Month: July 2022

Cayman Real Estate Third Quarter Forecast

Posted on July 5, 2022 by - Buyer, Investing, Rent, Seller, Seven Mile Beach, Tips, Trends

Cayman real estate market third quarter - Michael Joseph - Property Cayman Real Estate

Global markets are shifting, and it will be no different for the real estate third quarter in the Cayman Islands.

In this market forecast, I explain why Cayman’s real estate sector may experience what I’m calling a “recalibration” rather than a “slow down”.

Cayman’s real estate is well poised to remain steadier than most, and investors should see the next few months as a period of opportunity.

Real Estate Third Quarter Activity

We will see a slight and only temporary decline in the number of sales throughout the coming quarter.

This is due to several factors, including inflation, rising interest rates, a volatile stock market and seasonal changes in the number of tourists and residents on the island. However, the effects will only be short-lived.

Over the last few weeks, we have already begun to experience slightly fewer enquiries on listings. This indicates we can expect an equally small dip in the number of properties sold over the next few months. The key word here is slight.

The Cayman Real Estate Market is Different

In the United States, there was a 6.5% decrease in existing home sales between the first and second quarters of 2022, according to the National Association of Realtors. Moreover, the NAR forecasts another 6.9% decrease in sales from the second quarter to the third. (Source: NAR Q2 2022.)

Whereas the Cayman real estate market actually saw an increase in sales in the second quarter compared to the first. (The Cayman Islands Real Estate Market Q2 2022 Review.) So, while we may see fewer sales during the third quarter, I don’t anticipate as significant a decrease as has been experienced in the US. Furthermore, I envision a quicker return to activity.

Increased Supply. Consistent Demand

Cayman has experienced a historically low housing supply over the past two years. But the second quarter marked the first time since the pandemic that we have seen consecutive months of rising supply. The last week of June had the most active listings (757) in nearly nine months. (The Cayman Islands Real Estate Market Q2 2022 Review.)

While we can expect to see an increased housing supply in the third quarter, let’s put that in perspective. Pre-pandemic, listings were in the 1,000s. In my career, I’ve seen times when there were upwards of 2,600 properties on the market (a strong buyer’s market.)

So, while we may see an uptick in supply, we are still talking about very low housing inventory numbers. Demand continues to be strong despite the summer recalibration.

Cayman Real Estate Third Quarter Pricing

The NAR statistics showed a 15% increase in US median home prices in the first quarter of 2022 compared to 2021 and a further 9% increase in the second quarter. They also projected an 8% increase in the third quarter. (Source: NAR Q2 2022.)

So, you’re seeing two trends in the US. A slight decrease in home sales whilst sales prices are increasing, albeit at a lesser rate than they had been. We can expect more or less the same here.

I don’t anticipate significant decreases in Cayman real estate prices. There will inevitably be a small percentage of anxious property owners who look to sell. There will be individual cases where sellers urgently need to offload their property and may reduce their asking prices to ensure a quick sale. But I expect these to be the exception and not the norm. It will also vary depending on which sectors of the market we are discussing. But overall, what I envision for the real estate third quarter is more of a “levelling out” period, where increases in pricing will slow in some sectors, and some sellers may be more inclined to negotiate than we’ve seen in recent years.

There are a lot of different elements at play here. And as mentioned, each segment of the real estate market will behave differently. If you are confused about market changes will affect you, feel free to reach out. Our team is happy to discuss how this recalibration will impact your individual property plan and journey. Whether you are a first-time buyer or a long-term investor, we are here to help and our advice is always free of charge and pressure.

Real Estate Third Quarter Opportunity for Buyers

With the slow increase in supply and a temporary decrease in demand, there are potential opportunities afoot for buyers.

I wouldn’t say we’re transitioning to a true buyer’s market in the third quarter, but sellers and developers may need to make some brief concessions to be competitive. Purchasers could take advantage of a slowing rate of price increases and a slightly less competitive market to make moves on the property ladder.

For those interested in purchasing pre-construction, you now potentially have more negotiation power. In the extreme case, in a full buyer’s market, sellers and developers in the past have offered to pay for the first year of home insurance, strata fees, perhaps a better furniture package or the stamp duty in part or whole. I am not saying all these things are on the table. It’s a fine line and will vary tremendously from seller to seller.

Location is Key

I anticipate this market recalibration will primarily impact properties ranging from entry-level to those around the US$ 1.5 million mark. Generally speaking, properties located in Red Bay, Prospect, Newlands, Savannah, Lower Valley, East End and certain areas of West Bay are more likely to increase in supply, and therefore pricing will level off.

Seven Mile Beach, the Seven Mile Beach corridor, South Sound, Cayman Kai, North West Point and the Yacht Club areas will not be impacted as much by the market recalibration. Why? High-net-worth individuals are less likely to be affected by rising interest rates. Historically they take funds from more volatile investment vehicles and put them into something safer, like real estate in the Cayman Islands.  

We may also see fewer developments or new homes being built as high construction prices and an increase in interest rates force property owners to think twice about beginning construction, for now.

Long Term Property Asset

Real estate is a long-term investment. It’s not about next month or even next year. It’s about where you’ll be five, ten, twenty years from now.

For buyers, the next quarter will be an opportunity for you to invest. If you invest now while prices slightly level off, you are poised for a great future return on investment. Some advice; it’s time to stop thinking of yester years prices. Property value in Cayman will not drop that low ever again. Look forward, and invest while the market is somewhat less competitive.

For sellers, don’t panic. This recalibration is a temporary, small and frankly healthy shift proving more energy for further growth. My advice; hold off from knee-jerk reactions as best you can. Stay the course.

