A surge in demand in the most popular segment of Cayman’s rental property market has caused prices to rise by more than 10 percent in the last 12 months, real estate experts say.

Following the financial crisis, the rental market in the Cayman Island was characterized by falling prices in line with the drop in demand as work permit numbers plummeted.

In September 2011, then-Premier McKeeva Bush told the Legislative Assembly, “My information is that there are over 2,200 rental apartments currently empty.”

Since then, both the economy and demand for rental properties have experienced a considerable turnaround. So much so that mid-level rental properties for up to $2,000 are now in short supply.

Websites of local real estate agents and property managers show few listings, particularly in the mid-price segment.

Amber Yates, a realtor at Century 21 says, “I can list a rental under $2,000 and it is gone that day.”

The current state of the market is primarily a result of increased demand. From a peak of 26,659 in November 2008, work permit numbers fell to a low of 18,500 in the fall of 2010. This summer the number of foreign workers climbed back to 24,077 and is expected to reach 25,000 early next year.

Samantha Payne, a realtor at IRG, says the rental market is most sensitive to Cayman’s economic growth.

“As such, the lack of supply in the $1,000 to $2,000 range is largely an indication of demand due to an improving economy. Many in this sector will be workers on permits, and the generally improving economic outlook as well as demand from growth in the tourism area – the opening of the Kimpton for example – has led to an absorption of the existing rental supply.”

This has already resulted in rental rates firming and significantly increasing. Currently rents are about 10 percent to 15 percent higher in the $1,000 to $2,000 market than last year, and they are about 5 percent to 8 percent above 2015 rent rates in the $2,500 to $3,500 segment, Payne estimates.

“Of course, there is an upper end to the amount tenants can afford to pay, so rents will not increase indefinitely,” she says. “That said, it’s definitely becoming a landlord’s market once again.”

The tipping in the demand-supply balance has been exacerbated by some popular rental properties coming offline.

“The Rivera has closed its doors, as has Treasure Island – these were two hot spots for affordable one beds and studios,” says Yates. “All these tenants have had to find new accommodation, thus flooding the lower rental market along with new Kimpton employee service industry staff. As a result of this shift in supply and demand, we have seen more people seeking to share to still be able to afford to be in the prime areas and close to work.”

She notes that Cayman always had a lack of one-bedroom apartments. “The island is booming and it only takes a few things to happen for the dynamics to change within this lower affordable rental section.”

Yates agrees that the market shift caused rental prices to rise, so far without affecting demand.

Demand in the mid to upper-mid segment of the market, in the $2,500 to $3,500 range, has not been as strong as in the lower-mid bracket and there is not the same undersupply, says Payne. But the IRG realtor believes that the general economic growth of the island will bring in more professional and managerial work permit holders, so that the demand-supply equation will also favor landlords in the higher priced segments in the near future.

Commercial property recovering

The commercial property has also rebounded, says Payne.

“The commercial market is recovering nicely too with a low supply in the Class A market and space in the Class A- to B market gradually being absorbed.”

There are still high vacancy rates mainly in central George Town, but landlords have responded with more attractive lease terms, including more aggressive rental rates, upgraded buildings including improving common areas, providing remote parking and by adding generators to improve hurricane resiliency. All this “has led to increased tenant take up of the vacant space and bodes well for the health of the market in future,” she says.