Prices about to take off?

The Cayman Islands, a British Overseas Territory, are among the most prosperous of the island groups in the Caribbean. The islands are a well-known tax-haven, with more registered business on the islands than people, besides being a luxury tourism centre.

While property prices have been rising rapidly elsewhere, during the past six years Caymans prices have stagnated.

The problem? Bad luck, primarily. The Caymans has been hit by a series of mini-troubles, and each time one trouble blew over, another problem appeared:

• Tourism stay-overs fell off after the U.S. recession in 2000, largely because the Caymans is expensive, and has marketed itself poorly.
• The Patriot Act after 9-11 seriously roiled the financial industry, with the more secrecy-dependent parts badly hurt. Fund management has survived unscathed.
• Grand Cayman was hard hit by Hurricane Ivan in September 2004

The population is growing rapidly because the Caymans have taken the decision to develop a large amount of new infrastructure. According to some estimates, the population will grow 50% - 75% over the next 5 years.

Catching up

“We are staring to see rapid rental growth,” says Kim Lund of RE Max Cayman. “Rents here have increased dramatically over the last three years, while property prices have stayed stagnant.” He notes that during this period other costs have risen, including building costs. “Now we have tremendous pent-up demand.”

Property prices will now rapidly catch up with rents as the Caymans makes up for lost time, Lund believes. “Properties can sometimes be bought for less than they can be built,” he says. “Our market is 50% undervalued in real terms.”

The average price for beachfront houses on Grand Cayman Island is US$10,500 per square meter (sq. m.) and hillside properties are an average of US$3,600 per sq. m. The average price for properties located in the other Cayman Islands is US$3,200 per sq. m.

“Seven Mile Beach and Georgetown are very attractive. They are the focus of the new infrastructure – the new roads, the new retail developments, and the new Ritz-Carlton on Seven Mile Beach,” says Lund.