Prominent real estate brokers say 2011 was not a great year for the Cayman Islands property market – but at least it was better than the horrific 2010. They are looking forward to the launch of at least some of the government’s major initiatives to boost the real estate sector, which has been recovering incrementally in the absence of significant public sector projects.
RE/MAX broker/owner James Bovell feels more optimistic about 2012 prospects than he did going into 2011. “Because of this sense of a changing tide, I’m quite bullish for the new year. Major projects slated for development this year will have a significant impact on the economic recovery for Cayman, in my opinion. This is because they will provide far-reaching, sustainable benefits to the country as a whole, which will be enjoyed for many years to come,” he said.
Government proposals on the top of brokers’ minds include the ForCayman Investment Alliance with the Dart Group, the George Town cruise dock, Cayman Enterprise City and Dr. Devi Shetty’s medical tourism hospital.
Bovell said, “Once projects such as the Shetty hospital, Cayman Enterprise City, the George Town dock and the Dart deal are actually underway I believe there will be a surge of public confidence that will translate into greater investment in the Islands, snowballing dramatically as each project gets underway. This investment will not just come from local entrepreneurs, but should become a global movement, once the Cayman Islands positions itself as the pre-eminent location in the region for medical tourism, special economic zone investment, etc.”
2011 in review
Government real estate statistics for the year are skewed heavily by Dart’s early-year acquisition of a patchwork of premium Seven Mile Beach properties, including the defunct Courtyard by Marriott. Dart’s deal with embattled developer Stan Thomas set the stage for ongoing negotiations with government, with the plan for Dart to close the George Town Landfill, open a new solid waste facililty in Bodden Town, renovate the Courtyard by Marriott, close a section of West Bay Road, extend the Esterley Tibbetts Highway and begin the next phase of residential construction at Camana Bay. According to government data, real estate transactions in the Seven Mile Beach area totalled more than $130 million during the first six months of the year.
From January to November, the Lands and Survey Department recorded more than $610 million in freehold property transfers, a 99 per cent increase in the total value of property transfers for the entire 2010 year, and the highest year-to-date total since 2006. (Most, but not all, freehold transfers are property sales.)
“The number of properties sold is up about 6 per cent year-to-date but the dollar volume of those sales is up almost 50 per cent! Listings and listing value are both up and pending sales contracts are down 37 per cent,” Coldwell Banker Cayman Islands Realty senior broker JC Calhoun writes in his year-end market report. “What does all that mean? It means that more properties in the higher priced categories sold this year than last as a result of sellers becoming more realistic with pricing.”
The complete market report is available on the Cayman Islands Reality website.
Looking specifically at data for houses, Calhoun notes a 15 per cent increase in the number of homes sold in 2011 compared to 2010 year-to-date, with the average price up 23 per cent. “While it is a very good thing that there is more activity, the fact that the average price is up so much does not necessarily mean prices are rising. In fact it means more luxury property owners have been willing to accept less so those properties are beginning to sell,” he writes.
RE/MAX broker/owner Kim Lund said, “This year was still a disaster, but less of one than 2010. It is the first year, in four years, where there has been an improvement in real estate activity.”
Bovell said, “Activity has slowly begun to pick up after bottoming out during the past 12 months, a sign that confidence is starting to return and investors are becoming more active.”
Performing above the mean
As a company, RE/MAX has posted better numbers in 2011 than the Cayman Islands Real Estate Brokers Association as a whole, Bovell said. “RE/MAX Cayman Islands as a company has seen a higher than average increase in volume in 2011, when compared to other CIREBA members. In part, this could be due to the fact that RE/MAX brokers and agents deal predominantly in the higher end of the market, and in well-established, developed properties.”
Bovell said companies that buy land with the intent of developing it and then selling it have faced tougher times due to tight profit margins.
Cayman Islands Sotheby’s International Realty broker/owner Sheena Conolly said her company has benefited from careful positioning over the past several years, and focussing on selling Cayman property to foreigners who formerly may not have known much about the Islands.
“Actually we had our best year as a company this year,” Conolly said.
Her company – coming up on 10 years in existence, and five with the Sotheby’s brand – doubled in size this year and now comprises 11 staffers. She said overseas buyers have been impressed by the value of Cayman residential property relative to that available in other Caribbean destinations and offshore jurisdictions.
Likewise, Coldwell Banker is looking beyond the United States – traditionally the largest pool of non-Caymanian property buyers – for new clientele. Calhoun said his company is forging relationships with contacts in London and Beijing to bring in referral business to Cayman from both locations.
The property market looks to continue along the same modest trajectory, with the potential for acceleration if one or more of the government’s proposals materialise. Bovell believes ForCayman plans and the George Town cruise dock project have the potential to have the most immediate impact, but that Shetty hospital will take a bit longer than the others, primarily due to extensive site preparations needed before construction can begin.
The brokers aren’t popping corks for the entire market just yet, and indeed haven’t started icing down the bottles even. However, a mood of cautious optimism is pervasive, especially if the capital projects get started. At this point, 2012 still looks to be a buyers’ market.
In addition to the headline-grabbing public-private projects, Bovell pointed out other significant private developments that are occurring, such as the Flowers family’s construction of Willow House in Cricket Square. “In terms of significant new development projects, I’m more confident that we are nearer to them taking shape in 2012 than in 2011. In addition, it has been heartening to see local development such as the Flowers family building downtown come to fruition. The consistent development of commercial property in Cayman has really served the island well over the years,” he said.
Conolly said, “I’m very much more optimistic than last year. I know there are huge challenges on a global scale, but I can’t do anything about those challenges. What we can do in our office is put the Cayman Islands on the map for residential real estate.”
“It appears that there will be more gradual improvement in real estate activity during 2012. Prices have bottomed out, in general and although there is still a glut of inventory on the market, there is also less new development. At some stage, the pendulum will swing over to a decreased supply and stronger demand, but we are not there, yet,” Lund said. “I expect 2012 to show respectable progress, but pricing power to remain weak and a flat market in terms of capital appreciation. Looking further ahead to 2013, it should be a bit stronger than 2012 and likely will have more of a balance between supply and demand, whereas 2012 will still be stronger on the supply side and favour the purchaser.”
“First, with the capital projects with which we have been teased for some time. If a couple of those projects got going, and if Government can trim its budget (read bureaucracy) then we may be pleasantly surprised by our business activity,” Calhoun writes. “Further, local purchasing is being driven by lower prices and those with the available funds are taking this opportunity to upgrade their property portfolio, even if it is just their residence. Our guess is that our projects will not move as quickly as they could except perhaps Enterprise City, which could be a huge economic step forward for Cayman. But world economic conditions will somewhat dampen any real positive local economic influences for 2012. We would look for another year similar to 2011, so continuing partly cloudy skies are forecast.”
Bovell said it’s been difficult for everyone to be patient for the actualisation of the major public-private projects, but the payoff will be well worth the wait.