Here is where we are, right now, in our real estate market cycle. Sales activity is just above flat lining on last year and although real estate activity is improving, the growth in total, is still tepid.
Slow progress should continue over the next two years. However, until there is a major event in our market that will increase the speed of the recovery, such as a new hotel opening, either one or both of the planned hotels for the previous Marriott Courtyard site and previous Hyatt Hotel site, do not expect much rapid improvement.
Currently, there are 210 real estate sales, this year, compared to 205 for the same period, last year. In 2007, which was one of our better years over the last decade, we had 328 sales for the same time period. So, we are still only at about 64 per cent of that level of strong activity.
Where we are seeing a bit better recovery is in our resort market, which had been one of the biggest drags on the sales statistics, during the last few years. As the US economy slowly recovers, both tourism and real estate sales are benefitting.
This year, along the Seven Mile Beach corridor, sales of beach and resort condominiums are up by 27 per cent over the same period, last year. Since the US represents about 80 per cent of our resort market sales, improvement to their economy has a strong impact on us.
In our improving market, albeit slowly, the better opportunities or “low hanging fruit”, normally gets sold first. This has been happening over the last year in our resort market and about the last two to three years in the local resident market. It has been occurring for long enough, now, that a lot of the better deals have already been procured by savvy purchasers. There are still some exceptional opportunities – they are just getting harder to find.
Some very select properties and locations are seeing stronger interest and activity. Although, the market in general is not yet at the tipping point from a buyer’s market to a seller’s market.
Two of these exceptions that stand out would be WaterColours on Seven Mile Beach and Britannia Villas along the Seven Mile Beach corridor. These two developments, in particular, are experiencing stronger sales and demand than what is largely being experienced in the broader market, due to some special situations that are specific to these properties.
WaterColours had the unique advantage of entering the market as a six storey development, with introductory pre-sale pricing in a fair market range of US$4 to US$5 million per residence. Due to the new height allowance, they were able to build three more stories, yet their land cost remained constant.
The additional residences that could be added, allowed them to reduce prices by over US$1 million for each residence. This one event enabled pricing to change from fair market value to substantially underpriced, overnight. Even the ten sales that were already procured at the previous higher pricing were reduced, giving each owner a windfall savings.
So now, as this development nears completion, it is in the unique position of being able to slightly raise prices, due to strong demand and still offer better value than comparable resale properties. This is definitely an exception in the market because of special advantages, like having below market pricing and an award winning development that is truly distinctive to Cayman in terms of quality, facilities and services.
Britannia villas are also in an enviable position of experiencing growing demand, after having had values decimated from two disasters. Hurricane Ivan damaged the Hyatt Regency Hotel, which was the cornerstone to the development and it never was able to reopen. Then, the global financial crisis further exasperated an already weak market at Britannia.
At one point, a few years ago, there were approximately 45 villas for sale at Britannia out of just over 150 in three phases, on the golf course and waterway. Today, there are 12 villas for sale and 2 of them have just gone under contract to sell. With information about the new hotel starting construction, this year and the vast improvement that this will provide to the development, Britannia is being sought out, at bargain prices.
Last year, by this time, there were two sales at Britannia. This year, there are six sales and another two pending. There are also offers being negotiated on another two villas, as well. At sales prices from around US$250 per square foot, you could not build these villas for that price.
For Britannia, the improvement in the economy, planned new hotel with convention centre, pool, spa, restaurants, beach facilities, golf rights and plans to recondition the golf course, it is not hard to understand why new resale villas coming onto the market are higher in price. There is demand for this resort/residential lifestyle, especially with the forthcoming improvements and close proximity to Camana Bay.
The expectation for the Cayman real estate market is one of slow and steady improvement over the next two years, until more infrastructure is completed and online, creating much stronger demand. This process is already underway with major infrastructure being built, right now. However, we are still about two years away from this having a much more substantial impact to our real estate market and prices.