For young professionals in Cayman, trying to get on the property ladder can feel like chasing a constantly moving target.
As soon as enough money is saved for a down payment, the price moves up again.
The exponential growth of property prices in the past five years in particular has left many believing they will never own their own home.
“It feels like the system is rigged against us,” said Cathrine Welds, a young Caymanian working in the banking industry.
Entry-level homes now top $300,000 and many banks require a down payment of at least 10%, before lawyers’ charges, real estate agent fees, strata and home insurance costs and, potentially, stamp duty are considered.
Many young people say it is not possible to save enough for that initial payment.
“The cost of living is so high and wages are not adequate to leverage or accommodate, when you are starting out in your career, so it is hard to save and it feels like the goal posts keep moving,” said Welds.
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“Even for a $265,000 property at Downtown Reach you would have to save almost $50,000 for a down payment; by the time you get there, the property has been sold and the price has gone up.”
While premature pension withdrawals can help in some cases, many younger people have not accumulated enough for this to be a realistic option.
Chasing the Caymanian dream
Emily DeCou, 28, has done everything ‘right’. She got a good education, a good job in the financial services industry and is sensible with her money.
But searching for a home has been a losing battle.
Any time anything comes on the market in her price range – around the $300,000 mark – it is sold out in a matter of days.
“At this point, I have given up,” she said.
“My goal now is to buy a piece of land and hopefully with the help of some friends I can DIY my own home.”
When she rented her first apartment, at age 20, DeCou says she harboured hopes of owning her own place by the time she hit 30. But rent and the general cost of living have only increased and saving enough for a down payment has not been possible.
“I’ll be lucky to own my own home by 40 or 45,” she said.
Facing that situation and seeing many other Caymanians in the same boat was one of the reasons she decided to run in the last election.
“Property prices increase, salaries don’t increase fast enough to keep up, and a focus on affordable housing has been at the bottom of government’s list of priorities. It’s a recipe that has led to a crisis many in our country are part of, myself included,” she said.
Cayman’s open housing market means that young people must compete on price with overseas investors and new residents, who are incentivised to buy, in part through a permanent residency points system that rewards property ownership.
“Anybody in the world can buy property here sight unseen, they don’t even have to have set foot in Cayman,” said DeCou.
“Our governments have failed miserably in ensuring their own people have parity in certain areas.”
She would like to see government do more to make housing affordable for young Caymanians. Though she was not elected herself, she has high hopes for the PACT government in that respect.
“There should be homes that young single Caymanians can afford,” she added.
Welds too is struggling to see how to make her dream of home ownership a reality.
She has bought a piece of land and one day plans to build, but the cost of construction means that is not on the immediate agenda.
Meanwhile, she pays rent and tries to save what she can. She sees friends in similar situations. Even those with good jobs and solid incomes haven’t been able to afford a deposit on a home without parental support or by withdrawing funds from their pensions.
Many of her friends, she says, either still live with their parents, relatives or other friends, or pay rent at a level that makes saving for a home almost impossible.
In the run-up to the general election in April, Welds crunched some numbers and put together a spreadsheet, calculating how long it would take people in various salary brackets to save enough for a deposit at current prices, then shared those numbers on Facebook.
The broad conclusion was that the time frame to save – even with a good salary – was too long. Prices are moving so fast that even the most disciplined savers can’t keep up.
Simon Watson, of Charterland surveyors, which carries out an annual statistical review of the property market, said that has especially been the case over the last five years.
Homes in some complexes have tripled in price over that time frame.
“There is very little now on the market below $400,000. It is quite scary really for young people and families,” said Watson.
“It is very hard for people to get onto that ladder and more needs to be done to address that.”
He said the up-front payment, often including a 20% deposit and 7.5% stamp duty, was the biggest challenge for many buyers.
Though stamp duty is waived for first-time buyers on properties of up to $400,000 in value, many are not getting that exemption – either because they used the concession on a piece of land or because they are buying over the threshold price.
The new government has proposed further concessions but those have yet to be implemented. Watson said allowing people to pay the duty over a number of years rather than all at once, at a time when they are already required to come up with a significant down payment, would be a fairly simple way of making it easier for people to buy.
‘The inventory is not there’
As a real estate agent, a young Caymanian and the former host of Star radio’s ‘Straight Talk’ show, Ruthanna Young sees the issue from multiple angles.
She advises many young people, including couples and families, looking to get into the property market.
“The Caymanian dream for a lot of people is still a single family home but when you look at the financial reality, the top of their mortgage budget is maybe $350,000 and there is not much available at that price.”
Even buying land and building on your own has become more difficult, she says, because fewer banks offer construction loans and the price of building materials has escalated.
“Supply is a huge struggle, particularly at the price point your average under-30 Caymanian is looking at. The inventory is just not there.”
Young said she advises clients not to focus too heavily on their “dream home” but to buy something they can afford with a view to getting on the ladder, stopping paying rent and hopefully moving on to the ideal property later down the line.
“I don’t think the solution is to wait and hope the prices come down. That is probably the worst decision you could make. I have dealt with clients who have waited just for a year and everything has gone up another $60,000 or $70,000.”
‘They forgot young people’
Welds feels many Caymanians will eventually be forced to leave the island if they want to own a home.
Already, she says, many young professionals are on the road to becoming lifetime renters or living with their parents well into their 30s.
“What can unfortunately happen is that due to the rapidly rising housing market, the goal posts keep moving away from them; they may enter into relationships, start a family with a partner while still living under their parents’ roof, and the household becomes a multi-generational home for numerous years because the younger generation and now-parents can’t afford to leave.”
She also believes young people have been subjected to unfair market competition for home ownership.
Many work-permit holders arrive as mid-career professionals on decent salaries with savings in the bank – creating a larger-than-normal demographic of middle-class purchasers.
She said Cayman’s economy might have done well out of the housing market but too many people were being left behind.
“They forgot to keep young people, our up-and-coming professionals in mind. There is nothing in place to ensure everyone has a fair shake of getting into the housing market,” she said.
“Whether you can afford a home depends on your financial literacy, your salary, sometimes your background and your parents’ help or a pension withdrawal if you have enough to withdraw.
Even with all those things, the odds are stacked against you.”
She believes a number of measures could be introduced to reduce price competition, including stipulating that work-permit holders must be employed for five years before they can buy property.
She also suggests removing property ownership as an incentive in the permanent residency points system and structuring concessions for developers towards affordable housing.