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Oct 29, 2014

Cayman Islands' housing market is making a comeback!


After several challenging years, Cayman Islands´ property market is now improving considerably. Growth is centred along Seven Mile Beach for condominiums, and Cayman Kai, on the island’s north, for single-family homes. This growth reflects increased consumer and investor confidence in the island.

In 2013, the average value of property transfers rose by 13.5% y-o-y to KYD365,800 (US$446,098), based on a property review conducted by Charterland Ltd. This is in sharp contrast to the 14.5% annual drop in the value of property transfers in 2012.

Along Seven Mile Beach, a coral-sand beach located on the western end of Grand Cayman island, the price of condominium units starts at around KYD300,000 (US$365,854).

Cayman property transfers

During the past decade, the movement of the average value of property transfers has been erratic. This can be attributed to large-scale acquisitions made by some property developers in a particular period, which create distortions in the property market. For an instance in 2011, Dart Group made significant acquisitions, which represented about 28% of the total value of all the property transfers for that year.

Positive housing market outlook

Caymans´ property market is expected to remain buoyant in the coming months, especially along Seven Mile Beach, according to James Bovell of Re/Max Cayman Islands.

One of the newly developed luxury residential developments on Seven Mile Beach is The WaterColours residences, which is now selling rapidly. Dart, a luxurious, boutique-style resort is also expected to begin its construction of 101 new residences this year.

“Consumer confidence does seem to be coming back and people want to live here. People are buying, people are selling, people are upgrading. It’s good for the government with stamp duty figures. We’ve got Watercolours that ReMax has been pushing. That should be closing soon which will be a windfall for government. Lots going on and it’s very positive,” said Cayman Islands Real Estate Brokers Association (CIREBA) president Michael Day.

Property transactions are surging

Property demand is surging. Real estate transactions surged by 45% y-o-y to 317 sales in the first half of 2014 from a year earlier, based on figures released by CIREBA, the largest property portal in Cayman Islands. Likewise, the total value of real estate sales also soared by 20% to KYD190 million (USD231.7 million) over the same period.

This optimism is supported by figures from Re/Max Cayman Islands. During the first six months of 2014, sales of condominium units along the Seven Mile Beach surged by about 60% from the same period last year, according to James Bovell of Re/Max Cayman Islands Cayman Islands.

Cayman property sales transactions
 
Cayman freehold transfer

However, these sentiments seem contradicted by the figures released by Cayman Islands´ Lands and Survey Department, which shows total freehold land and property transfers dropping slightly by 0.7% to 968 units in the first seven months of 2014, compared to the same period last year. Moreover, the value of freehold transfers actually fell by 32.5%, to just KYD255.22 million (US$311.24 million).

In July 2014, there were 2,049 properties on the market, with a combined market value of about KYD1.81 billion (USD2.21 billion), according to CIREBA.

The rise of canal-front properties

Recently, there has been increased interest in canal-front homes, both from home buyers and property developers, according to Re/Max Cayman Islands, due to the incredible views they offer home owners.

Cayman household dwellings

For an instance, canal-front homes are currently under construction along the Seven Mile Beach corridor, stretching up to West Bay, primarily on land south of the Ritz-Carlton, Grand Cayman, and land to the north of the Yacht Club and land at Camana Bay. Another example is that of Safe Haven, though the canal-front properties there are leasehold.

In the first half of 2014, there were 10 residential canal-front land lots sold along the Seven Mile corridor, compared to 11 lots sold during the whole of 2013, based on registered sales on the portal CIREBA. These figures do not include land sold by privately by owners and by developers.

Interest rates and the mortgage market

Mortgage interest rates in the Cayman Islands are typically tied to the prime rate set by the Cayman Islands Monetary Authority, which follows the US Fed funds rate. Typically, mortgage interest rates are one or two percentage points above the current prime rate. The Cayman Islands dollar (CI$) is pegged to the US dollar at CI$1 = US$1.25.

Cayman mortgages

The maximum loan-to-value (LTV) ratio is 70% of the property’s appraised value, with maximum term of around 10 to 15 years. However, Caymanians are offered longer periods of between 30 to 40 years. The minimum loan amount is US$100,000.

Cayman Islands´ mortgage market has grown rapidly in recent years, from just about 30% of GDP in 2003 to around 60% of GDP in 2011.

