Cayman Real Estate Market: Q2 2024 Review

I feel the need to preface this quarterly market report. Like clockwork, I collate and examine the market data on the 1^st of each month and always provide a deeper analysis at the onset of every new quarter. As a result, the majority of this quarterly report was written on the 1^st of July, directly following the end of the second quarter, before the arrival of Hurricane Beryl.

Beryl was the earliest category-five Atlantic hurricane on record for over 100 years. She wreaked havoc throughout the Caribbean. Having lived through Ivan and prepared my family for Beryl, it would be remiss of me not to share my deepest sympathies to all those affected throughout the region and extend my absolute gratitude to all the emergency responders and front-line workers.

Luckily, Cayman fared relatively well through Beryl and has the infrastructure to rebound quickly. For me, the storm highlights our nation’s ability to come together. From the government to the private sector and non-profits, what makes Cayman special is our unified approach to inform and support.

Cayman Real Estate Review

As expected, the Cayman Islands real estate market experienced a slowdown in Q2 2024. Several factors contributed to this, including high interest rates, low supply, inflation, and rising living and insurance costs, collectively termed the "Costs Crisis." Despite these hurdles, historical trends and a closer look at specific market segments provide a nuanced understanding of the current landscape.

(Source: CIREBA)

Q2 2024 outperformed Q2 2023, with increased sales and the total value sold. However, new listings and sales decreased from Q1 2024, but properties sold faster, showing renewed buyer confidence despite high interest rates.

Performance by Market Segment

• Starter Homes: This segment of the market continues to be the most significantly impacted by high interest rates and inflation.
• Mid-Range Properties: Similarly affected by high interest rates and costs, but performing slightly better than the first-time properties.
• Luxury Properties: Demand remains steady, and growth is anticipated, but the lack of supply continues to frustrate high-net-worth individuals.
• Pre-Construction: Cayman, like the rest of the world, is experiencing extraordinary delays in development compounded by our location and supply chains. With projects years behind schedule, buyers' confidence in pre-construction options has decreased. This is compounded by a lack of new inventory and the removal of stamp duty incentives for pre-construction purchases.
• Land: Though not completely halted, land sales have slowed due to a low supply of contractors and high commodity, driving up labour costs, and the high carrying costs of undeveloped land, combined with the current interest rates.

The Impact of External Forces

Historically, the market tends to slow down every summer, but during U.S. election years, this slowdown often extends for a few extra months. This pattern arises based on the uncertainty associated with election outcomes, and the unknown influences new leadership will have on the economy.

In addition, as mentioned in the preface, the Caribbean just experienced a record-breaking category-five Hurricane, Beryl. Storm season is one of the regular, albeit small, contributing factors to the market’s summer slowdown. Local buyers may be deterred from purchasing due to certain wind patterns or flooding concerns. However, given the number of nations affected by Beryl and the global publicity of the storm, it is likely to cause apprehension for international buyers in the Caribbean at large.

Despite various market jolts in the past (e.g., September 11, Hurricane Ivan, the Great Recession, COVID-19, and the current cost crisis), the demand for Cayman Islands real estate always recovers. Why? We have a unique offering: a tax-neutral British overseas territory with economic stability, cultural harmony, modern infrastructure, first-rate healthcare, and unrivalled amenities. The Cayman Islands are unlike any other place.

Forecasting Q3 2024 and Beyond

This summer, we expect sellers to reduce prices to bridge the gap caused by the market’s lack of confidence. As the number of inquiries drops, Sellers will be forced to adjust their expectations and become more negotiable.

This past quarter alone, we saw the closing of three significant sales: Infinity Ridge, Villa Mora, and Renaissance Villa 14. Each of these properties had been on the market for nearly a year. The sellers decided to accept offers based on the 'time factor,' valuing immediate returns over potentially higher but delayed profits. Proper consideration of the property carrying costs and market shifts helped close the gap between seller and buyer expectations.

Post-election, post-summer, and post-hurricane season, we anticipate a gradual return of confidence in the market. Interest rates are also expected to decrease slightly before the end of the year, providing further relief and boosting market activity.

Long-Term Property Investments

The current market frustrations, interest rates, low supply, and high prices continue to dominate. However, holding off on buying may not be the best strategy. When interest rates start to come down, there will be more buyers afoot, and the current negotiability of sellers will be gone. Getting on the property ladder and allowing time to mitigate initial high costs can be beneficial. A patient, long-term mindset is crucial in real estate. By staying on course and making well-considered investments, you can navigate and thrive in the Cayman Islands real estate market.

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