Tenants will already have noticed the hit to their bank accounts, as the latest rental cost figures from the Economics and Statistics Office show a 19.7% increase in rents during the first quarter of this year compared to the same period a year earlier.
The jump in housing costs affected also the imputed rents for owner-occupiers which surged by 9.2% during the same period. Services for the maintenance and repair of dwellings rose 8.4%, while the cost of electricity was up 8.2%.
Meanwhile, communication costs increased 7.7% within a year. Housing and basic utilities were the main price drivers during the first quarter, according to the latest available statistics released on 4 Sept., causing an overall inflation rate of 4.5% compared to the same period in 2018.
Housing cost factors Much of the rental price increase is the result of a continuously growing population. Last year the number of Cayman residents is estimated to have grown by 3.8% to 65,800. The gradual increase in demand for housing has spurred significant development activity in Cayman.
But supply has been slow to catch up with the larger number of people looking for a place to live.
This population growth is expected to continue. Government last year introduced new economic substance legislation which forces certain Cayman-registered companies to establish more of a physical presence with offices and staff on island. This is likely to increase the demand for housing, but it will also be a considerable obstacle to bringing staff to Cayman. In the current market, the traditional lack of 1-bedroom apartments is exacerbated, despite higher rents.
Amber Yates, sales agent with Century 21, says she is often contacted by companies seeking to relocate single executives with a monthly rental budget of $1,000 to $1,500. “I don’t know what to tell them, because it is the top of their budget,” she said, but there are few properties to match that.
The same applies to families with children looking for a 2-bedroom or larger property. While properties used to be readily available in the price range of $1,500 to $2,000 per month, they are becoming rare. Unlike in previous years, there are also fewer people moving on island, Yates noted.
While most tenants are initially inclined to leave when a landlord tries to raise the rent on a new lease, they often decide to stay after scouring the market for a few days, “because everything out there is so much pricier”. Tegan Campbell, sales consultant at REM Services, agrees, stating that “tenants are staying longer in their rental because it costs too much to move; whereas before they might have moved each year or two to new
developments, or to be closer to work, school or the beach”.
The skewed supply and demand situation causes more than price pressure for tenants as landlords can also be more selective. “There are more and more landlords not accepting kids or pets than I’ve ever experienced in the past,” Campbell noted. Not only is demand increasing from population growth, the stock of apartments is also depleted as more people are putting their properties on Airbnb.
“That has taken a huge chunk out of the longterm rental market,” said Yates. Even in a market of rising rents and steady demand, she said, Airbnb rentals can be cost-effective compared to long-term rentals. “The Airbnb market is doing very well here, because landlords are offering a very personalised service. They pick people up from the airport and are dropping them off.
They are leaving items in properties that you would not get elsewhere, [there are] personalised guides and so forth.
They are creating a very personalised experience here,” the Century 21 agent said. “They are making good money.”
Meanwhile on the supply side, most of the properties under development are focussed on the higher-end segments of the market. Campbell said she is noticing “a high number of luxury property being built on island, but not many buildings going up for the average tenant”.
Rents have been gradually rising for the past five years, with the lower and middle tier of the market being most susceptible to rising price trends, whereas high-end rentals are more steadily priced, she added. Campbell currently observes a particularly high demand for middle market rentals, and very low inventory in that category. There is no immediate end to the price pressure in sight.
The REM Services sales consultant said she has seen rent increases of between 5% and 10% since the first quarter.
“However, we are aware that other landlords are asking more.” To cope with high rental costs, single tenants may have to resort to compromises. Yates pointed to comparable islands like Bermuda, where more people are house-sharing.
“I think we are going to see that here more.”