Cayman Real Estate Market: Q1 2023 Review

Numerous external and international pressures influenced the Cayman real estate market’s first quarter 2023 performance. A lot changed, and yet reflecting on the final numbers of the quarter, surprisingly, not a lot has changed. Cayman real estate is a resilient, strong market. Let’s dig in.

External Market Influences:

• Federal Reserve hikes put interest rates at the highest since 2007
• Russo-Ukrainian War is affecting the price of oil and, as a result, shipping costs
• Chinese manufacturing delays affecting access to construction materials
• Silicon Valley Bank crash raises odds of US recession, which should slow the Federal Reserve’s corrective measures
• Inflation results in less disposable income for investments

Local Market Influences:

• Multiple new developments previously delayed by COVID are now at completion
• The backlog caused by COVID had a knock-on effect on the pipeline of new developments as we see a slowdown of new products being brought to market
• The decrease in new developments is compounded by continued high material costs and shipping delays, as well as local labour shortages
• Increased local lending rates and scrutiny of new buyers and overseas investors

Q1 2023 Cayman Real Estate Market Performance

I told you a lot was changing! After record-setting years in a robust seller’s market, one would expect to see a decrease in sales and property value, an increase in days on the market and new listings. But that is not what exactly happened.

Yes, fewer sales are happening, and as a result, the total value of properties sold (sales volume) is down. But the average price per sale has gone up.

(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).

Despite the internal and external market pressures, property value in Cayman remains strong. The data proves this. Cayman remains a seller’s market, albeit with a few more buyer-friendly aspects.

Opportunities for Buyers

Yes, lending rates have gone up, but real estate is a long-term asset, so when we view lending rates over the last thirty years, the current interest rates fall below the average. In short, believe it or not, it’s still a good time to buy. Rates will come down again, and hopefully sooner than we think. The rate of increase by the Federal Reserve has already considerably slowed, and the last announcement on the 22^nd of March was the first time the Fed did not allude to further anticipated hikes.

As someone looking to get on the property ladder, it is easy to forget the impact of current lending rates on existing owners. Property owners with variable mortgages face monthly mortgage payments up to double last year. Unfortunately, this is forcing some owners to rethink and lose confidence in their property investments. Sellers with a specific timeline to sell may be more willing to negotiate. Homes initially listed with inflated price points (testing the market) are now correcting to meet true market value.

In addition, some buyers who qualified for financing for pre-construction properties a year ago may no longer be eligible for lending. So we are seeing an increase in re-assignment sales. (I should also note that depending on the pre-construction property, we are seeing up to a 45% appreciation in value from initial contracts to project completion. That just shows you how fast the market is moving.)

All this is happening at a time when there are fewer buyers in the market. If you can afford to buy now, do it. This is your window. Because when lending rates come down, and buyer confidence returns, demand and, with it, pricing will increase.

Tips for Sellers

No knee-jerk reactions, please. Inflation and mortgage rates will come down. If it wasn’t in your plan to sell now, do everything you can to try and stay the course. Property is a long-term investment, and you will see the most appreciation by retaining your asset.

If your home is currently listed for sale, be patient. There are fewer buyers in the market right now, but rest assured, sales are still happening, and property value hasn’t dropped. In fact, it’s risen ever so slightly. (Please note: this is a general market statement as different sectors react differently. Please reach out for a more bespoke detailed report tailored to your personal property journey.)

If financial circumstances, relocation, or your property plan mean it is time for you to sell, my advice, as always, is to go to market with a strategy. A proper plan, people! Understand your market sector, factor in your timeline to sell and carrying costs, and then present and price accordingly.

Here is a great example. I had this conversation with a landowner recently. Their circumstances had changed. A new baby was on the way. They no longer had the time to build, and they needed to put their land up for sale. After looking at comparables, both sold and current listings, discussing their timeline to sell and examining the pool of buyers in their segment of the market, we honed in on a comfortable, fair market price range. But ultimately, what ended up cementing the list price, was their monthly carrying costs. Listing on the lower end of the range increases the pool of buyers and speed of sale. In the end, it will put more money in your pocket because of the saving in carrying costs from a quicker sale.

Real Estate Investors

More investors are moving their money from funds and the stock market into bricks and mortar. There has been an increase in overseas enquiries, both for the high-end sector of the market and rental investments. Why these two sectors? Scarcity. Simple; supply and demand.

Cayman’s rental market is highly active. Population increase and increased lending rates mean more renters are afoot. The demand is at an all-time high, and inventory is scarce. This means rental investment properties are providing healthy returns for landlords. So it’s no wonder savvy investors are jumping on board.

When I say scarcity, I am also referring to the fact that there is a limited supply. There is literally a finite amount of real estate in Cayman. The product here, the lifestyle, is second to none. Safe, tax neutral, no restrictions on foreign ownership, great health care and education, world-class amenities, crystal clear blue waters and year-round sunshine — it’s an unmatched quality of living.

Your Property Journey

Sorry, that was a lot of information, but it shows that there is no one-size-fits-all real estate answer. Your lifestyle and your priorities are unique to you. What makes sense for you in your property journey is not the same as your next-door neighbour, your work colleague, or your friend. If you have specific questions, feel free to drop me a line. I would be happy to discuss what the current market performance means for you, your family and your personal property journey.