As we head into the fourth year of a lingering recession, it is apparent that this downturn has certainly taken its toll on the real estate market and the economy, not to mention the investment attitudes of our customers. Prices and activity have been driven down to a low that is uncharacteristic for the Cayman real estate market.
However, the weak economy is starting to make way for some good opportunities. This is especially true, if you feel that our real estate market and economy will start to improve, this year. It would seem that that will be the case, as long as some of the initiatives, projects and developments that have been announced to start this year, actually do get started.
The current slight increase in real estate sales momentum, so far this year, seems to indicate that there is a gradual improvement beginning in the economy. With the market having bottomed out and starting to improve, this would be a good time to consider some of the better real estate opportunities, as follows:
These types of sales are a sad result of the depressed economy that we have experienced over the last few years. It is really unfortunate that Cayman residents are losing their homes, but these properties nevertheless will still have to be sold to someone. These forced sales, usually by a financial institution, are handled through a real estate company and represent exceptional values. They are priced at our current, depressed, fair market value, but based on selling quickly. So, you know that you are getting the best possible value and this is confirmed by an independent valuation from a quantity surveyor. As the economy improves, opportunities to buy foreclosures will become more and more limited and prices will definitely be higher.
There are various reasons why sellers will discount their property. These range from just being tired of having it on the market and not being able to sell it, to wanting/having to leave the island and needing to cash out. Normally, when a good discount is offered and the property is priced below similar properties that have recently sold, this would represent an opportunity to buy at a very good value. Sea Breeze residences on Seven Mile Beach recently reduced the prices on two of their condominiums by 25 per cent in order to generate two quick sales and realise some cash. Waterway’s Apartments next to the Lime Tree Bay and the North Sound Golf Club have dropped prices 10 per cent across the board and will still negotiate. There are other examples of sellers being willing to take a huge discount to generate a sale or some sales momentum. This too, will change as the market slowly improves.
Invest/develop around trends
There have been some major announcements about projects planned for Grand Cayman. Opportunities for investment in strategic locations near, or on access ways, to these developments could be very rewarding in a few years, as these projects start to gain critical mass and expand. In most cases, you may be land banking the property for appreciation, but in many other cases, there are immediate opportunities for residential, commercial and retail development. Demand for warehousing will increase, as storage for materials and equipment amplifies when development is ramping up and moving forward. Strategic areas around the new public beach, which will increase in size by about 3 times, will be sought after for retail opportunities from restaurants and bars to shops, due to a much higher volume of traffic. The key to success in this type of investment, is to get in early, as the development is announced or about to start and before prices increase.
While we are still far away from the “boom times”, there is potential for another good run on real estate, just ahead. Between the large projects and developments that are starting this year and the fact that you are beginning to invest from the bottom of the real estate market, the upside over the next five to 10 years looks promising.
A lot of investors have been burned over the last few years with their real estate investments. They will be slow to jump back into real estate investment. However, that will change over time, so don’t miss the opportunity that you have, right now, while the market is down, there is little competition, and we are starting an upward trend.
The key is to not look at the market, today. Look at it in five years time. You should see a big difference from where we are now to where we are going. The pause of the last several years will not continue much longer. This year, could very well be the start of our real estate cycle heading back up, again.