MARKET REPORT
MID YEAR 2015 REPORT
AN HONEST APPRAISAL OF THE CAYMAN MARKETPLACE
Review
In our last report we predicted a continuation of the sales momentum we experienced in 2014 during the 2015 Winter Season, with some rising prices and multiple bidder situations. However, we cautioned that we also expected some stalemates on listings where Sellers expectations out-paced the market. Actually all these things have happened thus far this year.
General Outlook
The data supports our projections. The total # of sales YTD is up 8% and the value of those sales YTD is up 28%. The number of Pending sales is up by 10% YTD which bodes well for revenue in the second half of this year. The number of active listings declined by 14% which supports the comments that we will make later about lack of supply. And the multiple bidder situation we mentioned? We have had several already, and we expect other companies have as well.
Condos
There has been a 25% increase YTD in the number of condo sales. That makes the last two years consistently much more active in this market sector than previously. The average sale was up a whopping 50%, but that is misleading because it was largely the result of approximately $55M of Watercolours closings. As a result of the surge in the number of condo sales over the past 2 years, the most significant factor in the condo market is now the very small supply of beachfront condos for sale on 7 Mile Beach. As of this writing there are 10 units listed up to US$500,000; 9 units to choose from between US$500,000 and US$1.0M; only 5 units from US$1.0M to US$1.5M and 9 units from US$1.5M to US$2.0M. Further, once you factor in the customers special needs or wants (ie. rental pool, good beach, good view, # bedrooms, floor level, etc.) there are very few choices.
This is an incredibly short supply, especially in relation to the increased supply of potential buyers we are seeing. All of the existing listings are being shown repeatedly. Those that have not sold are still available only because they have been rented and we cannot often get in to show them, or because their asking prices are about 25% higher than the previous sales in 2014 and 2015. Buyers have been reluctant to pay that much more, but if they want to actually buy on 7 Mile Beach they cannot expect to do so now based on previous sales prices. They will have to increase their bids to encourage the Sellers to negotiate some. The Law of Supply and Demand will always have its way. And the sad part is that these potential buyers will end up having to pay even more if they wait until 2016, or they will just miss the boat entirely.
Residential
The number of detached homes sales is up 21% YTD, but the average sales price is down 18% YTD. That would indicate the market is absorbing more lower priced homes than normal. The supply of higher priced homes is sufficient, but there are fewer truly special homes out there as some have already been sold. One specific exception, and new to the market, is The Villa at Old Prospect. This is a one of a kind turn-key property which has it all: beachfront, unique architecture, great views, privacy, fabulous artwork, top quality FF&E; in a practical floor plan, and all at the very realistic price of US$4,995,000. Just being listed! Call us for details.
Land
In terms of numbers, land sales have been similar to last years YTD, however the average land sale price is up 47%indicating there are more waterfront parcels being purchased than inland residential lots. That is not surprising as potential homeowners try to nail down their land purchase before prices rise too much.
Commercial
The Commercial Market is still slow with nothing much moving. The big news this quarter was supposed to be the Government?s presentation of their ? revitalization of George Town? initiative. It was neither well organized nor well presented and left viewers who attended the lunch presentation at the Wharf wondering: where was the meat? The centerpiece turned out to be the ?Cayman Ice Palace? which was originally slated for West Bay Road but was, apparently at the behest of Government, ?encouraged? to a downtown location. This project is a long shot at best. Surprisingly, the main problem with George Town which has always been inadequate parking, was not even mentioned in this revitalization plan. One has to wonder how North Church Street and Downtown would handle the enormous traffic flow which would come with the addition of a 5,000+ seat arena.
Sister Islands
Cayman Brac ? A new luxury all-inclusive health spa/resort called Le Soleil d?Or is well underway with beach cabanas already in place along the white sandy beach entry. With this venture targeting and attracting high-end visitors, property values will eventually reflect the increasing appeal of the remote island experience of Cayman Brac.
Water front homes remain a terrific buy in Cayman Brac, with beautiful white sandy property. Prices range from US$850,000 to US$985,000. Panoramic sea views from Bluff edge property is offered at competitive prices, based on the sea frontage and depth to the main roads. Several cottage-style Caymanian homes on the water front are priced around US$225,000. Sellers are motivated, making it an excellent time to buy that dream home in tranquil Cayman Brac, or sea view property for development. Call Irene Scott-Thornton, our resident Cayman Brac Agent, for assistance with Brac properties.
Little Cayman ? When comparing 2014 and 2015 to date we have noticed a substantial increase in the number of information requests received on all types of properties on Little Cayman. Sales have also increased and are expected to reach higher levels than the previous two years combined. There are fantastic parcels of land available on the island in highly sought after areas such as Preston Bay and in the Bloody Bay Marine Park which offers world class snorkeling and diving right off shore. There is also a 3-bedroom beachfront condominium available in the exclusive complex The Club.
People are seeing the benefits Little Cayman has to offer both in lifestyle and in price. Not only is the island a quick and stress free escape from Grand Cayman, it is also the perfect place for people to spend their down time from abroad. Call Wes Dangerfield, our resident Little Cayman Agent, to have him help you with your property purchase in Paradise.
Development
After a hiatus of quite a few years, Developers have begun to surface again due largely to the combination of low prices and the increased buying interest evident now over the past 18 months or so. The Luxe Development at the foot of Cook Quay in Governor?s Harbour is nearing completion. It comprises 8 units of 2 ? 4 bedrooms with square footage from 2,000 ? 6,000 sq. ft. +/- and price tags from US$799,000 ? US$1,800,000. There are two new waterfront condominium projects planned for South Church Street, plus a new condo project on 7 Mile.
