More visitors arrived in the Cayman Islands during the first four months of 2015 than during any comparable period in the past eight years, according to statistics from the government’s Department of Tourism.
For anyone who might not understand the economic impact of drawing almost 900,000 foreigners here through April – the most recent figures available and the most tourists since 2007, before the global financial meltdown – here’s a reminder:
It comes as a passage from the United Kingdom website of a pair of luxury condos that an American businessman from Kansas City owns on Seven Mile Beach. These are units he rents most weeks of every year to vacationers from the U.K., Europe and, especially, North America.
In the “Review” section of the site, this is what a vacation tenant said about an April stay at one of Scott Frerking’s five-bedroom Sea Breeze units: “My family has been traveling to the Grand Cayman for 20-plus years. We love the island … (and) we could not have asked for a nicer place to stay. And we will definitely be back.”
No one could miss the loyalty this message conveys. And any Cayman resident can justly feel proud of what this experienced traveler said in the review: The family has been here plenty of times before, and the latest visit has left them wanting more. They’ll be back, pounds sterling in hand.
Such a message conveys optimism that especially resonates with a Caribbean vacation destination now clearly racing away from the doldrums that becalmed its economy for much of the last decade.
And the words go right to the heart of an industry that accounts for a large part of Cayman’s economy. The growth in tourism means developers are building homes and expanding resort hotels; investors, particularly those from abroad, are buying houses and condos all over Grand Cayman and beyond; and sun-seekers are booking cruises and flights as they haven’t since before the financial crash.
The building and buying boom is a big boost to Cayman’s economy, not only from the construction of new multimillion-dollar mansions and deluxe condos and the creation and expansion of resort hotels, but also from further increases to the islands’ proportion of international vacationers. Cruise ship visitor numbers, which crested at an all-time high in 2003, are again in recent years on the increase, but air travelers – so-called “stay-over tourists” – have increased even faster.
“And it’s the stay-over visitors who really help our economy,” says Michael Day, a long-time real estate professional and president of the Cayman Islands Real Estate Brokers Association. They are the ones who fuel an industry that accounts for the majority of jobs here, according to the Department of Tourism.
Often, housing booms occur in places that are growing in population. Cayman is not growing significantly. Its full-time resident population is less than 60,000. But its number of living units and guest accommodations is increasing pretty dramatically. Moreover, the price per unit is increasing, too, particularly at the upper end of the market, according to Day and data compiled by CIREBA.
That’s because the building boom and the tourism industry here are secured as tightly as backstays on a racing sloop. Much of the residential building in Cayman serves the tourism industry. Property transfers among full-time residents are only a part of the overall picture. It’s the giant visitor business in Cayman that can’t grow without all the second homes, resorts, condominiums and houses that developers have been building on island soil.
After all, one of the first things you do when planning a vacation is to get a room. No other tourist spending can occur until that’s under control.
In that light, consider Frerking’s condos: Depending upon the month, the American trucking executive rents his units for between 4,300 pounds and 10,770 pounds a week. (U.S. visitors pay between $8,000 and $12,000 a week plus tax.) Each unit sleeps as many as 10 people. So shelter alone causes a lot of cash to float ashore on Seven Mile Beach, as well as the rest of Grand Cayman.
Frerking’s guests will also buy food, dine out, drink at local bars, hire fishing craft, purchase souvenirs and enjoy other island delights, spreading wealth wherever they go.
Naturally, not all visitors who fly into Owen Roberts International Airport, on any of an increasing number of overseas flights, stay at $8,000 to $14,000-a-week Seven Mile Beach condos. A few of them, for example, stay at the Rum Point beach villa called “No Big Ting,” which Canadian expatriates Bonnie Gerow and her husband Colin Berryman own and operate near Cayman Kai Public Beach.
There, a seven-night rental this summer would cost just less than $3,000, plus the 13 percent tax. Gerow says the crisply modern, beachfront house emanates an ambiance “designed to have you forget all your worries.”
The couple, both attorneys, moved to Cayman eight years ago from Toronto and knew they wanted to retire in their new adopted home. They spent some time feeling out Grand Cayman, renting for a bit, testing condo living and finally buying a house of their own. It was in a quiet area on the north shore of the island and provided great views, but it meant a much longer commute to their jobs than they wanted.
