Economic Outlook for Real Estate in 2009 and Beyond

The year has opened with the global economy in turmoil and recession a reality for nearly every nation. But what does this mean for the Trinabgonian real estate sector and what other factors are at play that will influence the price of property, and the status of the market, going forward? AREA’s President Richard Saunders, Dawn Glaisher of Seajade Investments and Republic Bank Senior Economist Dr Ronald Ramkissoon peer into their crystal balls and discuss real estate prospects in Trinidad and Tobago for 2009 and beyond.

Petrocarbons and Public Expenditure

Budgetary adjustments due to falling oil and gas prices will have a knock-on effect for us all and for the real estate market in 2009 says Richard Saunders. “Oil and gas are the bedrock of the Trinidad and Tobago economy so any fluctuation in the price of those commodities is bound to impact the economy as a whole. “Oil prices today have been depressed significantly from above US$100 per barrel to the range of US$40. In addition to that you have a reduction in the demand for oil because the major developed and developing nations, which provide the demand, are all in some form of economic adjustment,” says Saunders, who is also managing director of property development firm Vicar Enterprises.

“Two things are hitting us: a) low price of oil; b) low demand for the product. We’re aware that the government is looking for alternative markets but it is still having an impact. Gas prices follow the oil prices and as such are on a similar downward trend.” Low petrocarbon prices are already having an impact on Government spending with the postponement of a number of major construction projects. And there are prospects for further cuts as Saunders explains. “Government spend regarding the budget was around TT$49 billion. At first it was down around TT$7 billion, which represented a 15% cut and that was when they were pricing oil at US$50 a barrel. It’s now in the 40’s and one would assume that there are some further adjustments that the Government will have to make.

“We did hear that the government was trying to keep spending at the same level it was at in 2008. Increases in the budget were in the order of TT$8 billion, so if they’re keeping it to that level then it is a budgetary cut of at least TT$8 billion that we’re looking at. “Also it’s not just that difference; because of inflation anything you are buying would be 10% more expensive, so you have to add in that inflationary component to get the real reduction of spend. “Really we could be looking at a reduction in government spending of 15-20% which will undoubtedly have a big impact. It would ripple through the entire system.”

Individual Earnings and Unemployment

The effect of reduced government spending is all pervasive and will be felt throughout 2009 adds Saunders. “People at both ends of the spectrum are having problems,” he says. “Businesses are saying they have to adjust and tighten the belts; there are also cutbacks in government projects which means there is less work out there and therefore less money circulating in the economy. “We are looking at a reduction in real demand, it might not have hit all of us yet but that is what is happening out there. “Unemployment is going to rise and that is because the level of economic activity has reduced. The construction sector, which employs a lot of unskilled labour, is under real pressure. The government has also cut back on its social programmes such as URP (Unemployment Relief Programme) and CEPEP (Community Environmental Protection and Enhancement Programme) and all of that unfortunately is because it doesn’t have the money.

“So we will see a rise in unemployment and the consequence of that is that the spend of that group will be reduced. Generally the retention of money within the URP and CEPEP bracket is short-term, it turns around very fast, so if those projects are scaled down, a lot of businesses, especially smaller ones, will feel it.”


A significant proportion of real estate demand within the past decade has been fuelled by investors; especially those looking to turn a quick profit from buying in at the commencement of a development and selling on completion. These investors are being more cautious now, a fact which will lead to a decreased volume of real estate transactions in 2009. “Investors have been very circumspect and are saying at the moment that if this market is supposed to be going down a bit I’m going to wait until it gets to the bottom and then purchase. “The time for me to buy is when it bottoms out so that is causing some reduced activity as well,” explains the AREA President. “They were jumping on every good deal they saw but now there is a much more wait-and-see approach. “It is another factor that will influence our market and slow down the volume of transactions going through 2009.”


The plethora of developments that sprang up in response to high real estate prices and demand meant that, as things slow down, there is now excess supply in the market. It is something which could take years to be taken up says Saunders.

“You have One Woodbrook Place, which is a major project bringing about 400 high-end units onto the market; there’s also La Renaissance which is another project bringing high-end. That supply will take years to be absorbed. During that time it’s also going to have an affect on the market.

“If I was an investor in One Woodbrook Place and I had a situation where I couldn’t find a tenant I would look to attract one at almost any rate to ease those mortgage payments. Say I have a TT$20,000 mortgage and I could get a US$2,500 rent from someone who is currently paying US$3,500-4,000. I will offer him that rental of US$2,500 and probably get it because this is a brand new apartment I’m offering.

“But the affect of that is that it’s going to disrupt the market. You’re going to have a situation where those that were getting US$3,500-4,000 will have to drop because otherwise they will lose their tenants. This might be good for the tenant but it actually drops the whole system down and reduces the amount of money circulating.”

