Owning real estate in the Cayman Islands remains one of the strongest investments you can make. Even as we now start to see an increase in supply, it is a small increase that is occurring after a two year long, all-time low. Simply put, investing in paradise is still a great option for you, your family and your portfolio
As we approach the end of what has been another year full of twists and turns related to COVID-19, here’s my Cayman real estate fourth quarter market analysis of 2021.
Cayman Real Estate Fourth Quarter Trends
Supply Upswing Continues
Cayman saw an increase in housing supply for the second-consecutive quarter following a stretch of about 18 months, where buyers were purchasing properties at a faster rate than they were going to market. Don’t get us wrong – it’s still a seller’s market. But the fourth quarter did see a continued shift toward a buyer’s market in certain sectors, similar to the third quarter. (You can read about the start of this shift in our third quarter market analysis blog.)
It all started with an extremely slow summer and that makes sense when put into perspective. We saw a lot of Cayman residents leave the island for the first time since the pandemic began. That meant the money they were saving while they weren’t travelling was no longer there. Neither, presumably, was the liquidity provided to them by means of pension withdrawals that many used on down payments for property investments. With rules surrounding international travel relaxing even further in quarters three and four, more residents focused on travelling overseas.
Plus, with the delay of Cayman’s quarantine-free travel policies for travellers visiting the island, Cayman was unable to fully capitalize on the Thanksgiving and Christmas bookings that bolster local businesses and give visitors a chance to see and perhaps buy their slice of paradise.
Anyone who lives in Cayman has clearly seen that November and December – usually the start of high season for Cayman’s tourism industry – has not been typical of what we’ve seen in the past. Potential visitors cancelled bookings and looked elsewhere for their holiday destinations as the delayed and full border reopening left many not wanting to visit with a quarantine mandate still in place. That softened consumer confidence and some potential buyers decided to look elsewhere not only for their vacations but for their property investments as well. It will take 3 to 5 years to win them back.
But the reality is this is a short-term situation. As more and more people get vaccinated, we learn how to live with COVID-19, and the Cayman Islands Government hopefully rolls back quarantine and testing requirements, travel to the islands will return to normal.
The Cayman Islands product remains extraordinary – beautiful beaches and harmonious society with top-tier medical and educational facilities alongside some of the best restaurants and hotels in the Caribbean. Mix in Cayman’s tax-neutral status and it’s easy to see why confidence in Cayman should remain high. Other jurisdictions simply cannot offer what Cayman can.
Much like other sectors in the property market, pre-construction development and sales did extremely well over the first 18 months of the pandemic. So much so, that many who were in the process of building, even if they weren’t real estate developers, decided to build multi-unit homes on their properties because the demand was increasing at a fantastic rate.
However, like in other sectors, that demand waned in the fourth quarter of 2021. Many of those in Cayman already purchased properties, and the border restrictions made it difficult for Cayman’s population to increase. Stamp duty concessions aimed at encouraging potential buyers to purchase are no longer available. Pension holidays are closing and those who may have taken out lump sums of their pensions in the early days of the pandemic may have already spent portions of that savings and no longer have that sudden injection of cash. Combine all these factors with the increasing cost of construction and the global supply chain problems, and it’s easy to see why the pre-construction market slowed in the fourth quarter of this year.
Days on Market
Days on market, particularly for the North American investor, is used as an indicator of the quality of a property. In the United States, for instance, if a house is on the market for more than a month, people assume there’s got to be something wrong with it.
In Cayman, we have seen a record low in terms of that indicator – properties in some segments of the market are selling much faster than they ever had before. To put it in perspective, the average number of days on the market for a house in Cayman traditionally has been around 375-395 days and just shy of a year for condos. Those times reduced significantly during the pandemic, however, with some condos selling in a few days despite increasing property prices. Demand was just that high.
As of the last few weeks, we are starting to see days on market number rise again in certain sectors. This correlates with the slight uptick in supply, low tourism and the continued slow border reopening.
Cayman Real Estate Fourth Quarter Summary
The fourth quarter of 2021 did see a slowdown in sales. A trend that started in the third quarter and bucked the previous 18 months of high demand and fast sales. Consumer confidence has waned slightly as Cayman’s stringent border restrictions and testing protocols caused many potential visitors and property investors to look elsewhere this holiday season. At the same time, many of the residents who were purchasing properties at record rates during the pandemic no longer have access to the same levels of cash as they previously had.
All that being said, Cayman has long been one of, if not the most attractive jurisdictions in the Caribbean and will continue to be, long after rules surrounding quarantine and COVID-19 testing subside. We remain in a seller’s market even though we saw dips in some key metrics over the last few months. The fourth quarter of Cayman’s real estate market in 2021 was just the natural ebb and flow of the market, a small course correction amid an overall booming property market. In short, it’s advisable to think long term and not react to short term happenings.
(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).
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