Many of the affordable housing concerns highlighted by the Compass in recent weeks are not unique to Cayman.
Other islands have been grappling with similar issues for years. And larger countries are starting to consider restricting access to their property markets in an effort to reduce competition for homes.
We take a look at some of the measures in place elsewhere in the world, including other island communities and Overseas Territories.
Bermuda limits foreign buyers
Bermuda has a tightly restricted property market with only limited access for foreign buyers. Much of the real estate on the island is available to Bermudians only.
Overseas investors can purchase higher end properties based on their estimated annual rental value (greater than $25,800 for condos and $126,000 for houses). These properties must also have been designated as “tourist accommodation and hotel residences”. They must also apply to the government for a licence to buy and pay a fee of 6-8% of the purchase price.
Foreigners cannot buy land in Bermuda.
Work-permit holders cannot buy property and most rent from Bermudian owners.
The policy serves to preserve residential housing stock for Bermudians only, reducing price competition. Critics of that approach caution that it has created a relatively stagnant housing market with comparatively few sales. There is also limited new development in Bermuda and many acquire property through inheritance.
The average property prices for local sales was $885,000 in 2020 according to a market report by Sotheby’s Realty.
High home ownership rates in Singapore
Despite its status as one of the most affluent and expensive places to live in Asia, the city-state of Singapore also boasts one of the highest local home ownership rates in the world.
That is largely due to the revered public housing scheme that has provided a steady stream of new homes since its inception in the 1960s.
More than 80% of Singapore’s population live in homes built by the government Housing and Development Board. The homes are sold at subsidised rates on a 99-year-lease.
A glowing article in Bloomberg Businessweek last year pointed out that the policy had helped ensure that a newlywed couple could afford their own home in a housing market with the world’s largest concentration of billionaires and where a luxury penthouse can sell for more than $50 million.
A crucial distinction with public housing schemes elsewhere in the world is that Singapore’s programme involves significantly more upmarket housing.
Amenities including clinics and community facilities are integrated into new developments and a social-integration policy requires minimum levels of occupancy for each of the main ethnic groups.
The scope of public housing building in Singapore was enabled by extensive use of compulsory purchase orders to buy up private land – something that may be less palatable in more democratic countries, like Cayman.
New Zealand bans foreign ownership
Responding to a surge in house prices – reportedly driven by Chinese and American billionaire investors – New Zealand moved to ban foreign home ownership in 2018.
There are a handful of exceptions, including for people from Australia and Singapore, courtesy of existing free-trade agreements, but the policy was designed to dampen the influence of overseas investors who were responsible for around 4% of the market. At that time, average house prices had increased by 60% over the previous decade.
“This government believes that New Zealanders should not be outbid by wealthier foreign buyers,” New Zealand’s Trade and Economic Development Minister David Parker said on the passage of the bill.
“Whether it’s a beautiful lakeside or ocean-front estate, or a modest suburban house, this law ensures that the market for our homes is set in New Zealand, not on the international market.”
There is no evidence that the policy has had a significant impact on prices at this stage.
London grapples with oligarchs
The city of London is the poster child for a global problem of the world’s mega-rich buying up property as investments and, in many cases, leaving them empty.
International buyers purchased 30% of homes sold in Greater London in 2020, the Financial Times reported. At the luxury end of the market, that proportion rises to 49%.
Prestige addresses like Kensington and Chelsea also feature highly in the database of empty homes, which number more than 20,000 in the UK capital, as investors park cash in property with no intention to live there or rent them out.
Over the past decade, the property market in many cities has outperformed investment funds or interest rates offered by banks, making it an attractive proposition for wealthy investors.
UK legislators moved last year to introduce a new 2% stamp duty surcharge for overseas buyers in an effort to address the problem.
Canadian Prime Minister Justin Trudeau has proposed a two-year ban on foreign ownership to address similar issues in Vancouver and Toronto.
Germans content to rent
While home ownership is historically and culturally seen as a financial necessity in the UK and the US, that’s not the case in some European countries.
Germany and Switzerland have some of the highest rental rates in the world. More than two-thirds of Germans don’t own their own property and most report that they are content to stay that way.
High taxes on property ownership, strong tenants rights legislation and price controls on rents, make it a more attractive proposition in those countries.
Perhaps by necessity, rather than desire, renting is becoming more common among younger people in the UK. Lower home ownership need not be a cause for concern, The Economist argued in a special report on housing last year.
Owning a home is not necessarily the route to riches that many believe and mortgage debts can inhibit entrepreneurship and restrict mobility.