Outside of a pandemic, the demand for short term vacation rentals in Cayman is more than steady. As a coveted travel destination, second home investment properties in Cayman, provide consistent healthy profits for owners – often generating returns in excess of 10%.
The current landscape has undoubtedly disrupted the playing field. While tourists may be dreaming of our white sandy beaches more than ever, travel restrictions and our border closures mean those visits will, unfortunately, have to wait.
Recapping COVID-19’s impact on the Cayman rental market
At the onset of the lockdown period, we were inundated with calls and emails from anxious vacation rental property owners. To counter the closed borders and lack of tourism, we strongly suggested that these property owners switch from short term rentals (nightly or weekly) to long term rentals (six to twelve months). This strategy proved effective at attracting local renters, jumping at the chance to live on the beach at discounted rates. And although the return on investment would be less than the previous year, it prevented landlords being stuck with vacant properties.
Other property owners with more remote East End, Northside, and Cayman Kai locations, have reduced their nightly rates and offered specials to encourage local vacations. With residents unable to travel overseas, this has spurred Cayman’s very own ‘Staycation Nation’. A trend which continues as residents seize the opportunity for a change of scenery, at a discount. We know we are!
The end result? The COVID-19 pandemic caused the average price of rentals in Cayman to drop. This drop is a short-term response. We foresee a rental market rebound once Cayman’s borders reopen and we start welcoming tourists back.
Tourist High Season
In March and April, when property owners first made the decision to offer longer-term rentals and reduced rates, they were holding out hope for tourism to return in time for high season. The winter months, November through to April, when you can’t find a spot on the beach, let alone a vacation rental in Cayman.
Fast forward to today, we are now approaching the middle of October, and the borders fully reopening before the new year is looking less and less likely. The last few government press releases have made it clear that the risk tolerance, when it comes to potentially exposing the island to the virus from inbound travel, is minimal.
If you couple that with the end of the mortgage holiday, offered by the banks, it’s now time for investment property owners to employ a more long-term solution.
Cayman’s Global Citizen Program
The Cayman Islands government has announced they will start what is commonly referred to as a digital nomad visa. A visa specifically designed to attract employed individuals to the island. Bermuda, Barbados, and Antigua have already introduced initiatives similar to what the government is calling Cayman’s Global Citizen Program. The goal is to entice entrepreneurs and other professionals who can work remotely, to set up office on our beautiful shores. These digital nomads would provide an inject of money into the economy, without affecting the local job market.
Positive news for the rental market
After the rental market dip early this year, the Global Citizen Visa Program is definitely a win for Cayman landlords. The demand for long-term rental properties is going to increase, as more working professionals swap their home office for a temporary beach view. This will drive rental prices back up and make second-home, income properties more valuable.
Our advice: Minimize your risk
If property owners continue to hedge their bets on the return of tourism in time for the winter refuge from the north, they may be left disappointed with empty apartments and pockets.
Rather than rolling the dice, owners should consider listing their apartments in the long-term rental pool. This way, they can attract a digital nomad looking to live the beachfront dream while they work remotely in Cayman.
Yes, the monthly rental income generated will be a reduction from last year, but when amortized across the lifetime that you hold the property, it is relatively insignificant. And some money earned is always better than none.