The real estate market never stands still. It constantly evolves and shifts, and those changes can mean different things depending on your personal property journey.
Coming off a historic run, Cayman’s housing supply is up slightly compared to 2021, while total sales have dipped.
We expected to see these trends. So, there is no need for kneejerk reactions or panic. The Cayman property market remains strong. There was more than US$ 198 million in total property value sold in Cayman through the third quarter. Even in the middle of a recalibration, the Cayman market proves to be resilient when compared to our global counterparts.
Changing Supply and Demand
The housing supply in Cayman has climbed steadily since the beginning of the year. The 845 properties listed for sale as of September 26th is the highest that we have seen it in 21 months.
To put it into perspective, that number is still well short of the pre-lockdown days, when listings were in the 1,000s.
In 2020 and 2021, Cayman experienced record-setting demand and in turn, sales, fueled by all-time lows in listings. So even as we are experiencing a recalibration in the market, the statistics show Cayman real estate remains an excellent investment.
There were 185 sales in the third quarter of 2022, nearly 32.50% fewer than the same period a year ago.
This follows a trend we are seeing in the United States, where the number of existing home sales are also expected to fall significantly. Multifamily units are projected to be the only housing sector with increased sales, according to the National Association of Realtors.
Another trend in the US — rising prices. The National Association of Realtors forecasts housing prices to rise more than 9% this year compared to 2021.
Purchase prices and rental rates generally have remained steady in Cayman through the third quarter. But the global economic market has caused some sellers to become a bit more flexible compared to a year ago.
For instance, we are seeing a slight shift in the asking price on high-end luxury homes. There are currently 12 properties listed for between US$ 10 - 20 million. Two years ago, there were only two in that sector. An increased supply offers more options for buyers and may force sellers to price more competitively.
The current environment presents opportunities.
While the Cayman product remains strong, a slight decrease in demand means prospective buyers may well have a bit more leverage at the negotiation table. Some sellers may be more willing to negotiate depending on their timeline to sell. Developers may incentivize investors with offers to pay strata fees, insurance, furniture packages or stamp duty.
CBRE estimates construction costs will increase more than 14% year-over-year by the end of 2022. It also expects that this escalation will stabilize next year and that overall cost inflation for materials will begin to cool, perhaps by the end of this year.
Locally, we’re starting to hear about improvements in shipping logistics and materials costs. I don’t know that we’ll ever see costs reach pre-pandemic levels, but certainly, we will see prices stabilize as supply chains even out. The cost and lack of availability of labour is expected to continue. It should also be noted that post-hurricane Ian, there will be a short-term delay of supplies to Cayman. (For more information on how hurricane season affects the Cayman real estate industry, watch Stefan Prior and Jude Holland’s discussion.)
Property Market Recalibration
We expected this recalibration. It’s normal and healthy.
We knew forces like inflation, rising interest rates, the war in Ukraine, post-pandemic shipping issues and the rise in construction costs would impact the market.
I also think it will be relatively short-lived.
Local hoteliers and others in the tourism sector expect this high season (the first without COVID-related travel restrictions or protocols) to be booming. They say rooms are being booked at pre-pandemic levels and furthermore, at higher rates. This is good for both the local economy as well as for investors interested in Cayman’s real estate market.
The Bottom Line
Rest assured, the Cayman Market remains strong. It is just recalibrating after a record-setting two years. There is no need to panic and suddenly change your property investment plans due to local or international market pressures. Remember that when thinking about real estate, think long-term. Think in years, decades even, not just in months.
There are always going to be ebbs and flows in the marketplace. It is natural and healthy. And history has shown that, in Cayman, real estate values are secure over the course of time.
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).
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