Signs of recovery in property sales

The first two months of 2011 have shown a significant increase of activity in the real estate market, according to the latest Cayman Islands Real Estate Brokers Association’s market update.

The number of land transfers in January and February of 2011 exceeded corresponding 2010 figures by 40 per cent and the first two months of 2009 by 48 per cent. The value of those transactions was more than four times higher than in the first two months of 2010 and more than three times higher than in the same period of 2009.

The massive increase is mainly due to Dart group’s purchase of the Courtyard Marriott and other properties that formerly belonged to Stan Thomas and his companies, including the Cayman Islands Yacht Club and about 1,500 feet of Seven Mile Beach property. However, even if this deal was excluded from the data a significant increase remains, both in terms of the number of land transfers and their value, CIREBA President Jeremy Hurst said.

The pick up in activity followed a very slow year for real estate transactions in 2010.

Chartered Surveyors Charterland, which issued a report on the Cayman Islands property market for 2010 based on the number of all transfers and related values, noted a decline in the volume and value of sales in 2010 compared to the previous year.

A decrease of 30 per cent in the number of sales and a drop of 36 per cent from $404 million in 2009 to $259 million in 2010 are not only sobering figures for 2010, they also constitute a significant fall compared to the market highs for the number of sales in 2005 (62 per cent lower) and 2006 for the value of transfers (57 per cent lower). Both volume and value of sales declined steadily since March 2010. However, this steady decline is not reflected in the average sales price, which remained fairly steady throughout the year.

Charterland therefore concluded that while the market has stagnated as far as sales volume is concerned, the decline in value was not as “dramatic” as many in the real estate business had feared.

“It would seem that sellers are choosing to hold off on selling their properties, where they are able, pending a market recovery, rather than take a loss in the current market,” the report said.

Sixty-four per cent of the overall sales in 2010 were for sales prices of less than $250,000 and just over 20 per cent of the sales fell into the price range between $250,000 and $500,000. Five point six per cent of property sales were transacted for a price between half a million and $1 million and 4.4 per cent of all transactions saw properties change hands for $1 million to $5 million.

In the ultra high end category of more than $5 million there was not a single sale in 2010. Overall this structure was in line with 2009.

The report also concluded that the vast majority (90 per cent) of buyers were based in the Cayman Islands. The picture is slightly different when only Seven Mile Beach is considered where overseas buyers are traditionally dominant. Yet, still 67 per cent of the buyers in this market segment were local.

About two thirds of foreign buyers are coming from the US, followed by Canada. European countries account for less than a quarter of all purchases.

Although the data set is very limited, the report noted increases in purchase prices of between seven and 12 per cent over 2009 for different medium to high end condominium properties on the island.

Lower end condominiums saw a mixed picture of sales prices within a range of 6 per cent increase to 12 per cent decline over 2009.

But the report pointed out that the average sales price comparison is distorted by the small number of sales, which does not allow a comparison like for like. The same applied to the analysis of house prices, where in some areas prices increased considerably but this had to be the ascribed to the properties being substantially superior to those sold in 2009.

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6 COMMENTS

  1. This is blatantly false. The real estate brokers have been saying this for over two years now. They think that creating a positive spin, people will believe this, and the market will return to normal.

    The problem is, and this is the part they are missing. No matter how much positive spin you put on the housing market situation. You cannot spin the story enough to replace 10K people who have left the island.

    In other words, until the number of people rise on the island. This housing market is where it is, and it’s going to get worse. This housing market crash, it’s not even far from being over yet.

    2000 apartment and housing units available at any one time. Isn’t hard to figure out that the rents and costs of housing, will plummet further

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  2. Big Berd, I think that was the intention, for the cost of housing to drop when Expats and foreign investors were encouraged to leave the island rolled over or forced out. The hope was that the cost of housing would drop for Caymanians, as least this is what I get from reading comments in the Compass. Tons of Caymanians hoped for this so they would be able to and I quote get back to the way things used to be. With the prices dropping the way they are it would allow Caymanians to afford that high end Condo on the Seven Mile Beach that would have been occupied by an Expat or High Net Worth Foreign investor.

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  3. I have never disagreed with your logic before nj2cay. But this time, I disagree.

    I think the housing market crash was an unforseen event by many, consequence of a reap what you sow reaction, to the expat Xenophobia here in Cayman.

