Cayman’s real estate market is thriving by any measure. Total property sales reached a record $800 million last year, an 18 percent increase over 2017. The number of property transfers, at 1,857 transactions, was 9 percent higher year on year. Construction activity, meanwhile, continues unabated all over the island.
The March conference of the Royal Institution of Chartered Surveyors in Cayman showed that the situation is a cause for optimism for developers and realtors alike.
For most of the speakers at the event, the current market is simply a natural progression from previous years.
Matthew Wight, managing director of NCB Group, said Cayman already had “a fantastic year” in 2017, following four years of consistent growth. The 2018 figures are even higher, he said, “which points to it being the greatest real estate market that we have seen in Cayman”.
Realtor Tony Catalanotto projects this trend into the future and believes the current development and sales activity is sustainable rather than just the sharp end of a boom-and-bust cycle.
“It seems that we are seeing a spike, but I think it is just the natural evolution of more people coming to the island,” he said. “I don’t like to use the word boom, because this suggests that things are going to come tumbling down. I think it has been steady sustainable growth. The market has caught up; the strength in the global economy has been helping us.”
Liam Day, the managing director of property and development consultancy BCQS International, noted that current market activity must be considered in the context of the economic crisis that started in 2008. It took three to four years to overcome the impact on prices and get back to pre-recession levels, Day said. “When some people say the market is overheated, I think it is overheated when you look at the past three or four years. But if you see the last 15 years that growth is more measured.”
Still, even from a planning approval perspective the level of development appears unusually high.
Director of Planning, Haroon Pandohie, said “the conversion rate from what gets planning permission to what comes out of the ground has been tremendous”.
At times, it may seem the department is struggling to keep up, but developers are also ready to go. From the point when an application seeking planning permission is made, Pandohie said, developers have the shovels ready to go into the ground.
Whether it is a boom or not, there are several reasons for the record activity.
Cayman’s population has grown to more than 65,000, the highest ever. The strength of the global and local economy has boosted confidence, which ultimately translates into higher sales and more new builds.
The two pillars of the economy, financial services and tourism, are booming. Conference speakers also lauded political stability and a “fiscally responsible and pro-development” government that grants concessions and has reduced fees.
The lack of capital gains and property taxes means that Cayman is still an attractive investment opportunity in a stable and relatively crime-free community, argued some.
For Amanda Bodden, senior personal lending manager at Butterfield, the biggest driver of the growth in the real estate market is immigration: “Our immigration system is tried and tested and working to the point where it is allowing for greater confidence when making long-term plans.”
The healthy risk appetite among the local banks is also supporting the development. The competition in loan origination is indicative of customers being able to negotiate with multiple banks, she said.
“We are all ready and willing to lend. I don’t think we would have been able to see this record high property market last year if there wasn’t easy access to credit. If you look at some of the advertising coming out of the banks, you get the clear picture that we are all quite aggressively seeking market share and focus on loan growth,” Bodden said. “I don’t see that changing in the near future.”
In addition, the speakers in a market update panel highlighted that Cayman had received a significant push from another factor: the Dart Group.
NCB’s Wight said, “It would be remiss of me to leave out the ultimate benefactor a country could have in the Dart Group.”
Attorney Cline Glidden, senior associate at Ogier, agreed: “I don’t think we can minimise that the Dart Group’s commitment to an investment that has been made that has significantly improved the lifestyle and infrastructure” not only in terms of new roads and hotels but also from an entertainment standpoint with the KAABOO music festival.
Dart’s plans to erect an “iconic tower” at Camana Bay as part of a $1.5 billion investment merited consideration, panellists said. But given the size of the project, the tower proposal should be separated from a wider debate about building heights in general.
Currently, new builds are limited to 10 storeys on Seven Mile Beach. Not everyone is convinced this is enough, while others lamented that it had already been a step too far.
According to BCQS’s Day, “We have probably gone higher than we should have done in the 7MB corridor.”
All policy decisions should be predicated on how to foster long-term and sustainable growth, especially in the tourism sector, where not everything is as rosy as it seems, Day argued. The recent spike was partially the result of additional tourists being diverted from the hurricane-damaged Eastern Caribbean. This increase may drop back in this year’s high season and next year.
“The problem is every time you increase the building height on Seven Mile Beach, it impacts on stayover tourism, because it pushes land values to the point where it simply isn’t viable to develop a mainstream-branded hotel on Seven Mile Beach anymore,” Day said. “I don’t think we should unless it is accompanied by an outline business case that shows why increasing the building height will grow the economy in the long term.”
Glidden, a former member of the Legislative Assembly, said previous governments had looked at increasing building heights in the Seven Mile Beach corridor to stimulate economic activity by encouraging the redevelopment of decades-old two- to three-storey properties.
This had turned the developments into attractive investments. Glidden argued that Seven Mile beach is one of Cayman’s natural assets and the place where people want to live. “We have to be cognisant of the fact that those are the reasons for the lifestyle that we enjoy today,” he added.
The question is, “Should we now consider that we need to go higher than 10 storeys or wait for the redevelopment of 2- and 3-storey sites?” Glidden asked. “It is just a matter of time if we want to use this natural asset that we have.”
Building heights may have a role to play in addressing of Cayman for future Caymanians, according to Wight. With the average sale on Seven Mile Beach being in the region of CI$1.3 million, the popular area has become unattainable for most Caymanians.
“It is not a solution to increase by a couple of storeys every few years,” Wight said.
Instead, the country has to determine where it sees itself in the future, whether Cayman should become a Dubai, Hong Kong or Singapore.
“If we don’t raise ceiling heights in certain areas and Cayman remains attractive, you get this sprawling effect of increased property values and the island itself, unless we create more land space, becomes more unaffordable quicker,” Wight said. “By looking at ceiling heights in concentrated areas, we are protecting the ability of Cayman as a whole to become unaffordable.”
Day concurred that one of the biggest challenges in Cayman’s property market is getting the first-time buyer on the property ladder. This issue is not limited to the Seven Mile Beach corridor.
The off-beach townhouse and condo market has seen a strong escalation in price during the past years, with prices in some cases doubling. At the same time, salaries in most industries struggled to keep pace with inflation and the cost of living, let alone property prices.
Day said the government stepped in and reduced stamp duty for first-time buyers and provided the ability to use parts of the pension pot for property purchases. “But going forward, we have to recognise this and manage it,” he said. “It is not going to go away.”