When the developers of Downtown Reach, an affordable homes complex on the edge of George Town, put the first 52 properties on the market in 2018 they sold out within 12 months. When the second phase went on sale one year later, all 28 apartments and town homes sold within two weeks.
“There is quite a bit of demand at that price point,” said Ben Tonge, who runs Sixtees Properties with his father Jonathan.
With one-bed apartments starting at $240,000 and two-bed properties priced from $320,000, the new development reached people who would otherwise not be able to buy.
A rise in building costs may see some price inflation before the third phase goes on sale, but the developer is determined to keep prices in a range that is manageable for young professionals.
Part of the reason the father-and-son team chose to invest in Downtown Reach – their first major project in Cayman – was that they saw the lack of opportunities for young people in the housing market.
As an 27-year-old who grew up in Cayman, Ben said he had seen first-hand the challenges faced by his generation amid escalating real estate prices. He said many of his peers were either still living with their parents or caught in a loop of rising rental costs and stagnant salaries that made saving for a home virtually impossible.
“Even if you leave university and get a good career, you are earning around $40,000. There is no way to save for a home at current prices,” he said.
With two more phases of Downtown Reach to come – including another 162 homes – he is hopeful that the development can continue to fill a niche in the market.
“We want to stay in the affordable price category. It is becoming harder and harder to get young people into homes,” he said.
Even with the best intentions, Jonathan Tonge said delivering homes at a reasonable price in Cayman is difficult. He said Downtown Reach and a handful of other recent developments had shown that it could be done.
“The saving grace for developers is that we know the demand is there,” he said. “That is encouraging, but to be able to deliver at the price point we want is still very difficult.”
Since the Downtown Reach project got under way, land prices in the neighbourhood, off Linford Pierson Highway, have more than doubled.
The cost of construction materials has escalated dramatically and labour prices have also increased.
That volatility means there is considerable risk for developers operating in the lower price range, particularly if they pre-sell the units before construction.
“It is really not easy to deliver a development with good quality homes that can be sold below $300,000. With the right volume and a like-minded builder, you can do it, but the profit margin is not high,” said Jonathan Tonge.
He believes concessions for developers who build properties priced below the $500,000 mark would help incentivise more businesses to build affordable homes.