The No. 1 question we are being asked lately is: What effect the US election results will have on Cayman?
For those who think it is improper to bring politics into a discussion about business – they are being incredibly naïve. More and more, politics effects everything because government is becoming more intrusive in all aspects of our lives. Whether it’s the licensing/permitting process for development, taxes or fees, budget deficits, educational process, free entitlements, immigration policies; you name it. Politicians now hold the key to whether a country prospers.
Whether we like it or not, our prosperity is inextricably tied to the US due to its proximity. Historically Cayman’s best years have been when the US is prospering, Why? Because when Americans have money to spend – they travel, and Cayman has always been a favoured destination for Americans. In fact 80 per cent of our tourism comes from the US and similarly the same percentage of our purchasers of real estate.
So now that Obama has been re-elected what will that mean for the US, and to us? Economically, in my opinion, it is very bad news for the US. If the President’s previous four years are any indication, we will have more entitlement spending, more taxes, higher costs of doing business and a weaker US dollar. Does anybody see anything here that will encourage travel spending by the Americans? Unless it is to travel to move money offshore – I don’t.
Speaking of moving money offshore, those moving assets here are not money launderers or tax evaders. These are honest and intelligent people who see Cayman as a place to put some money for “asset protection” as vehicles like 401k’s may no longer be inviolate. We are already seeing that in the real estate sector and expect to see more of it going forward.
Our real estate market in and of itself is reasonably healthy right now. Over the past four years prices have fallen, but due to slow but steady demand, supply in most sectors has also fallen. Our complete market analysis can be found in our Year End Market Report, which will be available to our customers in mid December. However, a quick snapshot shows, as of 1 November, sales prices about even YTD compared to 2011. Sales volume is down about 7.5 per cent but pending sales are up 50 per cent so the actual year end sales volume figures will probably be very close to 2011. Supply is down 5 per cent YTD over 2011.
In Cayman, private sector projects are either proceeding now or are ready to proceed. In addition, Cayman has recently been lauded in the press as “the friendliest country” by Forbes.
So in effect we have a marketplace where prices are attractive, new projects and opportunities are available for new residents and we have buyers that actually have some reasons to buy. In other words, the Cayman Market has likely bottomed and is beginning to look more attractive. Whether that is a response to lower prices, or signals an acceptance of the “new normal”, or whether it indicates more people are looking to get some assets offshore is debatable. Probably a combination of all three.
What is not debateable is that with expected continued economic malaise in the USA, it would be wise for Cayman to look elsewhere for both a tourism and investment infusion. These areas are: Canada, China, Eastern Europe and most notably South America. These places have two commonalities: Their citizens have money to spend, and they are further away from our normal US feeding ground.
Can you guess which project it is that we have been lobbying for over the past five years which would immediately help us bring travellers from more distant lands? Yes – a longer airport runway. Glad you can see it. Wish our government leaders could.
Why are we fumbling around, trying and failing to get a deal done on a new cruise ship port which would cost many times more? Especially when the cruise industry has significantly contracted, will likely continue to do so, and provides much less overall income to the island than air arrival passengers? In these uncertain times we need to spend our precious resources only on projects which will provide both long term and short term benefits. We need leaders in place who get that concept and can properly prioritise – whether it is politically controversial or not. We need to be doing what is best for the country.