Real estate brokers are close to agreeing with Government a 20 per cent cut in their commissions to help kick start property sales, industry insiders have disclosed.
The Cayman Islands Real Estate Brokers Association has been discussing a proposal this month to coincide with a six-month stamp-duty reduction that starts next week.
Brokers are just waiting for ministers to finalise the wording of the agreement designed to be a trade-off for the stamp-duty cut.
‘We’re waiting for Government and they haven’t advised us (when it will come into force),’ said Donna Sjostrom, manager of the association. ‘We’ve had meetings with them as recently as last week about what we want to do and what they want to do.’
Kim Lund, founder of RE/MAX Cayman, said the commission initiative – similar to one introduced in the aftermath of stamp-duty cuts post-9/11 – could be approved within the month.
‘It could be fairly quick, in a month or less. The idea was that, if the government did its bit, the real-estate market would cooperate,’ said Mr. Lund.
Brokers agreed the commission cut was quid pro quo for the stamp-duty cut approved on Friday.
‘The association’s been involved in the negotiations for some time. Let’s say they weren’t going to do their giveaway until we promised ours,’ said Billy Culbert, sales manager at Rainbow Realty.
‘It’s meant to be a win/win arrangement,’ said Doug Sell, a broker with Butler Properties. ‘I do know it’s in negotiation, but we’re waiting to see the Government’s final wording of the agreement.’
The move was first revealed by the Leader of Government Business Kurt Tibbetts at the Legislative Assembly on Friday during the passage of the stamp-duty bill.
That, together with another bill, the effect of which is to reduce the cost of construction materials, and the commission cut could reverse a real-estate slump, Mr. Tibbetts said.
Brokers, however, were more cautious about the effect of the stamp-duty cuts alone, which run 1 April to 30 September.
‘It will be very helpful,’ said John May, president of Capital Realty. ‘…It will take a while to see the effects, although I think it could boost volumes by 20 to 40 per cent.
‘It’s too early to say what the impact will be,’ he said, ‘but it may attract the overseas investors if we can get them.’
Mr. Lund agreed.
‘It’s really hard to say how much impact the stamp-duty cut will have, but it’s one more incentive to buy before October so that can’t be bad,’ he said.
The breaks will need to reverse a trend in property sales, which brokers say are down by up to a half to two-thirds.
‘I’d say over the past six to eight months, volumes are down by 50 per cent,’ said Mr. May.
Mr. Lund, who has also been tracking the figures, observed a similar trend.
‘Since September 1, last year, volumes on Seven Mile Beach are down by 61 per cent,’ he said. ‘The overseas market is frozen and 90 per cent of buyers in this area are from overseas, 80 per cent of them American.’
That said, there is still movement among less expensive properties, he said.
‘Anything over CI$500,000 is slow to sell,’ said Mr. Lund, ‘but those priced at less than that are selling fairly well.’
Properties still take up to a year to sell, he said.
‘Some properties sell in a month or two,’ said Mr. Lund, ‘but that depends upon the location, the price and the vendor but that doesn’t fluctuate a whole lot. Perhaps in the late 1990s, the time shortened, but a year tends to be the norm.’
The rental market, meanwhile, continues to hold up, said Mr. May.
‘At any one time, you’ve got 32,000 people here on work permits,’ he said. ‘That keeps it vibrant with all those people on one-year leases. They are not affected by property taxes and the legislation isn’t overly favourable to the tenant.’
The Stamp Duty (Amendment) (Temporary Provisions) Law 2009 reduces the tax payable on purchases of property in Seven Mile Beach, and other areas that attract the 7.5 per cent rate, to 5 per cent.
The percentage in all other areas, including Cayman Brac and Little Cayman, falls from 6 to 4 per cent for foreign nationals and from 4 to 3 per cent for Caymanians.
Another boost for the market agreed by legislators Friday during the passage of the stamp duty amendment bill gives first-time Caymanian homebuyers a further break for six months.
Those purchasing properties between CI$200,000 and CI$300,000 in value will pay 1 per cent stamp duty, half the current 2 per cent rate.
Caymanian first-time buyers will continue to enjoy stamp-duty-free purchases on properties valued at less than CI$200,000.