Review
In our last report we noted the surprisingly large number of Summer Tourists in June and July and said we expected this trend to continue. With increasing demand and limited supply we predicted rising prices. That is precisely what has occurred.

General Outlook
The CIREBA statistical report is very telling without even comparing it to last year. The average sales price for all properties sold this year by November 2017 was US$650,000. That is a very impressive average, considering it covers all types of property. But the average sale which is still Pending Closing (which means it likely went to contract after those which are already in the Sold column) is US$994,000! That is a huge increase and indicates the considerable upward movement in prices in Cayman. Of course not all sectors of the market move at the same pace, but, as usual, beachfront leads the way and the Tourist related higher priced properties are bound to skew the averages. We would almost have to do two separate reports to do justice to both the Local and Tourist Markets, however, there is little data which separates sales in that regard aside from simply making an assumption based solely on price and location. We will try to differentiate for you going forward. However, it is now difficult to find any market sector with the exception of inland mid-level residential which is not experiencing rising prices to some degree (more about that below).

Condos
The sales figures this year as opposed to last year show a very small decrease in # of sales and a very small increase in Dollar volume. In actuality, condo supply is up about 50%, so why the decrease in # of sales? Well the condo figure covers units at all market levels and most of the new development has been within mid-ranges, not top end. The decrease in sales is a reflection of short supply on Seven Mile Beach. In fact, as of this writing, in the MLS there were only 7 beachfront units for sale below US$4.0M on Seven Mile Beach. That is shocking! Right now, as we approach year-end, this is the situation. However, we expect supply to increase with some owners becoming willing sellers at prices 20-25% above previous highs.

Homes
Single Family Homes YTD show 20% fewer sales recorded in 2017 compared to 2016, but the dollar volume remained the same, soprices of homes have risen YTD. The supply of current listings is down about 8% YTD with their dollabackr value remaining about the same for further proof of price increases. There are a few prime single-family properties which have been on the market a while, where the owners have grown tired of waiting and have now reduced their price even in the face of an improving market. These are now bargains. One such home is Oceanus in Frank Sound (MLS# 403965) which has been recently reduced to US$5,995,000. (previously US$6,750.00) and included in the reduced price is a new beachfront pool, an additional bedroom with en-suite, a new full bath in the top floor Suite, plus a games room in the basement. With the influx of new visitors looking for a safe, warm weather, luxury destination, we would not be surprised to see a number of these more luxurious homes sell this Season.

Land
The number of land sales is up 10% YTD but the dollar volume is down about 7%. As the concept of spin-off or trickle-down economics is now being felt locally, there are more people buying and some of this activity is at the lower levels which would explain the dollar volume decrease overall. So that is actually a good sign rather than something to be concerned about in our opinion. To further support that notion the market supply for raw land has decreased about 25% YTD since last year. With the prices starting to rise in general and land supply decreasing we don't expect this dollar volume decrease to continue past the end of the year. We are currently working with Royal Bank to providefinancing packages for many of our land listings. Give us a call if you are interested in buying land with financing.

Commercial
The Commercial leasing sector of our market continues along the same path as it has for several years now. There has been a strong and obvious general trend to leave George Town for the much more modern buildings like Dart's Camana Bay development where the commercial leasing offerings include unlimited parking and newly built hurricane rated buildings. These leases offer "shelter of last resort" safety from storms, no longer requiring evacuating entire staff in an emergency situation. These are high efficiency rated buildings with advanced water chilled a/c systems and the like, and offer relief from the traffic congestion and parking problems of downtown. It's no surprise that much of this commercial space is dominated by the large Cayman Islands law firms, accounting and reinsurance companies, and they have been snapping up the A space. The newest addition is Aureum Re which moves into their brand-new waterfront space on Solaris Ave in Camana Bay in December. Cricket Square is another good example of firms migrating to new prime rated A space with sufficient parking, leaving the B rated buildings vacant in their wake. Cricket Square continues its expansion as of this writing with another impressive phase being added. Kudos to the Flowers Family. In the past, filling the vacant B space was not an issue with smaller financial services firms filling the voids, but this has been lacking for many years now and the trend continues. There is some fill-in happening, but it is on a very small scale compared to what has been vacated. We suspect these vacant B rated spaces will continue to be available, but theoretically once the rental rates drop into the low US$ 20's per square foot, there may be some additional activity.

