While “more of the same” does not ordinarily send shivers up the spine, this time it may be worth some enthusiasm as the experts peer into the near-term future for local real estate.
The local market has come a long way since the Great Doldrums of about 2008. The U.S. economy shows a good recovery as the International Monetary Fund predicts 3.5 percent growth in 2015.
In fact, IMF Managing Director Christine Lagarde said in January that a recovering U.S. economy “should continue” into 2015 as a result of “robust household spending,” cheaper energy prices and a strengthening job market.
In its latest World Economic Outlook report, the fund pegs overall 2015 global growth also at 3.5 percent, and at 3.7 percent for 2016.
U.S. trends bode well for Cayman, which draws most of its property buyers from its enormous northern neighbor. As U.S. GDP, long stalled at 2 percent, finally registered 2.2 percent growth in 2013 and 2.3 percent in 2012, Cayman real estate has shown analogous improvements.
Figures from the Cayman Islands Real Estate Brokers Association suggest fewer active listings at the end of 2014 than at the end of 2013, and 174 more sales during 2014 than 2013, worth an aggregate $443 million, $150 million more than 2013.
At the same time, the latest quarterly report by Coldwell-Banker Cayman Islands founder J.C. Calhoun bears out the sense of recovery: “The total volume of sales YTD over 2013 is up a whopping 52 percent,” he says in his Jan. 21 report. “Much of that increase occurred within the last winter season, although November 2014 was also very strong.”
He explains the 5 percent CIREBA-detailed decline in active listings as a product of two influences: “Perhaps it is the prospect of higher prices or maybe those who have been struggling with their payments have finally run up the white flag,” Calhoun says. “Certainly the number of forced-sale properties is increasing. It is likely a combination of the two.
“[W]e think the ‘tide is turning’ to favor the seller finally after seven years of a buyers’ market,” he said, as he sees “more and more listings coming on lately.”
However, solid figures are hard to grasp, Calhoun says, because, for example, Land Registry numbers are incomplete, failing to distinguish between a condominium and a house. But, overall, “we’re happy with the activity so far. It’s all a very good sign.”
Still not all the markets are moving at the same speed: local residential vs. land; high-end vs. low-end; and commercial property vs. residential property. “You have to differentiate,” Calhoun says. “Local residential land and local commercial are lagging, but that’s simply because it takes time to get these others up to speed. It needs sufficient time to ‘trickle down.’”
Other markets include Seven Mile Beach, condos, overseas purchasers and local purchasers. “Different agents have different markets,” says Sophie Miles of Milestone Properties Cayman Ltd.
She serves a small group of buyers not just from North America, but also from Europe, Russia and South America, dissuading her from relying too heavily on hard links between local real estate and U.S. economic recovery.
“This is a blurred reflection of that,” she says of Cayman property sales, acknowledging the U.S. link, but proposing a more nuanced outlook.
“I have spoken to so many people, lots of them moving into Watercolours and The Ritz-Carlton, and it all has a knock-on effect as they buy furniture and go out for coffee and to restaurants and use transport and buy gasoline, etc,” Miles says.
Recent immigration changes make it possible for non-working property owners to gain a six-month visa to remain in Cayman, eliminating the need for monthly reapplications, encouraging families to stay here for at least half the year – possibly more depending on legal interpretations.
“It’s all quite burgeoning, but it’s not necessarily the U.S. and Cayman markets in parallel.
“It’s largely local people… but I have Canadians and I have South Americans,” in the market, Miles says.
“Brazil is an emerging market, part of the BRICs [Brazil, Russia, India and China], and the size of the amounts coming though here is growing. I’m thinking about translating our website into Portuguese.
“The Argentineans and Chileans are the other big ones, we’re seeing more and more. As things get worse in Argentina, the economy and the currency collapse, people want to get their pesos out,” she says.
She is looking for increased European traffic as air carriers consider suspending trans-Atlantic fuel charges.
“Some of those charges should be rescinded this year,” Miles says, making flights “a couple of hundred dollars cheaper – and that will mean traffic is up and there will be more flights and more European property buyers.
“There are Asians and Russians and Middle-Easterners as well,” she says, pointing to CIREBA-mandated courses on money-laundering as real estate buyers become increasingly diverse and dynamic.
Paul Young, a broker at Savills, which opened in late January as Cayman’s latest luxury real estate company, says the firm has avoided joining CIREBA, freeing it from rules limiting “the flexibility and sensibility” it might otherwise offer customers in terms of, for example, shared percentages on purchases.
One of Savills’s chief aims is to gain more international attention for Cayman’s high-end real estate, exploiting the company’s 600-office network in 60 countries.
“We have a truly global reach,” he says, acknowledging that “between 75 percent and 80 percent of buyers are from the U.S., just because Cayman is easier to get to.”
But, like Ms. Miles, Young says if the market is to expand and diversify, “we need more attention.” Part of Savills’s strategy has to been to meet Tourism Minister Moses Kirkonnell and officials from the Department of Tourism, letting them know what Savills has in mind.
“London will send a buyer to us, and I’ll spend a week with him. We work as a consultancy to lawyers, private bankers, hedge fund managers and accountants. Buyers from the U.S. come back, yes, but we are going out to places like Dubai and Abu Dhabi and to Asia.
“My phone is ringing off the hook,” says Young, who recently listed a $6.8 million home in Rum Point and another for $9 million.
Commercially, the company is involved with the potential sale of Treasure Island Resort and the Marriott Beach Resort, and is talking, Young says, “to people at the Hyatt.”
In June last year Savills completed a $260 million acquisition of New York-based Studley Inc. the largest commercial tenant representative in the U.S., and hopes to leverage the link to help relocate to the island, for example, major New York law firms.
Across town, Sheena Conolly and Sotheby’s are seeing “a lot more activity, a lot more requests for visits, more people coming to look and more people deciding to purchase in the Seven Mile Beach corridor.”
Activity was encouraging in the “executive range” of properties, running from $600,000 and $700,000 to $1.5 million and more. The only problem, she said, appeared to be procuring financing. “It seems to be a little difficult, the bankers are a little difficult. The property appraisers are acting under instructions from the bankers, and the result is that a lot of sales have simply not happened. You have a willing buyer and a willing seller, but the banks won’t release mortgages and the market collapses.”
Class A commercial space has done very well, Conolly says, naming Camana Bay, Cricket Square and the Plaza at the Caribbean Club, observing that “high-prestige companies” are scrambling to relocate to Dart properties.
“There is a lot of opportunity for commercial space and land for investment,” she says.
As both the Cayman and U.S. economies improve, so has Cayman’s tourist product, attracting a series of 2014 accolades for beaches, diving, luxury accommodation, family vacations, weddings and honeymoons, underwater photography, destination of the year and dive destination of the year.