And how long does Saunders anticipate it will take for this property surfeit to be sold? “All of these things will take a good two to three years to run through because of the amount of plant being brought on the market. Once we go through this little phase then things will begin to pick up again.”

Demand and Prices

Though Saunders expects real estate demand to remain relatively high in 2009 he does foresee a drop in prices. “You have to look at affordability when looking at demand because many people will be either losing their jobs or getting much less work. This will shift the number of people, at the low-end, that were looking at coming into the market, back out of the equation again, purely on the basis that they can no longer afford it.

“The demand will stay relatively strong throughout 2009 but I think there will be some reduced costs of the property available in order to move that property. There is evidence that prices are falling right now. We’ve seen HDC (Housing Development Corporation) already making offers to try to sell some of its slower moving product. They’ve dropped prices in some of their developments, so that’s already visible.
“Adverts for high-end properties are saying ‘price negotiable’ or ‘call for price’ which is an indication that there is room for manoeuvre; they want to get a dialogue going to see if any common ground can be reached. Before it was a case of ‘this is the price and that is what I am selling at’.”

Construction costs could also come down in 2009, good news for those looking to build. “Prices will go down across the board,” says Saunders. “Construction costs, such as that of steel, are going down and now you can get a craftsman whereas before you couldn’t. “Labour, even the craftsmen, have to be a little more price conscious now whereas before they could pretty much name their own price and say take it or leave it. “With the high demand before it had pushed construction prices way out of line.”

Interest Rates

Republic Bank Senior Economist Dr Ronald Ramkissoon says the prospects for interest rates in 2009 are hard to predict with any certainty but the overall trend is downward.
“The major body that dictates interest rates is the Central Bank (CB). If the CB feels comfortable that inflation is continuing to decline, then you can expect a decline in domestic interest rates.
“I think inflation will continue to come down and therefore given the Central Bank’s monetary policy, interest rates will come down as well. But this will not be to the low levels of developed nations. Caribbean rates tend to be high, both for deposits and loans.”

There is reason for optimism though for those seeking loans in 2009. “Inflation has begun to come down of late and this was reflected by a slight decrease of the Repo Rate recently by the CB.
“The Repo Rate is the CB’s signal policy rate and we have seen a small decline in that which was reflected by commercial banks reducing their prime rates. “What is important is the direction. Our inflation rate had gone to 15% and we are now around 11% so it is heading in the right direction.”


The prospects for the sister isle in 2009 are not encouraging says Dawn Glaisher, with a number of factors feeding into a gloomy forecast.

“Diversification, represented by the Cove Eco-Industrial and Business Park, is a potential that will take time to actualize so we need to continue our efforts to refocus the government and local private sector investors on tourism.

“This means more fiscal incentives; a re-investment programme for the accommodation sector, which is now sub-standard; investment in infrastructure, especially the new airport terminal and hospital; encouragement of large investors in top quality hotels, because without good beds, the airlines and tour operators will soon stop sending tourists here, except on cut price package deals that will contribute nothing to our sustainable future.”

Glaisher says the removal of the controversial land licence, which requires all foreign investors to obtain a licence before investing in property, would make little difference.
“Even if the land licence were to be removed this month, nothing much would happen as the visitors are down to 1995 levels, local investors are afraid to take a chance, prices are still high, crime is increasing – which has a direct impact on real estate/tourism – and confidence is gone,” she says.

“The outlook for 2009 is bleak therefore, unless we seriously refocus, ignoring the negativity of the credit crunch and pushing forward with an eye on the future. There is always money to be had if you look for it. The credit crunch has not stopped industry on the whole, the world will continue and the upturn will come. “We have to position the island for that day or Tobago will remain 20 years behind its regional neighbours in quality and service. That would be a crime because the natural assets of the island far outstrip some of the other small islands. “We need to foster an environment of private sector investment in partnership with local government and central government for fiscal incentives. We have to work with government, mobilize our talents and labour force and spend our money wisely.”

How Long Will the Downturn Last?

So what is the prognosis for the Trinidad and Tobago real estate sector this year and into the future? Saunders gives us his opinion. “Unemployment will rise, inflation will fall (to about 9%), prices will come down and a period of general economic adjustment will take place throughout 2009 and beyond,” he concludes. “All in all I think we’re into a period of some decline in activity and transactions that will take a year or two to work its way through the system. It will also be two to three years before all the high-end properties coming onto the market are absorbed. “After that we will begin to see some slow growth and seeds of recovery. I think it will take up to three years for things to begin to pick up again, so by 2012 we should see the market back on track.”

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