market was attracting a growing cohort of buyers seeking exclusive, lower-density Caribbean lifestyle properties, and boutique resort development was active on several of the less-visited cays.

Turks and Caicos remained the Caribbean’s ultra-luxury leader. Grace Bay continued to generate extraordinary price per square metre benchmarks, and the territory’s pipeline of branded resort residences was attracting buyers for whom price was a secondary consideration relative to quality and exclusivity.

Trinidad and Tobago benefited from elevated energy prices and was directing increased fiscal resources toward infrastructure. The Tobago tourism recovery was continuing, and boutique hospitality developers were finding a more receptive market on the sister isle than had existed before the pandemic.

St. Lucia was emerging as one of the Caribbean’s most dynamic eco-luxury hospitality markets. The island’s extraordinary natural beauty — particularly the Pitons UNESCO World Heritage Site — was attracting boutique resort investment that commanded premium rates and attracted buyers for whom uniqueness of setting was the primary criterion.

Grenada continued to develop its CBI programme and its reputation as an authentic, unhurried Caribbean destination. Boutique villa and resort development was active in the southwest of the island, and Grenada’s growing organic agriculture and culinary tourism profile was adding a distinctive dimension to its investor appeal.

The overall performer for H1 2023 was the Dominican Republic, which maintained its extraordinary momentum from 2022 and showed no signs of decelerating as the most active, most liquid, and most internationally integrated Caribbean property market.

Looking Ahead: The Second Half of 2023

As we enter the second half of 2023, Caribbean property and investment markets face a landscape that is genuinely more settled than it was twelve months ago. The inflation shock that blindsided the global economy in 2021 and 2022 is fading — not gone, but clearly moving in the right direction. US CPI has fallen substantially from its 2022 peak. The Federal Reserve’s rate-hiking cycle appears to be approaching or at its terminal point, with the May 2023 hike potentially the last. If rate cuts do begin to materialise before year-end, the financing environment for Caribbean property purchases could begin to ease, providing a modest tailwind to markets that have been navigating higher rates for more than a year.

The hurricane season remains the most significant near-term uncertainty for Caribbean property and insurance markets. NOAA’s above-normal season forecast, combined with exceptionally warm Atlantic sea surface temperatures, suggests that the probability of a major Caribbean hurricane strike in H2 2023 is elevated. Caribbean property owners, governments, and insurers are right to be prepared. The insurance market remains in a hardened state following the post-Ian repricing of 2023, and a significant Caribbean storm event would further entrench the affordability and availability challenges that already characterise the regional insurance market.

The STR regulatory environment will evolve across the region in H2 2023 and into 2024, and investors in this space should monitor policy developments in each jurisdiction carefully. The regulatory direction — toward greater oversight and some limitation of STR activity in residential neighbourhoods — seems broadly set. The pace and specifics of implementation will vary, but investors who have built STR-centric business models should be thinking about how those models might need to adapt as the regulatory landscape matures.

Guyana’s continued oil production ramp-up will sustain its status as the Caribbean’s most dynamic economic story. With Yellowtail advancing through development and production volumes continuing to grow, the country’s fiscal capacity and its government’s ability to invest in housing, infrastructure, and social services will grow in parallel. The property market observer community will be watching closely to see how effectively those resources are deployed to address the real and pressing housing needs of ordinary Guyanese.

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 2023 to 3 July 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.

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