Cayman Real Estate Market: Q4 2023 Year-End Review — Property Cayman | Real Estate Experts in the Cayman Islands

Cayman Real Estate Market: Q4 2023 Year-End Review

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Michael Joseph

Real Estate Agent

It is incredible how predictable the market is. Any ‘perceived jolts’ cause a relative pause and recalibration in activity, followed by renewed growth. This is the fifth such cycle that I have experienced in my career. September 11, hurricane Ivan, the Great Recession, COVID-19, and now this post-pandemic inflationary cycle, aka, the cost-crisis. Each time, the market has responded and progressed in almost exactly the same way.

Essentially, we all have the crystal ball. But we are human, and unfortunately, panic can creep in, causing us to ignore historical trends and data, defaulting to a short-term mindset. For success, it’s vital you set an individual property plan and follow the course. It will save you from knee-jerk reactions as you wait out the inevitable twists and turns of the market. Play the long game. Why? Because real estate is a long-term asset.

2023 year-end review

Our team analyses the data, tracks the market changes each week, and projects the trends. That’s how we guide and inform our clients with confidence. We’ve got our finger on the pulse. Here is an overview of the trends of the Cayman real estate market from December 2022 to December 2023.

These patterns are further supported by the year-on-year comparison between 2022 and 2023.

(Source: CIREBA)

But if charts and graphs aren’t your thing, let me share this simplified summary of the island’s real estate market in 2023:

  • Decrease in number of sales.
  • Decrease in total value sold.
  • Increase in the average value of each sale.
  • Inventory remains low.
  • Increase in back-on-market properties.

Five key nuggets from the rearview mirror to help understand where we came from and where we are heading. Important to note, however, that each sector of the market reacted differently. For a more detailed and bespoke analysis of how these numbers pertain to your future and individual property journey, please reach out.

The outlook for 2024

We forecast renewed energy and market confidence. We saw signs of this in December as the number of buyer and seller inquiries rose. We experienced increased activity last month despite December traditionally being a year-end slight market slowdown. The current economic and geopolitical climate did indeed cause a prolonged summer slowdown and an extended market pause. However, per the predictable patterns in these cycles, homeowners and purchasers are becoming tired of waiting. They are, in turn, increasingly accepting of the current climate (lending rates, insurance costs, inflation etc.). The result is that more and more are ready to get off the fence, which is why we are seeing an uptick again in activity.

Lending Rates in 2024

Interest rates are not coming down significantly within the next twelve months. We might end 2024 at 7.50%, (a 1% decrease from the current local rate of lending), but overall, things are not going to change quickly. Also, let’s not forget that the current interest rates are still below average when comparing lending rates over the last 30 years. We took 3.5% rates for granted, getting a little too comfortable with a seriously low lending rate, but that doesn’t mean all is lost. Rates will stabilize and eventually come down, but in the meantime, the marketplace will continue to move along regardless.

Understanding the different segments of the market

As aforementioned, each segment of the market reacts differently to the overarching market shifts. Entry-level homes saw the greatest slowdown in 2023, mainly due to increased mortgage rates and inflation, all compounded by the lack of inventory. This segment will likely experience minimal change for the first half of 2024. While the rate of increase for mid-level homes slowed in 2023, pricing and sales remained somewhat stable. We will likely see an uptick again mid-year. The upper level of the market, luxury condos and homes continue to be bolstered by international demand from high-net-worth individuals and a painful lack of inventory. This segment will be impacted by potential changes to Cayman’s Permanent Residency system, legislation pertaining to residency by real estate investment and talk of increasing the Stamp Duty in high-end areas. However, until those changes are known, we expect this segment of the market to continue as it has been. Lastly, I think it is important to mention that the past 12 month slow-down in planning applications, (i.e. a drop in new developments), reflects a slowdown in the construction industry, this will affect entry-level rental rates, as well as the mid-level sector of the market.

Upward pressure on pricing

Once again, despite these internal and external influences on the market, Cayman is appearing more on the international stage. As of 19 December 2023, Cayman was officially removed from Europe’s “Grey List”. This is immensely beneficial news and now, more and more large global companies are considering Cayman as their new hub. All this brings a new surge to the market. It fuels international demand and population growth. This is intensified by a lack of inventory and further compounded by the lack of new development across all sectors. High demand and low supply mean continued upward pressure on pricing. Simply put, the pause in the rate of price increase is coming to an end. Those waiting for interest rates to come down will still be waiting for another year, and by then, housing prices will have increased again.

Government’s role in Cayman’s evolution.

A lot hinges on the Government’s decisions in a few key areas, including the long overdue development plan. There is talk of immigration reform, including the value of real estate investments within the permanent residency point system, changes to residency by independent means and heavy talk around increasing stamp duty for high-end areas. Yet to be determined, will stamp duty increases pertain to Seven Mile Beach, South Sound and Rum Point condos and homes? Perhaps all coastal and canal front properties fall prey? Or maybe all properties over a certain price point? More important than the selection criteria or parameters is a proper understanding of how these changes will impact Cayman’s annual revenue and infrastructure budgets in the short, medium, and long run. I, for one, hope the Government will consult the various industry stakeholders and key representatives, using an inclusive and transparent approach to ensure changes are well understood before implementation. Sometimes, change is required for growth, yet it needs to be logical and duly considered to ensure the outcome is positive for Cayman’s onward journey.

Final thoughts

I am not an economist or a politician, but I can tell you that there will always be internal and external pressures impacting the local market. It’s not what happens or why. It’s how you react when it does, or better yet, before it does! There will always be default excuses of why not to buy or sell. Pauses and recalibrations cause doubt, but know that the market will always keep moving with or without you. We’ve seen it time and time again. So, make your decisions with professional guidance and a long-term mindset. Do not get hung up on a single year in the market or what your neighbour has decided to do. Establish your own personal property plan to ensure your real estate decisions are informed by and reflective of your long-term financial goals and lifestyle choices.

(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).

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