On the Commercial sales side, up until recently this market has been quite flat. However, there has been some recent market activity where some smaller office buildings of 30,000 square feet or less have sold. These trades often occur when tenants have found a purchase more attractive than to continue to pay rent. Small Accounting and Insurance firms have been the typical end user here when the economics of ownership outweighs leasing. On West Bay Road we have just contracted the Bay Harbour Centre (Mitzi's) at the asking price. This is likely to be a redevelopment play for a new commercial center. There are deals to be had on older Office buildings downtown, and a few have sold. But until Government finds a way to solve the traffic and parking problems there, both sales and lease values will continue to suffer. There have been sales of some small retail plazas in and around the airport area, as well as some further from town where yields of 6% or higher attract buyers. Development of these continues, with gas stations/convenience stores leading the way. Small block Apartment Complexes have also been selling based on a similar yield, but it is difficult to find sellers. If you have an interest in these types of properties, coincidentally we have just listed a couple. Give us a call.

Sister Islands
It has been a busier year than normal in Little Cayman with a decent number of houses, condos and raw land trading hands on the island. One unit in The Club selling and being replaced by another unit which is good news for those who were looking but missed out on making a purchase. There has already been quite a bit of interest in this new listing and we don't expect it to be available for too long. There is also a great deal on a fixer-upper house that sits on a nice ocean front parcel with the potential of being divided in half giving great value and potential to someone looking for a bit of a project. More and more people are seeing the benefits that Little Cayman has to offer with its true island paradise feel, safe friendly atmosphere and fantastic water sports just outside your front door. If you want to be part of this little community don't hesitate to contact Wes and find out how easy and affordable it can be.

Local Market
Following up on our comments in General Outlook above, and contrary to what you often read, the vast majority of the Grand Cayman land area is not 7 Mile Beach. There are nice beaches in South Sound, Barkers, Spotts, Pease Bay, Frank Sound, Queen's Highway, North Side and of course Rum Point, and there are residential communities in all of them including condos and raw land parcels. Historically the pricing in these areas tends to follow what happens on 7 Mile, but normally there is a delay of about a year between the two, much like we experience between the US and Cayman's General Market trends. The best beaches always rebound first and then the inland properties (see our comments in the Land section above). As a result, the activity and pricing has been fairly static up until fairly recently.

We have had some calls and suggestions as to how Government can stimulate the local market. We personally are not big fans of artificial adjustments and generally prefer the market to regulate itself, but will repeat some of what we are hearing. One suggestion was to reduce Stamp Duty rates for all purchases under CI$500,000 to 5% instead of 7.5% thereby saving a purchaser up to CI$12,000. on every purchase. For those who are financing a purchase this could make the difference of being able to afford a property or not. Another suggestion was to increase the level of purchase for First Time Caymanian Home Buyers and prorate the Stamp Duty reduction on a sliding sale up to a maximum purchase of CI$500,000. The difficulty with this is that all these moves decrease the amount of revenue initially coming in to Government, so we would have to be reasonably sure that the # of sales would increase to a level which would more or less make up for the revenue lost by the rate decrease. It is probably at least worth a look.

Tourism
As mentioned above, the number of visitors to Cayman appeared to be continuing to rise and a look at the 2017 figures bears this out. YTD over 2016 the all important air arrivals figure is 5.3% higher this year. And, in fact, the visitor arrivals in July of 2017 set a new all-time monthly tourism record for Cayman. Imagine that - a summer month with more tourists than any winter month in history! And at year end we project a final air arrival total over 400,000 for the first time in History. The cruise passenger totals for 2017 YTD are down 7.6%, but with the damage to the islands of the Eastern Caribbean the cruise ship industry is predicting that Cayman will see an increase of 250,000 passengers in 2018 which would take the total to around 2,000,000/year and become a new all-time annual record.

Traffic
While the tourism activity quoted above is good news for the rental occupancy and income for tourist property owners, as well as Restaurant, Diving, Liquor, Taxi, and Car Rental businesses, think of what it will mean to our already problematic traffic situation. More taxis and busses, more rental cars, and more bodies downtown, will mean some serious gridlock this season. The By-Pass Road upgrades have been under construction for about a year, and while getting closer, are still not completed. The NRA estimates for the Camana Bay (Esterley Tibbetts) By Pass have been pushed back several times and completion before New Year is unlikely. Sadly, the Linford Pierson Highway upgrade may be later as well. Driving in Grand Cayman in 2018 is likely to be frustrating for local businesses . "Cayman Time" for appointments may go from 15 minutes to 30 minutes. Just saying...

