There are concerns the Cayman Islands newly approved system that allows foreign workers who have lived here for eight consecutive years to apply for permanent residence may, at least in the short term, deflate the local real estate market.
Farrah Ramsay is among the potential home buyers who had been considering purchasing property in Cayman. She had been considering putting in an offer on a house, seeking to boost her chances of obtaining residency, but who is now likely to give up that effort and live elsewhere for a year.
“With this new [PR points system] that you have to already invest $50,000 and still have no guarantee that you’re actually going to be given any assurance of anything,” she said. “Fifty thousand is a lot of money to put up front, knowing you have to leave in a year’s time.
“And why would a bank give me a loan now? As of right now, my passport is only going to be stamped through Dec. 9,” she said.
The point system, which judges whether a person can obtain permanent residence, offers up to 215 possible points and requires an applicant to earn 110 points to be granted residence.
Up to 30 of those points can be earned by way of a rather complex calculation used to determine an applicant’s investment in local property or in a locally licensed company. It is as follows: total investment divided by 0.4 x average monthly income or salary x 60. The resulting number is then multiplied by 30.
According to the proposal, total investment is calculated over the last five years with a minimum investment of $50,000. Maximum investment of $500,000 will be awarded the maximum 30 points for the category. Only the applicant’s income is taken into account and only the investments in his or her name will be counted.
Total investment is either the purchase price and stamp duty paid for the property, less total liabilities remaining on that property or total payments toward the residential mortgage for the last five years, whichever is the higher number. Personal funds invested to make improvements in the property (not including borrowed or gifted money) which was transferred as a gift can also count in the points total.
Investments in privately owned local small businesses that are solvent and the market value of stock investments in locally licensed and operated companies will also count toward the points total.
To earn the full 30 points for this aspect of the permanent residence system, an applicant who makes $60,000 a year would need to personally make a total investment of $120,000. If a married couple purchased a property together, that investment doubles to $240,000.
In other words, if a non-Caymanian is just now buying a property with the hope of getting permanent residence, the level of investment required would be massive.
“The real estate market could be negatively affected as the need for a substantial initial investment and a more stringent points system act as deterrents,” said Daniel Altneu, a local immigration attorney. “Applicants could face the reality of narrowly missing out on a grant of permanent residence, needing to make plans to leave the Cayman Islands but being stuck with a property in a market in which it takes an average of one year to sell.”
However, there is reason to believe in the longer term that it could help bolster real estate sales if enough work permit holders apply to live in the islands for the rest of their lives, according to representatives of the real estate industry.
The ratio now being used to calculate investment in the permanent residence points system is “a positive step,” according to local realtor James Bovell.
“Now, someone with a lesser income may be able to acquire the same amount of points as someone with a greater income if they invest sufficiently in property,” Mr. Bovell said. “This means that people on lower incomes are not necessarily penalized when making their permanent residency application. This, in turn, should help drive the real estate market.”
That investment, Mr. Bovell said, is also being looked at in the longer term by government.
“I believe that the requirement to show equity invested in a property rather than simply rely on the purchase price is also a positive step for the real estate industry and seems a fairer way for the [Immigration] Department to ascertain just how much a person has invested in a property,” he said.
One concern Mr. Bovell has is that investment in Cayman is only measured five years prior to the permanent residence application being filed.
“This means that new residents on island who hope to stay here long term and eventually apply for permanent residency will be deterred from making an investment in property straight away.