Population decline leads to glut of apartments
The contraction of Cayman’s population has led to a glut of apartments and a reduction of long-term rental prices of 20 per cent or more.
Director of Sales at Century 21, Howard McLaughlin explained that though the rental rate decrease was mainly a result of supply and demand, there were other factors at play.
“There is a vast over supply of rental properties on Island, with over 2,000 available at any given time,” he said. “With a considerable number of the people on work permit returning to their countries of origin, this has saturated the market. Additionally though, what you also have happening is that people who may be building another home and might have sold one house to build the other, aren’t doing so because of the depreciation of property values and are instead opting to rent in order to mitigate any possible loss and choosing to sell later instead – when the market comes around in a year or two.”
In addition, Mr. McLaughlin said the previous high demand in the rental market gave many landlords a false sense of comfort. As a result, some properties were not taken care of and in a market where the expectations for value are high, that was another factor making filling vacancies difficult.
“Having said that, it is a good time for renters,” he said. “Instead of renegotiating rent for a property, we are also seeing people just move on. We are also seeing virtually no escalation clauses in contracts, which usually make provisions for rent to increase at the landlord’s discretion.”
Despite these realities, Mr. McLaughlin said December was the busiest month of last year, something he attributed
to companies hiring people for the New Year who had come to scout property in December.
“It’s a good sign and indicates that a turnaround is in sight. But we will end up filling properties and diminishing supply before prices begin to come back to where they were,” he said.
Monica Hydes, the retail manager at Tessa Hydes Property Management, said owners of properties are getting creative about how they market vacancies and that incentives such as half of the first month’s rent are not an unusual occurrence.
“People are also asking for fixed agreements at these prices now and with work permit holders down by about 5,000 individuals, owners are often left with no choice,” she said.
“We are still seeing a high enough volume of business but in terms of revenue, we are easily down 20 per cent as a consequence.”
She added that the lower prices were also creating new dynamics for some neighbourhoods, as many people could now afford to move closer into George Town or, in some cases, on to the beach.
Owning a rental property to provide accommodations to expatriate workers has traditionally been a source of investment and income for Caymanians.
Charmaine Lee, an owner of properties for rent in the Savannah area, said she has been running the same ad for a vacancy in the paper for months now.
“Usually as someone leaves, there are others ready to fill the vacancy, but things really began to change after 2008,” she said.
“I could rent a two bedroom for $1,600 back then, but now I have come down to $1,000 and still can’t rent it; and this is a two bedroom in an affluent enough area.”
Ms Lee said she remained hopeful things would improve and shared what she thought was the general consensus of the rental market.
“The bottom line is that luxury rental accommodations are doing OK because there are a limited amount of them,” she said.
“Two and three bedroom apartments are down about 30 per cent in rent fees and one bedrooms tend to be just holding.”
Ms Lee added that she thought it might be a good idea to take a look at instituting a moratorium on the development of apartments in order to regulate the industry and protect those who had already made investments.
“If this keeps up I don’t know what I will do,” she said.
“Cayman was one of the few places where rent could have covered the mortgage on the property and maintenance, as well as provide discretionary income, but what we are charging for rent now can barely pay the mortgage and to be honest, to go any lower than where things are at now would be a real liability,”
In Ms Lee’s opinion, another contributing factor to too many apartments remaining vacant is low wages, causing some people to cohabitate in large numbers and fewer places being rented as a result.
“I had a two bedroom apartment for rent and was approached by eight individuals who wanted to live there,” she said.
“I had to say no, as I don’t believe that is what anyone wants for their place or their country.”