The consensus appears unanimous: Real estate brokers say things are great, and anyone checking out the market must agree that they are.
WaterColours has only six units remaining of the 60 original 3,600-square-foot residences. Also, the 62 homes in the 10-story tower at the Kimpton Seafire Resort and Spa are going fast – and, according to brokers, for a record $1,700 per square foot. The building boom in South Sound threatens to overwhelm the two-lane South Sound Road, but National Roads Authority plans mean it probably will not. And the 44 three-story residences at the $110 million Stone Island, on a private peninsula near the Yacht Club, are poised to break ground later this year.
Jeremy Hurst, president, and broker/owner of International Realty Group, says the numbers are powerful and climbing.
“Basically, we’re seeing growth of 11 percent in property transfers in 2014-2015, a volume of CI$600 million,” he says, outpacing the 2008 high of $560 million.
“In 2010,” he said, the depths of the global recession, “that dropped to $300 million, but now “we have recovered, I think it’s safe to say.”
While the accompanying graph suggests that the $632 million in property transfers/sales volume in 2011 appears to have outpaced all other years, Hurst points out that a one-off event pushed that number.
“The 2011 figures were skewed upwards by the sale of the Stan Thomas properties to Dart,” he says – the old Marriott Courtyard – now rebuilt as the Kimpton Seafire – and properties in and around Salt Creek north of the hotel.
The volume is set to drive the entire economy after four-year doldrums. Real estate broker/owner of Coldwell Banker, J.C. Calhoun, observes that the sense of relief is almost palpable.
“People are even buying raw land again just because the market has improved,” he said. “Local people have some money now,” and residential purchases are driving restaurants, furniture stores, restaurant suppliers and taxi drivers.
“It takes a year or two of tourist-related income to give local people the opportunity to take a loan, buy a car, upgrade their home, get some appliances, and it’s all starting to happen now.”
He describes the essence of “trickle-down economics,” which has run into ideological headwinds in economies as large as that of the U.S., but is much more effective and immediate in a small community like the Cayman Islands.
Tourist-arrival numbers underline Calhoun’s point.
The 2015 total for cruise ship tourists, who each spend approximately $100 per day, was 1.7 million, outpacing last year’s 1.6 million, itself the highest since 2007’s pre-recession 1.7 million, a tick less than last year, although not as high as the record 1.9 million in 2006.
Passengers who arrive by air and who use hotels, regularly patronize restaurants, rent cars and, ultimately buy properties, hit a 15-year high of 385,378 in 2015. The next closest was 382,816 in 2014, the highest since 2000 (354,087).
“We’ve seen a lot of people, mostly from the U.S., North America in general, and they are surprised. Prices here are now higher than in, say, Florida or even Austin, Texas,” says Kim Lund, broker/owner at Re/Max Cayman Islands.
More than 75 percent of 2015 air arrivals, almost 292,000, were from the United States; 24,300, or 6.3 percent, were from Canada; and 8.9 percent, nearly 34,300, were from Europe. The balance, roughly 9 percent, or 35,028, were from elsewhere, which, incidentally, included a single arrival from Algeria.
“The U.S. has a huge impact, especially in Seven Mile Beach, and new people are coming in, renting and buying,” Lund says, “and we get the benefit of them seeing the amount of works, the progress being made here, a lot of new developments – the port, the airport, downtown.”
Renovations to the port and downtown are in early planning stages, so changes remain pending, but the sense of movement is infectious, Lund says.
“The feeling, then, is ‘we can wait’ or ‘we can do it now’ and most of the smarter people know that the longer they wait, things get more expensive,” so they are buying now.
“We are only starting to see price appreciation, just on the wholesale or larger level.”
The Ritz-Carlton, Grand Cayman, he says, has completed work on five residences at 7 South, and they are selling between $1,500 per square foot and $2,000 per square foot, fully $300 to $800 per square foot more than previous standards. The last sale was in December, a US$3.35 million three-bedroom residence that sold at US$1,041 per square foot.
The Kimpton “is a whole new pricing paradigm,” he says, pointing to more expensive construction costs, relatively limited supply balanced against growing demand, a desire for healthy profits by developers and a willingness on the part of a younger breed of investors to pay top dollar.
“There’s a lot of confidence,” Hurst says, pointing, like Lund, to a sense of burgeoning development.
“The private sector and government are working toward economic recovery. Health City is expanding medical tourism, which is bringing confidence to the country that we are not reliant on one or two sectors.
“Cayman Enterprise City will bring other investors. Neither of these has reached its potential,” he says, but both are fueling a buoyant market.
Health City has announced a $25 million capital investment program this year, with another several million dollars of private investment – a commercial center and hotel – nearby. The hospital’s accreditation in April by the U.S. Joint Commission International has cleared the path for international patient traffic to begin in earnest.
CEC is scheduled to break ground in the second half of this year near Fairbanks Prison on the first of two $25 million gateway buildings, kicking off a 20-year multiphase, $300 million project to build an 850,000-square-foot Special Economic Zone.
“We also have a balanced budget,” Hurst says, “which is an enormous accomplishment, offering a firm economic footing.
“Crime statistics suggest we’ve managed to control some of the outbursts from a few years ago, and government is now facing the unemployment issue.
“There’s a lot happening and as we get the fundamentals right, investors and developers are keen to be here,” he says.
Previously sleepy South Sound is experiencing frenetic development of its own: Stefan Baraud’s six-condominium Shore Club is sold out; Davenport Development’s 56-condo Vela Phase I is also sold out, Phase II’s 56 condos are half gone, and another 56 condos in Phase III are in the planning stages.
