The Cayman Islands real estate sector isn’t exactly the picture of health, but by comparison the construction industry is on life support.
Bad news pervades the section on construction in the government Economics and Statistics Office’s recently released Annual Economic Report for 2011. Nearly every statistical measure – size of the industry, project approvals, building permits, and certificates of occupancy – exhibits a negative trend.
The bottom line is there are fewer construction jobs to be had. From 2008 to 2011, the number of people employed in construction has fallen from about 5,800 to 3,700, a decline of 36 per cent, according to the Office’s Labour Force Surveys and the 2010 Census. That decrease is about the same for Caymanians (33 per cent decline) and non-Caymanians (38 per cent decline). Non-Caymanians held 60 per cent of construction jobs in 2011.
From 2010 to 2011, however, construction jobs fell by only 4 per cent, with the number of Caymanians in construction actually increasing by 3 per cent, and non-Caymanians falling by 9 per cent.
Similarly, the value of the construction industry as a whole (as measured by real gross domestic product according to 2007 prices) contracted by 1 per cent from 2010 to 2011, to about $76 million. From 2008 to 2011, the construction industry shrank by 47 per cent. During the same time period, Cayman’s overall GDP fell by 9 per cent, to $2.4 billion.
By comparison, the value of the real estate sector declined by 3 per cent from 2008 to 2011, and posted a 4 per cent growth rate from 2010 to 2011, to $215 million.
According to the annual report, “The total value of building permits and project approvals fell to their lowest levels in seven years, respectively to $183.1 million and $251.8 million. Similarly, the number of certificates of occupancy fell for the second consecutive year, declining by 36.2 percent to 391.
“Construction activity continued its downward trend falling by 11 percent to $183.1 million, albeit the decline is sharply lower than the 42.1 percent recorded a year earlier.”
The report does offer a glimmer of hope for construction: “Nevertheless, building activity showed some signs of stabilising in the second half of the year with two consecutive quarters of growth following nine consecutive quarters of contraction.”
The value of residential projects that received building permits fell for a second consecutive year, this time by 12 per cent, according to the report.
“In addition to the 5.5 percent decline in house building, apartment/condominium building activity fell to its lowest level in 10 years ($37.4 million). Recovery in residential activity, particularly in the apartment/condominium category, remains hampered by declining population and slow employment growth,” according to the report.
From 2007 to 2011, building permit values fell by 59 per cent.
Overall, the value of project approvals declined by 24 per cent to $252 million in 2011, compared to the previous year. The report traces the decline to a 72 per cent decline in commercial projects and 53 per cent decline in the “other” category.
“Projects in the non-residential sector receded from $107.8 million in 2010 to $59.3 million. The commercial category plunged to its lowest level of $25.9 million with only one new office building planned in 2011 compared to four buildings in 2010,” according to the report.
On the bright side, the $12.5 million distribution centre for Foster’s Food Fair IGA propped up values for the industrial category. Additionally, according to the report, “Residential approvals recorded an 11.2 percent increase to $151.4 million following a 31.4 percent decline in 2010. Higher approvals for houses (24 per cent) offset a 24.1 percent contraction in the apartment/condominium category.”
The value of project approvals in 2011 was 61 per cent less than the market’s peak of $621 million in 2006, and is off by 50 per cent compared to 2008.
Certificates of occupancy
From 2010 to 2011, the number of certificates of occupancy for completed buildings fell by 36 per cent, from 613 to 391.
According to the report, “The monetary value of properties granted completion approval, when compared to a year ago, rose by 3.5 per cent to $150.5 million in 2011 as a result of completion of the $50.6 million Government Office Accommodation Building. This significant offset the declines across remaining categories.”
Not including the value of the central government headquarters, the value of completed properties declined by 31 per cent compared to the previous year.
Including the government building, the value of completed properties in 2011 is 46 per cent less than the value of completed properties at the high point in 2009. Excluding the government building, the 2011 value is 64 per cent less than in 2009.