2011 has brought some much needed stabilisation to our real estate market, after three very brutal years of weak demand and falling prices. While this will likely be a flat year, it will lay the groundwork for a real estate recovery, lead by new development and some major projects.
Our market peaked in 2007, before starting to weaken in early 2008. By the time the global financial crisis really took hold around September 2008, our market was already in a free fall. If you compare real estate activity in the first half of each of the last five years, sales activity has dropped off 30 per cent overall from 2007 to today.
The first half of this year has been stable and is basically equal to the market activity during the same period, last year. It has not fallen off further, as it did each previous year, after 2007. This is an encouraging and important development, as a level base seems to have formed. With the huge projects starting later this year and early next year, market activity should eventually be able to build some momentum from this foundation.
While it has been virtually impossible to be optimistic about real estate investment, during the last few years, the market dynamics are changing, now. By this date, next year, Grand Cayman will be at the start of one of the largest development booms ever. The stars are aligning for this to happen, both politically and economically. Here’s why:
Several billion dollars – correct, that is billion – in privately funded projects will finally be starting construction or moving into another phase, later this year and early next year, including 200+ homes and condominiums at Camana Bay, Dr. Shetty Narayana Medical Center, 300 acre Special Economic Zone, Dart development of resort/business hotels, new buildings and new roads, aside from countless other ones that have been held off or stalled, until this year.
Real estate prices are at rock bottom. Period. In many cases, prices are where they were a decade ago, or at less cost than it would take to build them, today. Not only has any excess in the sales prices been taken out of this market, the reduction in these prices has likely been overdone. There is tremendous value, as well as strong potential for capital appreciation, especially considering the planned improvements to the country’s infrastructure.
We need a larger population base to support our economy and growth. Recent press articles are implying that the government and opposition both understand the critical need to attract and keep key employees and residents, possibly by changing the controversial seven year rollover policy. This alone, could turn the tide and make Cayman more desirable to new residents and investors looking for some sense of permanence when they relocate.
For the last three years, there was very little positive news or developments to help our real estate market. These years have probably been our worst and longest real estate downward cycle ever. This is starting to change, now.
Stayover tourism increased every month, except for two months, during 2010 and has improved every month, this year. That represents a critical demand element for our resort markets and injects much needed capital into our economy. It is a momentum that we have not seen for some time.
Over the balance of this decade, in North America, the 65 to 74 age group will grow by nearly 44 per cent and the 55 to 64 age group will grow by nearly 40 per cent. A number of these people will be seeking a second home or residency in a stable country, with a warm climate, and tax neutral economic base.
There are not that many good choices available, especially nearby. Providing we can give new residents and investors some security of tenure, combined with attractive new developments and infrastructural improvements, there will be more business and job opportunities and a better economy for all of Cayman.