Naul Bodden has already sold eight of his 24 residences at Tides, a 1.6-acre beachfront development near the South Sound Cemetery. Groundbreaking is in June with completion scheduled for September 2017.
Rene Hislop is selling a 9-acre development site next to the 40 acres already sold to China’s Dating Investments for 30 condos and a shopping center. The builders are contemplating Phase II.
Planners at the National Roads Authority also point to the 91-acre Adagio Community Development residential site west of Old Crewe Road, comprising 20 lots for “multi-family dwelling units,” and a residential development of eight multi-family units on Bel Air Drive.
“The coastline is a popular location,” Hurst says, “and you don’t necessarily need to be right on the water.”
At the other end of that western-shore coastline is West Bay’s Boggy Sands development, 20, three-bedroom 2,400-square-foot condominiums with a clubhouse and two swimming pools on 2.4 acres near Boggy Sands Road. Priced between $885,000 and $1 million, construction started on May 1 last year, with phase 1 now completed. Developers Coen Coleman Ltd say only eight units remain.
Meanwhile, Calhoun laments a dramatically diminished inventory of South Sound residential units priced between $500,000 and $1 million, selling only three the area in the last four months. He knows of only one more remaining.
“South Sound is on fire. They are more in the nature of residences than rentals,” he says, pointing to older developments like Seaview and Oceana on the northern part of South Sound Road and nearer to downtown. They are running $1.5 million and up.
“Down South Sound and ‘around the corner’ are Bela and other stuff, across the street from the beach, with new granite and all the bells and whistles,” Calhoun says. “They are the equivalent of what used to be the average two-bedroom unit on Seven Mile Beach.”
As residential development expands, he predicts it will start “pushing out” into the Eastern Districts – including Ironwood and Dart’s Barefoot Beach.
“There’s been a lot of buzz that will push it further afield,” Calhoun says. “We have older customers who want to know, for example, how good our medical facilities are. They are a hot button for them. The fact that they are world-class does no harm. Even if they are as much as an hour away, it’s all right. It’s the knowledge they are there.”
Inland development is a distinct market from coastline real estate, Calhoun says, touching on St. James Point at Beach Bay. He says land sales are moving in Frank Sound and East End, and near the beaches at Cayman Kai: “There is a lot more interest in buying land, which ultimately will be used for single-family dwellings.”
Hurst says Beach Bay is shaping up to be a significant attraction. “The architecture – with high ceilings – is highly stylized, a whole new dimension, unlike anything we have seen in the Caribbean.”
Its 93 residences will attract a younger set of investors, ready to pay anything from $1 million up to $3 million, he says.
Elsewhere in the interior, Calhoun says, price increases have not yet mirrored coastal areas. “It’s the only area lagging,” he says, explaining that it was overbuilt and over-financed as long ago as Hurricane Ivan in 2004, resulting in a “fairly substantial number of properties in forced sales,” as owners default on bank loans, a hangover from the recession.
He estimates 200 properties, or 12 percent of CIREBA listings, currently listed as “forced sales,” and names locations like Patrick’s Island, West Bay, Savannah and Prospect, “anything not on the water.”
“Because of the improvement of our economy in general,” Calhoun says, those properties “are now being absorbed more rapidly” than in the past two years.
“Based on increasing absorption rates, it may be less than a year before we see price appreciation in the better inland properties,” but until they are gone, few increases are likely in the interior.
Lund expects to see movement, albeit slowly, in the Eastern Districts, near Health City and Frank Sound’s Ironwood development, which he describes as a “whole other area for residences and medical tourism,” although it will take another two or three years to spark that market.
“Expansion will be one phase after another, as demand dictates and one phase drives the next,” he says.
Commercial development, all three agree, has been largely overtaken by Dart Enterprises, offering not just the Kimpton Seafire Hotel, but 18 Forum Lane, its adjacent sister building, tentatively dubbed 18 Forum Lane South, boasting a 20,000-square-foot landscaped courtyard between the two, a massive road-building, realignment and tunnel scheme, and an elevated platform stretching from Seven Mile Beach and a new hotel into Camana Bay Town Centre.
“Commercial always follows residential,” Calhoun says because, for starters, “without roads, you don’t get commercial.
“Commercial has started to show some improvement, but there is not much downtown, and it won’t improve until they fix it. A lot of improvements are needed: traffic and parking need to be addressed, but Camana Bay has already killed downtown George Town. They need another plan.”
He underscores the point, noting that energy costs in Camana Bay offices are half those in older downtown buildings.
Hurst agrees that Dart has changed the commercial market entirely. “Dart has a different economic basis for its own development. They don’t need external financing.”
Elsewhere, he says, “the cruise dock has brought a little more certainty to downtown, but it’s too soon” to predict what may happen.
However, Hurst says, “Butterfield House was sold to a local law firm, and Mary Street’s Zephyr House has had lobby, reception-area and external renovations.”
Cricket Square has gained permission for phase five, a $20 million, six-story, 120,000-square-foot office building with parking for nearly 1,000 next to the Shedden Road Rubis station. Opening is expected in 2018.
Like his “one phase drives the next” prediction for the eastern districts, Lund observes that “in the next five years, you are going to see more and greater changes in Cayman than you have seen in the last 10 years and 20 years, and that will create a lot more attention and interest in Cayman, more tourism and more residential.
“It will be a huge difference and it’s already started. Not many have noticed it just yet.”