The government acted in trying to stimulate the economy last Friday by reducing stamp duty on immovable property purchases for Caymanians and non-Caymanians.
Whether the action actually gets more people to buy property in Cayman remains to be seen, for there are still many obstacles to buying here.
First off, the lending terms – the lower interest rates aside – aren’t necessarily conducive to sales unless potential buyers can come up with large down payments.
Banks can’t be blamed for being cautious in their lending, given the realities of the global economic crisis. However, it was partially the greed of the global banking industry that brought on the economic crisis in the first place.
Cayman’s banks weren’t at the centre of that sub-prime mortgage meltdown, but they could help facilitate a local economic recovery if they would relax their down payment requirements, even if they still go to great lengths to determine their customers’ credit-worthiness.
Another private industry group that could help stimulate the local economy is the Cayman Islands Real Estate Brokers’ Association. CIREBA is currently considering a temporary reduction of its stated commission rates to help facilitate sales. While the reduction wouldn’t necessarily apply to non-CIREBA real estate companies, we would hope that they would join their fellow realtors in offering a reduced commission rate.
Combining the government’s reduction of stamp duty with reduced sales commissions and more flexible financing terms wouldn’t guarantee sales, but it would certainly encourage people, especially those who have been thinking about if for a long time, to buy Cayman real estate now.
The government also acted by reducing import duties on some building materials. That’s a good start, but it would be even better if contractors, engineers, surveyors, architects and designers would all agree to temporarily reduce their rates, even by a little. If the companies that sell building materials also chipped in by offering a small discount, the combined savings to the homebuilder would probably stimulate a lot of construction.
By the same token, furniture stores, appliance stores, gardening centres and all other retailers for that matter should agree to lower their profit margins by a little bit, at least until the economic crisis is over.
The point is that Cayman’s economic recovery should not just be a problem for the government to solve. The private sector should also try to create ways of stimulating the local economy. Retailers probably understand the concept better that anyone: having sales and giving the customer the perception of getting a deal, increase business. The bigger the sale, the more business will come in the door.
It’s time for all private businesses to realise there is no ‘business as usual’ right now and extraordinary times call for extraordinary measures.