Global markets are shifting, and it will be no different for the real estate third quarter in the Cayman Islands.
In this market forecast, I explain why Cayman’s real estate sector may experience what I’m calling a “recalibration” rather than a “slow down”.
Cayman’s real estate is well poised to remain steadier than most, and investors should see the next few months as a period of opportunity.
Real Estate Third Quarter Activity
We will see a slight and only temporary decline in the number of sales throughout the coming quarter.
This is due to several factors, including inflation, rising interest rates, a volatile stock market and seasonal changes in the number of tourists and residents on the island. However, the effects will only be short-lived.
Over the last few weeks, we have already begun to experience slightly fewer enquiries on listings. This indicates we can expect an equally small dip in the number of properties sold over the next few months. The key word here is slight.
The Cayman Real Estate Market is Different
In the United States, there was a 6.5% decrease in existing home sales between the first and second quarters of 2022, according to the National Association of Realtors. Moreover, the NAR forecasts another 6.9% decrease in sales from the second quarter to the third. (Source: NAR Q2 2022.)
Whereas the Cayman real estate market actually saw an increase in sales in the second quarter compared to the first. (The Cayman Islands Real Estate Market Q2 2022 Review.) So, while we may see fewer sales during the third quarter, I don’t anticipate as significant a decrease as has been experienced in the US. Furthermore, I envision a quicker return to activity.
Increased Supply. Consistent Demand
Cayman has experienced a historically low housing supply over the past two years. But the second quarter marked the first time since the pandemic that we have seen consecutive months of rising supply. The last week of June had the most active listings (757) in nearly nine months. (The Cayman Islands Real Estate Market Q2 2022 Review.)
While we can expect to see an increased housing supply in the third quarter, let’s put that in perspective. Pre-pandemic, listings were in the 1,000s. In my career, I’ve seen times when there were upwards of 2,600 properties on the market (a strong buyer’s market.)
So, while we may see an uptick in supply, we are still talking about very low housing inventory numbers. Demand continues to be strong despite the summer recalibration.
Cayman Real Estate Third Quarter Pricing
The NAR statistics showed a 15% increase in US median home prices in the first quarter of 2022 compared to 2021 and a further 9% increase in the second quarter. They also projected an 8% increase in the third quarter. (Source: NAR Q2 2022.)
So, you’re seeing two trends in the US. A slight decrease in home sales whilst sales prices are increasing, albeit at a lesser rate than they had been. We can expect more or less the same here.
I don’t anticipate significant decreases in Cayman real estate prices. There will inevitably be a small percentage of anxious property owners who look to sell. There will be individual cases where sellers urgently need to offload their property and may reduce their asking prices to ensure a quick sale. But I expect these to be the exception and not the norm. It will also vary depending on which sectors of the market we are discussing. But overall, what I envision for the real estate third quarter is more of a “levelling out” period, where increases in pricing will slow in some sectors, and some sellers may be more inclined to negotiate than we’ve seen in recent years.
There are a lot of different elements at play here. And as mentioned, each segment of the real estate market will behave differently. If you are confused about market changes will affect you, feel free to reach out. Our team is happy to discuss how this recalibration will impact your individual property plan and journey. Whether you are a first-time buyer or a long-term investor, we are here to help and our advice is always free of charge and pressure.
Real Estate Third Quarter Opportunity for Buyers
With the slow increase in supply and a temporary decrease in demand, there are potential opportunities afoot for buyers.
I wouldn’t say we’re transitioning to a true buyer’s market in the third quarter, but sellers and developers may need to make some brief concessions to be competitive. Purchasers could take advantage of a slowing rate of price increases and a slightly less competitive market to make moves on the property ladder.
For those interested in purchasing pre-construction, you now potentially have more negotiation power. In the extreme case, in a full buyer’s market, sellers and developers in the past have offered to pay for the first year of home insurance, strata fees, perhaps a better furniture package or the stamp duty in part or whole. I am not saying all these things are on the table. It’s a fine line and will vary tremendously from seller to seller.
Location is Key
I anticipate this market recalibration will primarily impact properties ranging from entry-level to those around the US$ 1.5 million mark. Generally speaking, properties located in Red Bay, Prospect, Newlands, Savannah, Lower Valley, East End and certain areas of West Bay are more likely to increase in supply, and therefore pricing will level off.
Seven Mile Beach, the Seven Mile Beach corridor, South Sound, Cayman Kai, North West Point and the Yacht Club areas will not be impacted as much by the market recalibration. Why? High-net-worth individuals are less likely to be affected by rising interest rates. Historically they take funds from more volatile investment vehicles and put them into something safer, like real estate in the Cayman Islands.
We may also see fewer developments or new homes being built as high construction prices and an increase in interest rates force property owners to think twice about beginning construction, for now.
Long Term Property Asset
Real estate is a long-term investment. It’s not about next month or even next year. It’s about where you’ll be five, ten, twenty years from now.
For buyers, the next quarter will be an opportunity for you to invest. If you invest now while prices slightly level off, you are poised for a great future return on investment. Some advice; it’s time to stop thinking of yester years prices. Property value in Cayman will not drop that low ever again. Look forward, and invest while the market is somewhat less competitive.
For sellers, don’t panic. This recalibration is a temporary, small and frankly healthy shift proving more energy for further growth. My advice; hold off from knee-jerk reactions as best you can. Stay the course.
Cayman is a mature, tax-neutral jurisdiction with low crime, excellent medical facilities and schools, and some of the best restaurants and entertainment in the Caribbean. It remains a strong investment option, even through tough market conditions.
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, or if you have questions about the market in general. I love to talk about real estate, and I love this island, so let's chat!
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