Owning a little piece of the rock has long been part of the Caymanian dream. Now, for the first time, homeowners can buy a slice of the sky.
Davenport Development has become the first company to take advantage of the introduction of ‘air parcels’.
Changes to the land law, introduced in 2017, allow developers to sell three-dimensional lots, sometimes known as ‘flying freeholds’.
The Central Planning Authority approved the first application for an aerial subdivision last month. Davenport Development was granted permission to create “99 volumetric lots” for its new 96-home development, Arvia, in Grand Harbour.
Paul Pearson, director of Davenport, said registering aerial parcels meant buyers on the upper floors of a development could acquire full title to their homes.
“It is really a block of air. Once you register it as a parcel, it can be treated in the same way as a piece of land,” he said.
Previously, multi-storey developments had to be registered as building stratas, meaning the structure must remain in joint ownership between all the residents.
In this case, the community and common areas will be managed through a homeowners association.
The wider impact of the introduction of aerial parcels is that it will allow developers to build over public land.
Dart Real Estate has long-term plans to build a hotel, shops and restaurants on top of the overpasses that link Camana Bay to Seven Mile Beach.
To do so, they will have to apply to sub-divide the land vertically, meaning government can retain ownership of the ‘ground floor’ parcel where the road is located, while Dart is able to own the air space above it.
Stamp duty savings
For Davenport, one of the advantages of dividing land in this way is that it allows buyers to make savings on stamp duty.
Anyone buying into the development can pay stamp duty on the land or air parcel price rather than on the finished property. Pearson said it would mean savings of up to $40,000 for purchasers.
Government has described this type of arrangement – already commonly used for transactions for more typical land developments – as a loophole in the law and will introduce legislative changes at the start of next year to ensure buyers must pay full stamp duty on the final sales price in such linked transactions.
Several developers, including Davenport and NCB, have argued against this change, saying it will make home ownership more difficult to afford for middle-class families.
Avoiding the full impact of stamp duty has long been considered a perk that offsets the uncertainty of buying into a new development before construction.
Pearson said, “This change is 100 percent going to affect our sales in the mid-range market. We and other developers have told the government that.”
He said there was no bank financing available for stamp duty, so in order to afford the down payment, stamp and other fees on a mid-range home, buyers would now need around $100,000 up front.
Growth of Grand Harbour
Arvia is under construction on land behind Hurley’s supermarket in Grand Harbour. It features a mix of two- and three-bed canalside homes with boat docks.
With land on South Sound scarce, Pearson believes Grand Harbour is the next major growth area for residential developments.
He said new businesses in the area, including bars, restaurants, banks and a gas station, were helping create a mini community.
“I think the commercial development has really fed the real estate development. It is usually the other way round, but in this case, the businesses have come first and now the homes are starting to be built.”