Their solution was to turn it into a rental and live near work, in Grand Cayman’s vibrant Seven Mile Beach corridor, from where their commutes were negligible. Meanwhile, to keep up some momentum in their investment portfolios, they cashed out of some of their stocks and bonds and bought another beach rental, Coral Loft, which they also have transformed into a bright, airy and contemporary showcase on the Caribbean. It rents on a weekly basis from $600 a night and up, depending on the season.
One important index of the success of a rental property is its percent of occupancy – how many weeks of the year paying guests are in residence at these premium rates. One of the couple’s properties brings cash into their accounts 44 out of 52 weeks a year, the other one 46 out of 52 weeks.
Add it up. That makes Gerow’s part-time job as a landlady a very lucrative endeavor. And Canadians like them – as well as U.S. investors – are thrilled when they learn there is no annual property tax on land and residences in the Cayman Islands, just a one-time 7.5 percent fee at the time of purchase.
In many parts of the U.S., a $1 million rental structure may require payment of, plausibly, $15,000 property tax each year, paid promptly to a county’s tax assessors office. Landlords in Cayman are required to pay small government inspection and license fees each year. “The inspections are rigorous, too,” Gerow says. But the benefits are two-fold.
“It’s a way to maintain quality,” she says, and that enhances the reputation of Cayman as a quality tourist destination, where the streets, beaches and neighborhoods are not only safe, but the rental units are kept up well, too. Beyond that, a rental unit must be licensed in order to advertise on the tourism department’s website and in its publications.
For Gerow and Berryman, another benefit to the licensing process is that, once they retire, they intend to sell their home in the bustling Seven Mile Beach area and move into one of their rental properties since they won’t fret then about long commutes to work. “It’s much quieter there,” she says, more zen-like, as her online ad point out. “We have this pretty well planned”
Having good plans in place is essential in a place like the Cayman Islands. James Butterworth, another long-time real estate broker here with Coldwell Banker, points out that the islands’ meager footprint is a principal reason homes can be more expensive here than in other venues. It’s also why they increase in value more sharply during a bullish property market, like what the islands are experiencing today.
“Prime building land is scarce,” he says, “so the economics of supply and demand take over. For example, the value of Seven Mile Beach land has risen enormously over the last 50 years.” Inherent desirability is another factor. The shoreline there “has been voted numerous time the best beach in the world,” Butterworth points out.
Building material on an island mostly without natural resources also costs much more than in mainland North America. “Everything comes here by ship,” he says. “That adds to the cost.”
All that is quite understandable. There are aspects of Butterworth’s role as a prominent realtor, though, that defy cold calculations, including where on the three Cayman islands a particular newcomer will choose to build a vacation home.
There’s little predicting that, he says. “I have been surprised too many times where customers ultimately buy.” He cites the example of a wealthy client who had never been to Cayman before but was told by peers only to buy on Seven Mile Beach, where a property’s economic appreciation is almost guaranteed.
Butterworth spent the requisite time showing him high-end condos along the lively strip. Once the client thought about it, though, he surprised his advisor by buying an older, somewhat isolated, house on the north side of the island away from shops and restaurants but with beautiful views, cooling breezes, a very private beach and a more relaxing style of living.
That was what he had in mind for a second home on a Caribbean island, after all, Butterworth decided. Such is the case with many vacation-home seekers, and the broker expects places like Grand Cayman’s East End to develop far more in the years to come, with some very deep-pocketed companies investing in housing and resort developments there. Ditto the north side of the island.
The veteran realtor also knows that many buyers come with specific needs – schools for the kids or access to the airport for heavy travelers or just a need for the hustle-bustle of Grand Cayman’s western shore. Butterworth himself, though, says, “I live in the east end and yet work in the western end.” To him, the more isolated geography is nearer the way he remembers Cayman as being in decades past. “The journey,” he says, “is worth it.”
From time to time, though, particular developments help redefine parts of the island. He considers the WaterColours development of 60 condos in a mid-rise that sits along 100 meters of Seven Mile Beach to be such a place.
Extreme luxury is the main characterization, with units starting at about $3 million and pricing up to more than $11 million per unit. “In my view, once you start building homes that are purchased by monied people, it creates a groundswell of a ‘must-experience place.’ There are plenty of other examples around the world – Monte Carlo, Cannes, Santa Barbara, etc.,” the broker says.