Report: Construction sector struggles in CI

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. 

 

Building permits 

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. 

 

Project approvals 

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. 

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7 COMMENTS

  1. It’s the cascade effect of Rollover in action.

    Forcing people off island leads to less demand for housing, leading to less demand for new construction. As a consequence a rather large number of expat construction workers lost jobs and likely had to leave the island.

    Leading to even less demand for housing…

    Is anyone really surprised by this?

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  2. The wider construction industry is the single biggest job sector in the Cayman Islands at approximately 52% of all jobs.

    When this industry is suffering it has a devastating effect across the widest range of jobs and people. Low income and middle income people being the most impacted as well as grocery stores etc.

    These jobs are also carried out in a significant way by people on work permits. When this sector is down, and locals and work permit holders are out of work and youth emplyment is particularly high, then the Immigration Dept and Work Permit Board have to be especially rigorous in their handling of work permit renewals and the grant of new work permits.

    How can you justify the grant of a work permit to bring someone in new to work in construction if locals and work permit holders here are alreasy out of work. Just doesnt make sense.

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  3. This is exactly the problem that every single elected CI Govt. has to grapple with…and so far, have failed miserably at, since this party system came into existence.

    In the boom years of Cayman, between the mid 1970s and the mid to late 1990s, Cayman was still an underdeveloped society…construction of buildings to support this underdevelopment was the foundation of the industrial economy of Cayman.

    Given Cayman’s limited geographical and population size, that situation HAD to change at some point in time…and change it has.

    The Cayman Islands can only support so many buildings of any kind…with a now saturated overdeveloped land mass…who is going to occupy any newly constructed buildings ?

    But today’s politicians are still rooted in the ‘get-rich-quick’ culture that used to be the norm for Cayman…that is a thing of the past…and something that they will NOT acknowledge.

    The task any locally elected govt. in Cayman now is to provide industrial work for a shrinking population…

    And each of these political parties, PPM and UDP are failing miserably in this job…

    Therefore, crime is increasing, the economy is suffering and people’s lives are becoming miserable…

    Because they refuse to accept that they must provide for the MAJORITY of their population who will always need INDUSTRIAL work to survive.

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  4. olddiver when are u the vast majority of expats working here admit that u are part of the problem why ? because the money earned here does not stay here it goes to the expats country of origin. I see them lined up every week at the western union in the grocery store I work at plus they barely spend here.it is the Caymanian who spends here thus contributes to local economy most expats are just here to better themselves their families back in their own country while Caymanians struggle just to survive. but no worries bo bo ( yes i said bo bo its a Caymanian thing ) there will be some serious change soon come its called Revolution permanent rollover mon !

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  5. Indigenous, Can you really blame these Expats for sending their money back home and trying to prepare for the day when they will be bounced up out of Cayman. I mean really, why would they want to sink anything into an economy that clearly doesn’t want them there. So how can anyone really fault them for trying to better themselves and their families back home which is where they are most likely to end up in the long run. I can actually understand why they spend the minimum while in Cayman, it’s because they have to realize that their being there to work is only a short term means to an end. You would do the same if you were in their shoes.

    Also again you bring the talk of this revolution, can you tell me if preparations are already in place for this revolt you mention and how it’s expected to impact Non Caymanians living on your island ? I think a lot of us would like to know if plans and preparations are being made to insure we have no future here while we’re spending our hard earned money to make one.

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  6. Dear indigenous,

    You obviously have not been following my story line. My wife and I are former expats. We don’t live in the Cayman Islands, and will probably never return. I follow along here because I find it amusing. You in particular are worth a laugh every time you post something.

    When it became obvious that we would never be allowed to stay permanently we took our investment money out of the Cayman rental property market, and we left. I’m sure many more wish they had done so as well.

    So please, bring on your revolution. I’m sure I’ll find it damned funny to watch, from this side of the Atlantic Ocean.

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  7. Mr Indigenous, Here’s my story in a nutshell, my wife and I spend about 75-80 percent of our time in our home in Cayman. We purchased property there because when we first came to your beautiful island we feel in love with the place and thought it would be a nice place to call home one day. We had good experiences with some really kind Caymanian people. Neither one of work on Island nor have we ever and have we no plans on doing so, yet I am constantly hearing people like you insinuate that we are stealing something from or disenfranchising local Caymanians simply by our presence. I’ve even heard accusations of having stolen our land from the Caymanian people, when in fact we paid a fair price for it to a Caymanian that inherited it from his parents and felt the land was useless swamp.

    You claim to have an issue with Expats not spending money locally, do you have the same issues with the Caymanians that go to Florida to buy goods instead of buying them locally. And when you gripe at foreign land owners do you also have the same ill feelings toward the people that sold their family land?

    When I read your comments I get the impression of a person that’s not happy with his life and is looking for someone other than himself to blame.

    OldDiver is right about one thing, I do wish that we had spent more time getting to know the true feelings of Caymanians before sinking all of our hard earned cash into property here when the people we see day to day are plotting to get rid of us.

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