Caribbean real estate in the pandemic

The Caribbean is a popular tourist destination, with most of the islands depending on tourism; only Trinidad and Tobago, where oil and gas production make up 40% of GDP, is less reliant on tourism. With a big decline in visitors since the beginning of the COVID-19 pandemic, therefore, there have been similarly significant impacts on the region’s market for real estate. 

Figures from Tourism Analytics show that in 2018, there were around 23.4m arrivals in the region, whether by air or cruise, which increased to 24.2m in 2019. However, the pandemic has led to the suspension of stayover tourism in countries such as the Cayman Islands and Trinidad and Tobago, while cruise arrivals have been cancelled indefinitely.  

This has had an adverse impact on regional economic activity, and the UN World Tourism Organization estimated that the sector could witness a 20–30% decline in tourist arrivals in 2020, continuing into 2021. The reduction in tourists has in turn hit the hospitality and commercial sectors, and was further compounded by new or extended lockdowns in the core markets of Canada, the UK and Europe during the last quarter of 2020. 

Current indications are that the tourism sector is expected to achieve 35% occupancy this year at best. There has also been income compression in retail, which has experienced sharp declines in rental and vacancy rates. Unlike North America, the UK and Europe, there are few institutional investors in the commercial property sector in the Caribbean as most real estate is owner-occupied. 

However, a report by Carib Capital Ltd mortgage services suggests that residential real estate has bucked the trend and is still attractive to wealthy foreign buyers, because the Caribbean offers a safe retreat with fewer cases of COVID, fewer restrictions, and great weather for outdoor activities.

However, with increasing numbers of new COVID-19 cases, more companies have adopted work-from-home practices, leading to a decline in office space requirements and rent compression. Furthermore, although demand for new warehouse space has been increasing before the pandemic, it is now in decline. 

Meanwhile, although there have been some sales in the luxury residential market, there remains a few years' worth of available supply. With traditional buyer markets in lockdown, there has been a decrease in foreign purchasers, so this supply is likely to remain available for some time. Market activity overall remains significantly lower than prior years. 

Figure 1: Number of real-estate transactions in Barbados (source: Barbados Revenue Authority)

Figures from the government's Lands and Survey Department for 2020 show that the number of properties sold increased by 18%, while the value has only decreased by 7%, which suggests that the market has continued to perform relatively well during the pandemic. 

This growth can be attributed to several factors such as the stimulus packages introduced by the government. These include pensions withdrawal options – the National Pensions (Amendment) Law 2020 law was amended during the COVID-19 lockdown crisis to allow withdrawals from pension accounts to alleviate the financial strain the pandemic has caused, with an estimated US$444m paid out to eligible persons by pension companies, some of which has been invested in real estate.  

The government has also done extremely well in managing the pandemic, which has resulted in increased demand from wealthy foreign investors. In October 2020, the government launched a Global Citizen Concierge Program, to attract so-called digital nomads who earn a minimum of $100,000 to live and work remotely in the islands for up to two years. This scheme has also resulted in an increase in absorption rate of luxurious condos along the popular Seven Mile Beach, acquired by overseas investors. Wealthy individuals will contribute to the economy by acquiring property from which the government receives stamp duty revenue of 7.5% of the market value, and by spending on goods and services

The outlook is promising, with the government planning to open its borders some time in April once the local population is all vaccinated. 

Figure 2: Number and value of all real-estate transactions in the Cayman Islands

Demand was also strong from the local market as a result of several factors. A Global Property Guide article states that the National Housing Trust leads the mortgage market, with a 90% share in 2018. In 2019 it launched several initiatives that have had a positive impact on the market, including increasing the loan ceiling from J$5.5m (US$40,915) to J$6.5m (US$48,354), a reduction in interest rates, and intergenerational mortgages with a loan period of up to 60 years. 

The 2020 figures suggest the pandemic has not had a significant impact on the real-estate market either, which has remained buoyant and resilient according to JN Bank, the country's largest private mortgage lender, and the Realtors Association of Jamaica.

Figure 3: Number and value of real-estate transactions in Jamaica 

Exclusions from tables: transactions in the informal sector (non-registered property) which are difficult to track; where the property is vested in a company and the transaction is by way of company shares; foreign exchange transactions from value figure as they would have a distortionary effect due to not being stated in Jamaican dollars. 

Although the real-estate market in general has suffered from the fall in economic activity, it has experienced an increase in transaction volume across residential segments, including luxury homes, second homes and vacation homes, resulting from a greater demand. However, the closure of Trinidad's borders since April 2020, with no indication of a reopening date, is expected to have continued negative impact on the retail and hospitality sectors. 

Figure 4: Number of real estate transactions in Trinidad and Tobago (est.) 

As the pandemic continues into 2021, the residential sectors remain stable while the commercial and hospitality sectors remain in flux. However, changes in consumer behaviour as a result of the pandemic may keep affecting the islands' economies and their real-estate market well into the future.