    There are some Caymanians who beleive they don’t need expats on this island, and as soon as all the expats are gone, they will get all the jobs. Well, 10k expats have left the island. So there should be absolutely no unemployment for Caymanians now. And surprise, this year is the highest unemployment in 30 years!.

    Its’ taken 40 years to balance the economy the way it was before the rhetoric of send all expats home, we don’t need them mentality. But the voters are having thier way. And it clearly shows, that just because you have a vote, does not mean you know what the heck is going on, or the outcome of voting a certain way.

    But sooner or later, even the most dense individuals are going to see. That, the way of thinking, all expats would be better gone, is only hurting the people who think like that.

    Less expats, less Caymanian jobs. And it’s been proven for 2 years now. More expats, more Caymanian jobs. The two people are intertwined. As soon as those that have voting power, figure that out. And vote accordingly. The better it’s going to be for thier kids, and the future of Cayman.

    Companies can pick up and move in a month,in todays market. Where as 20 years ago, it would be a costly and a huge endevour. Now it’s simply changing where your business is located. And business’s are speaking out loud and clear. You force us to ruin our business’s by staffing people who dont’ have the skill set. They move.

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  4. I do not think that the departure of 10k expats per se precipitated the housing crash, as expats who worked in the Cayman Islands rarely buy property but prefer to rent, particularly since the roll-over policy came into effect. The statistics in the article underline this by pointing to the fact that 90% of the buyers were locals. Hence either Caymanians or residents who either planned to stay or were willing to keep a home as a vacation home once they left the islands, but not the garden variety expat who comes here for a 3-5 year stint, as most do now.

    Hence most of these people were never in the market for a house anyway and thus never contributed much to demand for housing (note, I am not talking about the rental market). Had the Cayman economy hummed right along (for example, with Caymanians actually being able to replace leaving expats, or through the creation of industries that did not require high numbers of expats), local demand for housing would have likely stayed fairly stable.

    The main drivers behind the housing crash on Cayman, in my opinion, were the global financial crisis, which had a great impact on one of Cayman’s most important economic sectors, and as a corollary – a crisis in confidence on the part of potential buyers, who are reluctant to buy either because the island has no future now that the financial sector has been decimated, or they want to wait to buy until the entire economy is completely decimated when it’s a good time to buy. I have heard that from a few people who are in the market, namely that they are still waiting for things to hit bottom.

    While a new influx of expats will help the rental market, I do think the housing market will be more affected by some of the projects that are slated to happen, such as the enterprise park and the hospital. Buying a house is at least partly an emotional decision. Once things even just appear to look up, housing demand will pick up as well as people living here perceive a future for the island, which means that the real driver behind the housing market is the economy, not merely the number of expats on the island.

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  5. I think we’re on the same page Big Berd about this being a reap what you sow result. But I’ve seen mostly anti expat and foreign investment comments. Most were that the high cost of living and Unemployment stats as well as Crime were all to to the expat population and as you said the expected result with them gone would be that Caymanians would all have high paying jobs and high end homes.

    The big issues is here now is that with so many people left and more and more businesses closing it will be hard to lure people back. Especially with most of the world starting to realize that Foreigners aren’t really as welcome as they used to be in Cayman. You see it in the uprisings against every Development Project that includes a foreign Investor as well as in all the comments against the expat population.

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  6. Actually Caymanmango. Many Caymanians built or bought second homes to RENT to expats. Since the rental costs were VERY high when the island was more populated with expats.

    So the expats leaving entirely had direct consequences to this housing crash.

    As well, less spending because there are less people on the island. Means less money in Cayman pockets. Again, furthering the need to buy a house.

    The global economy didn’t and would never have effected cayman, if the last government in power, didnt’ spend money like there was no tomorrow. Since Cayman is, in itself a self sustaining economy, where if the world crashes economically, it only stands to benefit cayman. Since we import 99% of our goods. Our goods become cheaper, which inturn makes island living cheaper.
    Boat going Tourism doens’t fuel the island’s economy, only in a small percentage. The stay on island tourism, adds more income onto the island than boat tourism, but is utilized by people who have alot of money. Finance is the major contributer to the islands finances. And as economies crumble. The rich like to stash thier monies off island, again, fueling more business, not less for cayman.

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