Cayman is a mature, tax-neutral jurisdiction with low crime, excellent medical facilities and schools, and some of the best restaurants and entertainment in the Caribbean. It remains a strong investment option, even through tough market conditions.

Please note that this is a broad analysis of the overall market. Please reach out for a more bespoke detailed report tailored to your personal property journey, or if you have questions about the market in general. I love to talk about real estate, and I love this island, so let’s chat!

The Cayman Islands Real Estate Market: Q2 2022 Review

Posted on July 1, 2022 by - Buyer, Investing, Seller, Tips, Trends

Cayman real estate market report Q2 2022

The Cayman real estate market, like any market, is constantly evolving.

There are ebbs and flows, ups and downs, increases and decreases. It’s a natural and healthy cycle.

Over the second quarter of 2022, we started to see the very first signs of a recalibrating market. The change is happening mainly because of seasonal shifts but also in part because of global economics and events.

Make no mistake, the Cayman Islands real estate market is very strong. The current shifts we see need to be viewed in context. That context is that for over two years, The Cayman Islands real estate market has experienced a record-breaking run. And because the market naturally fluctuates over time and real estate is a long-term asset, its analysis should always be by years, not weeks or months.

Increase in Supply

A first glance at the second quarter statistics from the Cayman Islands Real Estate Brokers Association (CIREBA) might not indicate a market correction of any kind.

Based on sales, the average property value is up 14%. And the median number of new listings (30), pending/conditional sales (38) and back-on-the-market properties (8), all remained the same compared to the previous quarter. (Read last quarter’s market report: https://www.propertycayman.com/blog/cayman-first-quarter-real-estate-review/)

We have, however, experienced a slight increase in active listings. There were 757 listings this last week in June, the most in nearly nine months. May and June also marked the first time the market has experienced consecutive months of increased supply, albeit an incremental increase. Context is important here as well. 757 active listings is still extremely low. In early 2020, that number often was over a 1,000.

Simultaneously we are starting to experience slightly fewer enquiries from potential buyers about those active listings because of the typical seasonal summer slowdown.

What does this mean? For the first time in a long time, supply is up, and demand may be waning very slightly. And this could be an indicator of a small recalibration away from a firm seller’s market. Don’t panic. The market is still very healthy. The numbers show a minor softening, an inch towards the buyer’s end of the market, in a very strong seller market. It is also important to note that this is a normal season shift. It is best to view it as more of a short-lived period before anticipated activity resumes.

Sales Remain Strong

The number of completed sales over the second quarter is well above the total sales in over the first three months of the year as well as the fourth quarter of 2021.

It seems counterintuitive to talk about a possible correction or softening of the market while the number of sales is up. In fact, Property Cayman had a record best month in May this year. Yet, just as we need to view the market in context, it’s essential to look at those sales in the true context. The process that led to those second-quarter closings was initiated several months prior — when borrowing was cheaper, consumer sentiment was different, and a number of geopolitical events were just beginning to unfold.

The good news is that we’re still seeing substantial sale’s numbers, approximately 228 in this past quarter alone, underscoring that the real estate asset class remains robust and Cayman remains a jurisdiction of choice.

Current Market Pressures

Locally, things tend to slow down in Cayman over the summer months. Many residents traditionally use this time to leave the island, and the travel restrictions related to COVID-19 have prompted many to take extended vacations since their ability to travel has been limited for the past two years.  

While some restrictions have eased since the start of this year, pre-arrival testing for entry into Cayman and mask mandates were only lifted yesterday, the 30th of June. Quarantine requirements for unvaccinated remain in place. (https://www.caribjournal.com/2022/06/29/cayman-islands-testing-visitors-waives/)

It’s also worth noting that testing to enter the US, Canada, and the UK, among other countries, have been removed over the course of the last four months. This is significant because visitors play a major role in the local real estate market as potential buyers or short-term renters. So the island’s ability to match its pre-COVID tourism numbers is directly related to the market’s success. We’ve seen places like BVI, Turks & Caicos, Bahamas and Antigua attract visitors that, before COVID, would have made Cayman their destination of choice. Hopefully, with the easing of travel restrictions that came into effect on the 30th of June, we will begin to attract back those tourists and new ones. Spread the word, Cayman is open!

There are also the changing economic policies in the US to consider. North America is Cayman’s largest market for stayover tourism. And Cayman’s financial services industry relies on US-based clients for much of the island’s investment capital. So when the US struggles with record inflation and imposes increasing interest rates to curb costs, we can assume the Cayman Islands real estate market will feel a ripple effect. But let’s not forget the 12-17% interest rates in the 1980s. I keep saying it, but context is important — keep the new interest rates in perspective.

The Cayman Islands Real Estate Market Long Term Forecast

Historically, Cayman’s property market has shown the ability to weather the storm, figuratively and literally. It’s a time-tested fact that the industry as a whole is very resilient.

Whether we go back to events like the 11th of September (2001), Hurricane Ivan (2004), the US housing crisis (2008-12) or COVID-19 (2020), the local market has proven resilient. There may be dips and valleys in various statistical indicators, but we don’t see the prolonged market stagnation that can exist elsewhere impacting your overall investment.  

It’s for precisely this reason that I don’t use the word “slowdown.” In the second quarter, we experienced the beginning of a pause in the trends of limited supply, surging demand and increasing prices. We see a levelling out of what has been, quite frankly, a red hot market.

It’s a healthy recalibration. It’s natural, and I expect Cayman’s real estate market to continue to sustain its confidence and reward investors for their patience.

I love to talk about real estate, and I love this island. So, if you have questions about the market or investing in real estate, reach out. Let’s chat.

(Source: CIREBA. Please note that this is a broad analysis of the overall market. Please reach out for a more bespoke detailed report tailored to your personal property journey).