After several challenging years, Cayman Islands´ property market is now gaining momentum, amidst increased consumer and investor confidence. House prices are rising strongly. Property transactions are picking up. Residential property construction is improving considerably.
During the first ten months of 2015, the average value of freehold property transfers rose by 11% to KYD329,702 (US$402,076) over the same period last year, based on figures from the Lands & Survey Department. This was in sharp contrast to the 9.5% y-o-y decline in the average value of property transfers in 2014.
In Q2 2015, residential property prices in the Cayman Islands range from KYD287,000 (US$350,000) to KYD9.84 million (US$12 million), based on figures from CIREBA, the largest property portal in Cayman Islands. In other areas, prices are lower, ranging from KYD100,000 (US$122,000) to KYD2 million (US$2.44 million) over the same period.
Growth is centred along Seven Mile Beach for condominiums, and Cayman Kai, on the island’s north, for single-family homes. The most expensive housing are along Seven Mile Beach, a coral-sand beach located on the western end of Grand Cayman island, where property prices can reach as high as KYD1,066 (US$1,300) per square foot (sq. ft.).
In the Watercolours Residences, a newly completed residential complex located on the Seven Mile Beach and the highest residential building in the Cayman Islands with 60 apartments, three- and four-bedroom units measuring 3,700 sq. ft. are priced from KYD3,198,000 (US$3,900,000).
Residential construction activity is also picking up, thanks to increasing foreign investors. A sports and real estate development was planned on a 600-acre of land in the eastern district of Grand Cayman. The development is expected to build a world-class golf course and to offer freehold apartments, villas, and land plots starting from KYD205,000 (US$250,000).
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.
Caymans’ property market is expected to remain buoyant in the coming months, especially along Seven Mile Beach and in residential developments such as the Crystal Harbour, Grand Harbour, Vista Del Mar, and the Yacht Club, according to local real estate experts.
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 commercial and residential LEED complex in Camana Bay is now finished and already available in the market.
“Currently, there are over 230 companies operating, with over 800 employees. As CEC continues to expand, supply undoubtedly will be impacted, with prices of properties possibly increasing,” said Charterland. “With the first phase of Health City Cayman now completed and fully operational, it is projected that residential property in the surrounding area should become even more attractive to investors as Health City continues to grow.”
“Looking forward to 2016 we can expect to see further developments as the $360 million mixed-use Ironwood Community in Frank Sound breaks ground, and the much-needed redevelopment of the Owen Roberts International Airport (ORIA) gathers pace,” said Cayman New Resident.
Property demand is surging. The total number of open market property transfers in the Cayman Islands rose by 27% to 1,362 units in 2014 from the previous year, based on a property review conducted by Charterland, Ltd. Likewise, the value of real estate transactions also rose by 28% y-o-y to more than KYD504 million (US$615 million).
In 2014, the number of homes sold via the CIREBA Multi-Listing System rose by 41.2% y-o-y to 120 units. Along the Seven Mile Beach, the volume of residential property transactions almost doubled in 2014 from a year earlier, according to local property experts.
From January to October 2015, total freehold land and property transfers remained almost steady at 1,461 units compared to the same period last year, based on figures released by Cayman Islands’ Lands and Survey Department. On the other hand, the value of freehold transfers rose by 11% y-o-y to KYD481.7 million (US$587.4 million) during the first ten months of 2015.
The surge in demand can be partly attributed to increasing interest from foreign investors. Homebuyers from the United States almost doubled from just 5.61% of all home sales in 2013 to 10.04% in 2014, according to Charterland. Likewise, Canadian homebuyers also accounted for 2.35% of total home sales in 2014, up from 1.5% in a year earlier.
As of Q2 2015, there were about 400 homes available on the market, according to CIREBA. On the Seven Mile Beach, around 84 condominium units are currently on the market.
Recently, there has been increased interest in canal-front homes, both from home buyers and property developers, according to Re/Max Cayman Islands, mainly because they are more affordable alternative to oceanfront properties but they also offer incredible views to home owners.
For an instance, canal-front homes are currently under construction along the Seven Mile Beach corridor, stretching up to West Bay, primarily on land south of the Ritz-Carlton, Grand Cayman, and land to the north of the Yacht Club and land at Camana Bay. Another example is that of Safe Haven, though the canal-front properties there are leasehold.
