Rent has doubled in the Cayman Islands since 2015, according to a property market index.
The data comes from a 2023 Market Report published by Provenance Properties which also shows a decline in sales over the past year.
Despite those indicators, the report suggests Cayman has largely withstood the impact of surging interest rates on the property market.
Rent remains a challenge
The data shows rents have surged in recent years and are currently at an all-time high.
Additional anecdotal analysis by the Cayman Compass corroborates the index’s finding of a 100% increase. A small condo that rented for $900 in 2015, for example, now rents for $1,800 a month.
Similar leaps have been seen across the spectrum with significant implications for the around 50% of the population who rent property.
The Provenance Properties Market Report 2023 quotes a proprietorial index, which benchmarks rents over a longer period. The overall data pattern suggests this leap in prices is, at least partially, a correction following years of stagnant rents.
The trend over the last 20 years indicates a much more measured increase in prices of just over 2%, in line with inflation over that time.
Despite the challenges for renters, the report paints a positive picture for the property market, concluding that it has withstood the impact of a surge in interest rates and will strengthen further as the US Federal Reserve begins to reverse that trend in 2024.
Mixed picture for home and condo sales
The overall conclusions of the report are that, despite falling home sales and rising rents, Cayman’s property market has largely withstood the impact of surging interest rates.
Data from the Cayman Islands Real Estate Brokers Association indicates a drop in the number of sales and total dollar value of sales in 2023.
CIREBA’s data indicates 676 sales in 2023 – a drop from 874 sales at the year before. However, that is still the third highest year on record for sales.
The record year in 2021, which saw 989 sales, is viewed as something of an outlier following the COVID lockdown, during which thousands of residents were granted access to their pension funds.
Given a sharp rise in interest rates, the market was expected to take a bigger hit in 2023.
The Provenance report notes, “This sharp increase significantly affected the Cayman Islands’ mortgage landscape, where standard rates (Prime +1) jumped from 4.25% to 9.5% within two years, dampening sales activities.”
The biggest direct impact for anyone in Cayman is on monthly home loan repayments. For example, the repayment costs of a $400,000 mortgage would rise from $2,166 to $3,494 in line with that prime rate increase.
The obvious upshot of that is it makes homes less affordable and loans less easy to come by for most middle-class Cayman Islands residents.
But while CIREBA data indicates a dip in sales, Provenance quotes a proprietorial index which suggests average prices in the condo market remain solid.
The company’s data suggests a substantial growth in condo prices in 2023 of more than 9% compared to 2022.
Demand for homes still outstrips supply
The report suggests a clash of competing influences, with Cayman’s strengthening economy and growing population providing resilience against a potential slump.
“The Cayman Islands’ economy thrived, continuing to allure businesses, residents, and tourists alike. Increased housing demand exceeded supply and exerted upward pressure on the market.”
Another factor cited in the report that may have helped grease the wheels of the property market is that banks compromised on rates.
“A key factor could be the local banks’ strategy to mitigate variable rate hikes by offering fixed rates between 6-7% for two to three years.”
Land prices, meanwhile, continue to increase, as demand remains high and available, and developable plots continue to be scarce.
The Provenance index shows land prices have almost tripled since 2015.
The data suggests property remains a stable investment, despite a surge in costs.
The average condo price has more than doubled since 2015. But the percentage returns from investment condos have decreased slightly over that time.
The market report goes on to paint an optimistic picture for the real estate market in 2024, anticipating that interest rates will begin to decline, making home loans more affordable.
“This decline in interest rates typically benefits property values. Moreover, the economy of the Cayman Islands continues to be robust, coupled with a steady demand for housing. Consequently, the future prospects for the real estate market look promising.”
A separate analysis from Property Cayman highlighted similar trends.
The report noted that entry-level homes saw the greatest slowdown in 2023, mainly due to increased mortgage rates and inflation.
The analysis, attributed to Michael Joseph, also highlighted a lack of inventory at both the low and high end of the market.
“The upper level of the market, luxury condos and homes, continue to be bolstered by international demand from high-net-worth individuals and a painful lack of inventory,” he wrote.
Joseph attributed the 2023 slowdown to both buyers and sellers being slow to adapt to a new climate of higher interest rates. But he projects that will dissipate as rates stabilise and time passes.
“We forecast renewed energy and market confidence,” he wrote of the market prospects for 2024.
“Per the predictable patterns in these cycles, homeowners and purchasers are becoming tired of waiting. They are, in turn, increasingly accepting of the current climate (lending rates, insurance costs, inflation etc.). The result is that more and more are ready to get off the fence, which is why we are seeing an uptick again in activity.”
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