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Property prices are rising strongly in Cayman Islands
During the second quarter of 2017, the average value of freehold property transfers rose by 9.6% to KYD406,817 (US$496,118) over the same period last year, based on figures from the Lands & Survey Department. The average value of freehold property transfers surged by 42% y-o-y last year, after rising by 6.7% in 2015 and declining by 9.5% in 2014.
The average sale price of residential properties sold through the Cayman Islands Real Estate Brokers Association's Multiple Listing System (MLS) was KYD564,552 (US$688,478) in 2016.
Growth is centered 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 KYD1,200 (US$1,463) per square foot (sq. ft.).
- At The Meridian, a collection of 32 super luxurious oceanfront villas located on the Seven Mile Beach, the average sales price of villas was KDY1.45 million (US$1.77 million) in 2016, up by 3% from the previous year.
- At The Pinnacle, a luxury beachfront development on Grand Cayman's Seven Mile Beach, the average sales price of condominium units was KYD1.62 million (US$1.98 million) in 2016, down by 3% from a year earlier, according to Charterland, Ltd;
- At the Regal Beach Club, a beachfront condominium development of 57 units in six, 3-storey blocks located on the Seven Mile Beach, the average sales price rose by around 9% y-o-y to KYD570,185 (US$695,348). Residential property values have been rising since 2013.
- At The Grandview, a seafront development of 60 condo units in 12, three-storey blocks in Seven Mile Beach, the average sales price increased 11% y-o-y to KYD526,427 (US$641,984) in 2016, following an 8% rise in 2015.
- In George Town's Garden, Coco, Mystic and Sunset Retreat, the average sales price of two-bedroom inland townhouses was stable at about KYD193,000 (US$235,366) in 2016.
With strong demand, coupled with limited supply, the housing market is now turning into a seller's market.
Property demand remains robust. The total number of open market property transfers in the Cayman Islands rose by 4% to 1,616 units in 2016 from the previous year, based on a property review conducted by Charterland, Ltd. Likewise, the value of real estate transactions surged by 16% y-o-y to KYD622 million (US$758.5 million). Then during the first eight months of 2017, the number of freehold property transfers increased 8.8% while the value of transfers fell slightly by 2.3% from the same period last year, based on figures released by Cayman Islands' Lands and Survey Department.
Residential construction activity continues to improve, with an increase in luxury condominium developments. In the first quarter of 2017, residential project approvals in Cayman Islands increased, both in number and value, by 37% and 140%, respectively, according to Cayman Islands Planning Department. Building approvals for condominiums more than tripled to KYD94.7 million (US$115.5 million) in Q1 2017 from a year earlier. Likewise, building approvals for houses increased 46.3% to KYD37.6 million (US$45.9 million) over the same period.
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 distort the property market. For 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.
"The outlook for the market still looks positive for the 2017 and onwards," said CIREBA. "The rental market is growing along with the population of the islands. Cayman tourism is doing well with both stay over and cruise tourism numbers remaining steady in addition to development across the island."
"I believe that when you look at how things are trending in Cayman on a macro level - taking things such as real estate sales, public and civic development, improvements to infrastructure and the favorable laws in this country with respect to taxation and private business - you see the Cayman Islands continuing to grow, prosper and move in a positive direction with respect to future growth and economic stability," said CIBERA president Jeanette Totten.
Rental incomes in Cayman Islands ï¿½ good rental yields, ranging from around 5% to 8.2 %
In Cayman Islands, rental returns can be surprisingly good. Condominium costs on 7 Mile Beach vary in a wide range, with prices from about US$4,000 to US$11,000 per square metre (sq. m.), and some super-luxury large condos hitting amazingly really high per sq. m. prices.
The expected rental income from the smaller properties (120 sq. m and 200 sq. m.) is now about US$3,000 to US$4,500 monthly. This means average rental yields of approximately 5% to 7%, which is not bad.
Our property sample for larger condos was too small to give an accurate picture of rental incomes for this property category.
In general, prices have been firm. The average price of condos in the Cayman Islands at the time of our 2012 survey was US$4,242 per sq. m. - just a bit higher than last yearï¿½s US$4,041 per sq. m..
Rental yields in the other beach communities in Grand Cayman were even better. Properties are less expensive, at about US$2,000 to US$3,000 per square metre, but the expected rental income from these properties is about US$1,000 to US$3,000, giving rental yields of from 7.48% to 8.17%.
In the Cayman Islands, really large properties are less attractive in income terms, with much lower rental yields.
We were surprised by the generous rental yields on smaller and medium-sized condos. But in recent years, high yields have been normal in the Cayman Islands.
Absolute tax freedom in the Cayman Islands
The Cayman Islands is a no tax jurisdiction. There are no income taxes and capital gains taxes in the Cayman Islands.
Stamp duties are levied on lease contracts and transfers of properties.
Rental Income: Owners leasing properties to tourists are liable pay to tourist accommodation tax a levied at 10% on the gross rent without any deductions.
Buying costs are high in Cayman Islands
Roundtrip transaction costs are around 13.50% to 20.50% of the property's value. The buyer pays the 7.5% stamp duty. The real estate agent’s commission is around 5% to 10% of the property's value, and is usually paid by the seller.
The law is pro-landlord in Cayman Islands
Rent: Rents and rent increases can be freely negotiated. Landlord power is strong. Landlords can (in practice rather than strict law) increase rents in mid-lease, and impose surcharges for late rents.
Tenant Eviction: There are no specific legal provisions regarding rental contract termination. Landlords often give tenants notice a few days before contract expiry. Using formal legal channels, it takes an average of 180 days to evict a tenant.
Modest economic growthThe Cayman Islands is one of the most affluent countries in the Caribbean. Thanks to its twin pillars of development, 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%.
However economic growth has been modest since then. In 2016, the economy grew by 2.7%, after expanding by 2.8% in 2015, 2.2% in 2014, 1.5% in 2013, and 1.3% in 2012, according to the Economics and Statistics Office (ESO). The economy is expected to continue growing modestly this year.
In Q2 2017, nationwide inflation rate stood at 2.2%.
Unemployment dropped to 4.1% in Q2 2017, from an annual average of 4.4% from 2012 to 2014, according to the ESO.