The rental market is growing

Cayman Islands´ rental market is expanding as the population rises, and more employees have offices in the island’s special economic zone, Cayman Enterprise City.

The rental market is tight, especially near Seven Mile Beach, according to Capital Realty. A two and three-bedroom condominium unit on Seven Mile Beach rents for about KDY2,050 (US$2,500) to KDY4,510 (US$5,500) per month.

Apartment complexes on Seven Mile Beach offering long-term rentals include George Town Villas, The Grandview, Sunset Cove, Seagull Condominiums, Laguna del Mar, Lacovia, The Sovereign and The Pinnacle. Monthly rents range from KYD1,500 (US$1,829) to KYD9,000 (US$10,976).

There are also other upscale residential areas outside Seven Mile Beach. This includes the South Sound, a posh area close to schools, and George Town which offers executive homes and apartments. The monthly rent of two-bedroom apartments across the road starts at KYD1,500 (USD1,829) while those on the sea are rented from KYD2,000 (USD2,439) to KYD4,600 (USD5,610).

In the Old Crewe Road, the Sunrise Apartments, Pine Crest Apartments and Elizabeth Villas are found, with the monthly rent of two-bedroom apartments starting from KYD1,400 (US$1,707). Some of the newer, more exclusive condominiums in the area are rented out from KYD2,000 (US$2,439) to KYD2,500 (US$3,049) per month.

Other areas in Cayman Islands that are popular with families and professionals include Jennifer Drive, Andrew Drive, Palm Heights Drive, Canal Point Drive, Parkway Drive and Whitehall Estates.

Modest economic growth expected in 2014

The Cayman Islands is one of the most affluent countries in the Caribbean. Thanks to its twin pillars of development namely, tourism and international finance, this British overseas territory enjoyed average real GDP growth of 3.1% annually from 1998 to 2007.

From 2008 to 2010, the spillover effects of the global financial meltdown caused real GDP to fall by6.3% in 2009 and another 2.9% in 2010. The economy finally recovered in 2011, with a real GDP growth rate of 0.9%. The economy grew by 1.6% in 2012 and another 1.2% in 2013.

In the first quarter of 2014, Cayman Islands´ annualized real GDP growth rate stood at 1.5%, according to the Economics and Statistics Office (ESO). The economy is expected to continue growing modestly this year.

In the second quarter of 2014, the total value of merchandise imports rose by 9.4% y-o-y to KYD196.1 million (US$239.15 million).

Cayman GDP and inflation

“I am pleased to note that both petroleum and non-petroleum product imports increased, an indication of growth in local economic activity,” said the Minister for Finance and Economic Development Marco Archer.

In Q2 2014, the country’s overall inflation rate slowed to 0.7% from 2.3% in the previous quarter, mainly due to falls in imputed rentals for owner-occupied housing and the average cost of utilities, according to the ESO.

By end-2013, nationwide unemployment rate was 6.3%.

Developments in tourism

Tourist visits from the United States, Canada and Europe are surging as their economies improve. Tourism accounts for around 30% of GDP. Visitor arrivals by air in the first eight months of 2014 rose 11.7% y-o-y to 280,248 visitors, according to the Cayman Islands’ Department of Tourism. Sea and cruise ship arrivals surged by 17.3% to 1,087,579 visitors.

Cayman Island tourist arrivals and visitors

The introduction of medical tourism in the country is a new strand. The Narayana Cayman University Medical Center, a 500-acre, 2,000-bed medical school and hospital complex - opened its first phase, a 200-bed hospital, in August 2012. According to its renowned heart surgeon, Dr. Devi Shetty, the hospital initially intended to target medical tourists from America, but will also focus on attracting patients from South and Latin America and the Caribbean.

According to Kim Lund of RE/MAX Cayman Islands, other significant developments include:

  • George Town port and berthing facility for cruise ships;
  • Camana Bay town centre expansion and residential development f 200 homes and condominiums;
  • Expansion of Marriot Courtyard Hotel and its re-instatement to a new 4 to 5 star brand; and
  • Cayman Enterprise City and special economic zone
            





Comments

#1 DOUG WORDEN | May 25, 2010

Grand Cayman may see an nice increase in demand and tightening of supply over the next two years. A new medical tourism hospital has been announced and projected to have a substantial impact on the need for hotel rooms and housing. We are hoping to see real estate values respond accordingly.

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