Developments
The Dart purchase of the Ritz has now been formally announced which meansthe Dart Group is now Caymans biggest luxury Hotelier. The Residential building at the Kimpton will be largely finished and some units furnished by Christmas and will have owners and longer-term renters in residence. Considering the Kimpton South building and the Ritz South Tower, and the Ritz Exclusive Resorts Development, there are now some fabulous luxury options for high-end customers moving to Cayman. With the prices being asked and paid on 7-Mile Beach, Cayman is rapidly becoming the high budget tourist mecca that Hon. Mr. Jim Bodden envisioned nearly 40 years ago.

Currently under construction in Rum Point adjacent to the Retreat are the Rum Point Club Residences. This is a 36 unit, 5 story luxury development, featuring units at price points from US$1.5M - $2.2M. There are 12 already sold. The project is modelled after the Caribbean Club which was developer Joe Imparato's well regarded previous effort. Purchaser financing is available from Bank of Butterfield. Call us for current availability.

Ironwood
There has not been much heard lately about the Ironwood Golf Resort, which is proposed to be built in Frank Sound. The recent deaths of both Arnold Palmer and Gary Tweed (who was a key financier) have not helped matters. However, behind the scenes there actually has been activity. We have learned that Mr. Joe Imparato now owns the majority of the land for the project and will act as a Joint Venture Partner/Landowner and contractor. David Moffit is still the lead Developer, but Mr. Imparato's active involvement adds a large measure of credibility to the entire project. There are current discussions underway with two potential investors which, if successful, will ensure this project moves forward. This is a US$150M project which would be a very good thing for Cayman, and the Eastern Districts in particular, so we hope the current positive direction continues.

Valuations
Private sector appraisers continue to be all over the map about values. Some insist on sticking only to historical sales which in a rising market means their opinions MUST, by definition, be lower than any current value. So those customers who are prepared to pay the higher prices that the market currently demands, cannot get any help from the banks since the appraisals don't support the new current price levels. That not only serves to keep locals out of the market because they don't have enough cash on hand to make up the difference between the market price they have agreed to pay and what the bank will lend based on the lower appraisal. It also helps keep the Forced Sale inland improved property market sluggish as well.

On the other hand, Government Appraisers are busy reevaluating transactions if they think the price paid is under Market Price, or the value of a used piece of furniture has been rated too highly. The time wasted both in the Public and Private Sectors dealing with these completely subjective issues is mind boggling - and so is the cost. Earlier this year a Cayman judge ruled that the price paid IS Market Price, but Government has thus far ignored that. Besides being an elegant solution to the problem, it would free up hundreds of thousands of dollars in wasted time costs and foreign Appraisers salaries and benefits which would be better spent on improving our infrastructure or setting up a proper technical/trade school for our citizens.

First Impressions
If you have been traveling to and from Cayman this year you will likely have not had a very good experience at the airport. Certainly, the airport expansion and construction has not helped and is absolutely necessary, however it is thetime it is taking to get through Immigration and Customs which is the most concerning. It is often takingwell over an hour for visitors standing in line to get into Cayman. I have heard many complaints this year from long time visitors and property owners bemoaning the Cayman entry experience. We also hear complaints from Immigration staff about the long hours and lack of time off. Putting the two complaints together paints a picture of either poor allocation of human resources or an inadequate supply of staff.

We have always been proponents of judicious spending and a balanced budget, however when our service gets to the point that we begin to lose tourism business to other locations from previously loyal visitors, we need to reevaluate what we are doing. Recently, a close Caymanian friend returned from Jamaica saying it was such a pleasure to arrive at Kingston airport. The lines were orderly and there were lots of staff to help the arrivals. She said the comparison when she arrived back in Cayman was like night and day (and we were night). Changes must be made - and fast. The Winter Season is now upon us.

Forecast
The distress in the Eastern Caribbean, coupled with the strong economic performance in the US during 2017 and the resultant improvement in the Cayman community, add up tothe potential for a record-breaking year in Cayman for 2018. The traffic congestion and lack of supply of product to sell on the beach will doubtless have a dampening effect to some degree. But we expect supply to increase a little, allowing enough sales to be made at higher levels to result in a very strong residential real estate market, with Commercial and Industrial sectors finally also becoming active on the shoulders of this expected strong residential performance. Therefore, we project sunny skies and warm breezes for the first half of 2018.

Merry Christmas, Happy Holidays,

and a Healthy and Happy New Year.

 From your friends at

Coldwell Banker Cayman Islands Realty