The Consumer Price Index dropped 1.6 per cent in March 2006 when compared to March 2005, according to a report released by the Economics and Statistics office recently.
The CPI also dropped 1.6 per cent when compared to December 2005.
The housing price index fell 8.1 per cent from one year ago, and 4.1 percent in the last quarter, primarily because of falling rental prices.
The report indicates that over the past year, rental prices have dropped 20 per cent in Prospect, 13.5 per cent in West Bay and 13 per cent in South Sound.
Tony Catalanotto, a sales and leasing associate at Rainbow Realty, said he has defiantly seen a drop in the rental prices, which he attributed mostly to higher supplies of rental properties available.
‘There are oodles and oodles of listings out there now,’ he said. ‘Six months ago we had nowhere near the numbers [of rental properties] we have now.’
Mr. Catalanotto thinks there are three reasons for the increase in the supply of rental properties: properties that have come back on stream after Hurricane Ivan repairs; renters who have left the country; and former renters who bought properties here rather than renting, especially in the first year after Hurricane Ivan.
‘After Ivan, realtors wondered who would ever buy after all the devastation, but the exact opposite happened. Real estate sales went crazy.’
The falling rental prices will put some landlords in a pinch to cover higher insurance costs, Mr. Catalanotto said. However, keeping a property priced appropriately to rent is vital.
‘If you have property taking two or three months to rent, there’s your year out the window,’ he said.
Mr. Catalanotto thinks rents are still about 20 per cent higher than before Hurricane Ivan, but he doesn’t think they will fall below pre-Ivan costing because landlords need to cover higher costs.
Some of those who cannot cover their costs with reduced rental rates will put their properties on the market to sell, he said.
In addition to housing, the CPI showed drops in education and medical services, and household equipment.
Other items showed CPI increases, including alcohol and tobacco, which went up 3.8 per cent over the year, and food, which went up 2.7 per cent.
Transportation and communication prices went up 2.4 per cent, even though the price for communication services fell by 23.9 per cent. The 6.8 per cent increase for household vehicles caused the overall increase.
Woody Foster, managing director of Foster’s Food Fair, said most of the price increases for food were caused by higher freight costs, which are a result of higher global oil prices.
Weather has also played a role in higher prices, especially for produce items, Mr. Foster said.
Tomatoes, for instance, showed an increase of 73.6 over the past year, from an average of $1.59 per pound to $2.76 per pound.
‘We had a lot of issues with things like tomatoes and lettuce over the past year because of weather issues in Florida and California,’ Mr. Foster said, noting that prices on produce often fluctuate with weather conditions in the supplying locations.
Mr. Foster believes the ESO report mistakenly showed higher than actual increases in milk prices and less than actual decreases in eggs.
The report showed a 54.4 per cent increase in milk prices, stating that the average price of McArthur brand milk was $3.38 a gallon in March 2005 and $5.22 a gallon in March 2006.
‘McArthur milk hasn’t been [$3.38 per gallon] in longer than I can remember,’ Mr. Foster said, adding that milk prices are very stable and that there are never sales on milk.
Similarly, Mr. Foster said the $2.31 figure quoted in the report as the average price for a dozen eggs in March 2005 was too high because the prices never reached that level for ordinary eggs.
Alcohol and tobacco was another item that showed significant price increases.
Ron George, marketing manager at Jacques Scott, said higher freight costs due to oil price increases only played a small role in the higher liquor prices.
The consolidation of large alcoholic beverage corporations through mergers and acquisitions has led to global minimum pricing structures, Mr. George said.
‘[Liquor prices are] not going to go down,’ he said. ‘We’re hoping the prices globally have stabilised.’
The fluctuations in alcohol prices have made it difficult for Cayman distributors, who have had to pass on the price increases, Mr. George said.
‘We were effectively adjusting prices every time a shipment came in,’ he said. ‘It was crazy.’
Wine prices have also gone up. Jacques Scott’s marketing manager wine, Ross Phillips, said the increase was due partially to higher oil prices, which have not only increased freight costs, but also production costs.
But not all wines have gone up in price to the same degree.
‘I think the high-end California wines have gone up just because they can get away with it,’ Mr. Phillips said. ‘They develop a cult following and sell out their production every year, so they can raise prices.’
Not all alcohol prices have been rising. Beer has remained stable because worldwide beer demand has dipped, Mr. George said.
Jacques Scott also distributes tobacco products, and Mr. George said the increases were due in part to litigation costs in fighting law suits, and because of declines in sales in certain areas because of legislation.