There are plans afoot to develop the Redlands Peninsula (renamed Stone Island) in the Yacht Club basin as a luxury, gated, single family home community. Meanwhile, not far away, the Kimpton Hotel/Condo complex is moving along rapidly and is projecting completion in the fourth quarter of 2016.
The older 7 Mile condo complexes are approached from time to time by local developers looking to promote a redevelopment scheme. That is happening again, but we just may see one this time around. With the percentage of required owners support necessary for re-development right now at an all time low of 75%, it would seem to be more possible than ever. However, we expect that percentage to increase once the committee studying this issue releases its report. Our expectations are that the committee recommendation will be 80%, (although we would like to see it a little higher than that). Will the Government accept the recommendation, once made; and then, will they act on it? We shall see.
Tourism
The tourism figures continue to improve and impress. The most important statistic is air arrivals which are up 4.4% YTD over last year, making this the sixth straight year of stay-over Tourism increases! The spending of our stay-over visitors is the single most important factor in improving our overall economy.
Bureaucracy
2015 may well be remembered as ?The Year of the Survey?. Employers have been inundated by requirements to participate in Income Surveys, Pension and Health benefit surveys, etc. It?s a wonder we could actually get any business done in between it all. The worrisome part of all this is that we are now starting to see Government actually doing something after having been in office since 2013. I say worrisome because like most other worldwide Governments, the emphasis seems to be on workers rights and fines and penalties for employers, rather than focusing on making it easier for companies to do business. We are just now beginning to come out of our recession, with many local businesses still struggling, so less hassle rather than more would be a welcome change. With every layer of bureaucracy it becomes more difficult and more expensive for employers to do business. The CI Chamber of Commerce instituted a program a couple of years back which was designed to help solve some of these problems. We get the feeling there was never much ?buy in? by Government and with the latest disagreement between Government and The Chamber, we could see more of the same. Sadly, unless you have been a business owner, it is hard to understand how much of a negative effect increased bureaucracy has on business. Many elected officials have never run a successful business. That fact, combined with their #1 priority being getting re-elected, often leads to a proliferation of new bureaucracy, rather than focusing on lessening regulation and streamlining Government (whose financial cost is the major source of our huge National Debt).
George Town Cruise Pier Controversy
After several previous botched attempts to achieve an acceptable plan and award a contract to build a cruise ship berthing facility in George Town, the current Government has now presented its proposal. This one is located along North Church Street (which was to be the site of one of the previous efforts). This time it has gotten as far as an Environmental Impact Study by Government, but may not get much further. The EIS quantified the removal of 15 acres of healthy reef plus killing or damaging another 20 acres of adjacent healthy reef. The study suggests that even popular dive sites to the south of the Harbour like Devil?s Grotto would also be lost. At the moment, petitions are circulating calling for a referendum to vote on the issue. While there is understandably widespread opposition to this plan by environmentally sensitive individuals, as the premium dive destination in the Caribbean, Cayman also has to protect one of its largest income bases.
The impetus for a Cruise Berthing Terminal has arisen apparently because of the cruise industry?s reluctance for their passengers to be ferried to shore using tenders, which has been done here from the beginning. Is it an insurance issue or simply a passenger convenience issue? According to the report the bottom line is the total damage to marine resources would cost Cayman between $100 million and $165 million over 20 years, principally from loss of tourist spending on recreation and water sports activities in the harbour. In return, it is estimated the piers would bring nearly 1,000 jobs and inject $250 million into the Cayman Islands economy over 20 years through increased cruise tourism. While the need for jobs for Caymanians certainly exists, the jobs argument may not be as strong as it seems. Certainly there would be jobs to be had during the construction of the facility, but one has to wonder how much of the income to be derived later by this huge and expensive project will go to Caymanians at the end of the day. (Therein lies the real challenges for our Leaders). Considering the current size of our debt and the need for a longer runway, perhaps all this money should not be spent on cruise passengers. A case can be made for both sides of the argument, but the real question to be asked ? and answered ? is what do we want Cayman to be in the future?
The Airport
If you have been here over the last 6 months or so, you will have noticed some temporary changes in the Departure Hall. This was necessitated by the continued increase in tourism numbers and flight options over the past 2 years. Recently, a CI$55 Million permanent expansion which will triple the capacity of Grand Cayman?s airport has gone out to tender. Works are expected to commence in August and be completed in the first quarter of 2016. While the new 29,000 sq. ft. building will be mainly for baggage handling and storage, it will free up the current outgoing baggage handling area which is to be redeveloped and added to the departure lounge. However, it is unfortunate that the runway extension was not included in the works. While admittedly that would have been a very expensive component, we cannot think of anything which would have a greater positive effect on our air arrival figures than more direct flights from more distant locations. You can be sure there will be long-haul direct flights to Cuba in the near future.
Forecast
Tourism figures continue to rise, the Real Estate Market is steadily improving, developed property supply is limited and developers are planning new projects, and local businesses are starting to make money again. This seems like a recipe for continuing improvement of our economy. The recessionary deals are now gone and tourist related property prices are rising. We expect our new momentum to continue albeit more slowly during the Summer Season, bringing us into the Winter with a solid Sellers Market. Local property values may also begin to increase in the Winter as long as local businesses can make it through the next few months. Therefore we see mainly sunny skies with some seasonal overcast for the next 6 months.
Have a Great Summer & Fall!