In October 2015, there were 20 canal residential subdivisions in Grand Cayman, half of which can be found along the Seven Mile Beach and West Bay, and the other half run east from Prospect to North Sound Estates and the Cays in Rum Point.
Canal subdivisions can be divided into five levels, depending on the price and quality.
Mortgage interest rates in the Cayman Islands are typically tied to the prime rate set by the Cayman Islands Monetary Authority (CIMA), which follows the US Fed funds rate. Typically, mortgage interest rates are one or two percentage points above the current prime rate. The Cayman Islands dollar (CI$) is pegged to the US dollar at CI$1 = US$1.20.
During the fourth quarter of 2014, the average prime lending rate stood at 3.25%, unchanged over the past six years, based on figures from the CIMA. On the other hand, the average interest rate on loans has risen slightly to 6.59% in Q4 2014, from 6.24% in a year earlier.
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 the previous years, from just about 30% of GDP in 2003 to around 60% of GDP in 2012. However, the mortgage market contracted in the past two years, to 55.6% of GDP in 2014.
In 2014, the total outstanding amount of property loans to households fell slightly by 0.8% y-o-y to KYD1.52 billion (US$1.86 billion), according to the CIMA.
The 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. In 2014, about 46% of households in Cayman Islands were renting their dwellings, according to the Economics and Statistics Office.
The rental market is tight, especially near Seven Mile Beach in Grand Cayman, which is considered as the most expensive area in the Cayman Islands, 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. Currently, monthly rents range from KYD2,000 (US$2,439) to KYD9,000 (US$10,976).
The Terraces, located in the Camana Bay, also offers 63 apartments for long-term rental, with monthly rents starting from KYD2,050 (US$2,500) for a one-bedroom unit.
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.
Cayman Islands also offer good rental yields, ranging from 5%-7% along the Seven Mile Beach to 7.5%-8.2% in other beach communities in Grand Cayman, based on a research conducted by Global Property Guide.
Tourist visits from the United States, Canada and Europe are surging as their economies expand. Tourism accounts for around 30% of GDP. In 2014, visitor arrivals by air rose by 10.8% y-o-y to about 382,800 visitors, according to the Cayman Islands’ Department of Tourism. Sea and cruise ship arrivals also surged by 17% to 1,609,600 visitors over the same period.
During the first ten months of 2015, air arrivals rose slightly by 1% to 315,709 tourists from the same period last year. Over the same period, cruise arrivals increased 2% to 1,311,871 tourists. The United States account for more than 75% of all tourist arrivals in Cayman Islands.
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.
To attract more visitors, the government has been improving its infrastructure and flight access from around the world. Recently, the government has unveiled its plan to construct an airport terminal, with an estimated cost of US$50 million. The expansion of the Own Roberts International Airport is expected to be completed by 2018.
According to Kim Lund of RE/MAX Cayman Islands, other significant developments include:
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. The country is the world’s sixth largest banking center. “Cayman is a First World country in the Caribbean with a large international business community and well developed, diverse facilities including hospitals, schools, golf courses and hotels,” says Charles Weston-Baker of Savills.
From 2008 to 2010, the spillover effects of the global financial meltdown caused real GDP to fall by 7% in 2009 and another 2.7% in 2010. The economy finally recovered in 2011, with a real GDP growth rate of 1.2%. In 2014, the economy grew by 2.1%, after expanding by 1.4% in 2013, and 1.2% in 2012, according to the Economics and Statistics Office (ESO). The economy is expected to continue growing modestly this year.
In 2014, the total value of merchandise imports rose by 5% to KYD813.3 million (US$991.8 million) from the previous year. In Q1 2015, merchandise imports fell slightly by 0.9% from the same period last year.
The country’s overall inflation rate slowed to 1.3% in 2014 from 2.2% in 2013, mainly due to falls in imputed rentals for owner-occupied housing and the average cost of utilities, according to the ESO. Then in June 2015, consumer prices actually dropped 3.6% from the same period last year.
In September 2015, nationwide unemployment rate stood at 5.6%, from 4.7% in 2014, 6.3% in 2013, 6.2% in 2012, and 6.3% in 2011, according to the ESO.
#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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