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
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
Cayman’s Global Citizen Program
The Cayman Islands government has announced they will
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
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.
A completely reasonable and fair assumption dictates that during an unusually slow summer season, closed borders, zero tourists, and a reduced population count all resulting from a world pandemic we should expect ZERO sales right!? Well, when a market moves against all expectations it’s worth looking a little closer.
We have reviewed the Association movements between June and July 2020 (the new dawn) how it differed from July last year (the old world) and finally we also reviewed what we are seeing in August so far and what the latter part of the year will look like.
June 2020 Vs July 2020
40% up in Condo sales 150% up in House sales 25% down Land sales – but watch out got lots of August activity. No change in commercial sales
July 2019 (old world) Vs July 2020 (the new dawn)
52% down in Condo sales 44% down in House sales 65% down in Land sales 66% down in Commercial sales
Property Cayman had 9 transaction sides in July 2019 Vs 4 in July 2020 – 44% decline. However that’s 4 more than we were expecting.
Observation: This decrease is expected however it isn’t what you could have expected with a pandemic underway. Also note it’s only a temporary shift. Despite internal and external pressures, transactions and demand are still very clear and present. This level of activity is returning with gusto which is a direct testament to local confidence. Many are seeing the opportunity to lock in (with the help of pension withdrawals in many cases) a new home or long term investment before the borders open and population with demand increases again.
With a steady incline of new listings, new contracts and a decline of the Back on Market listings, the August/Sept/Oct pipelines are filling up nicely.
August 2019 (old world) Vs August 2020 (new dawn)
24 Condo sales last August and 8 sales so far this August10 House sales last August and 1 sale so far this August32 Land sales last August and 3 sales so far this August0 Commercial sales last August and none this August… so far
Property Cayman had 10 transaction sides in August 2019 Vs 14 lined up to close this August 2020 (pipeline contracts) – 40% up and we have 3 weeks to go! Watch this space.
Observation: Another summer season with record number of transactions? Despite a reduced July (year on year) there’s a surge of activity to rebuild the pre-covid momentum. It says a lot. Local demand and confidence is holding its ground and we can expect some good catch up this month.
August and beyond
With borders closed and pension withdrawals slowing down in the latter months of the year we can expect to see a decline in properties going to contract and a consequential increase in inventory (lowered demand with increased supply). We feel however that things won’t slow down and that when borders open up we can safely forecast new and positive influences on the market.
With open borders the market will quickly absorb any oversupply of inventory. With extended border closure into November we can expect pricing pressures to take effect but in reality it will be more of a stabilizing effect than a significant decrease in pricing.
Either way, whilst numbers are averaged down by 50%, most sectors of the market won’t see any significant decreases in pricing as seller’s continue to be patient. Markets ebb and flow over time so be sure to establish your big-picture property plan and consider the different chapters of YOUR journey. If you wait for a market to change to your advantage you will miss out on the opportunities currently in front of you.
This analysis is broad and general and more designed to spark the conversation. We would be delighted, as always, to assist you along your personalized property journey so feel free to reach out and let us know your thoughts, ideas and even concerns. We can cut through the noise and give confidence to your next move which every direction that might take you.
The impact of Covid-19 on our industry has been unprecedented. Showing properties, which has always been core to what we do, was no longer.
Fortunately, 90% of what we do, can be done online. We have adapted to the current reality and continue to actively offer guidance remotely and online, keeping you apprised of trends, changes and projections in the Cayman Real Estate market.
As of Monday 8th June, with Government approval and strict safety measures in place, our office is back open and we are able to show properties again. We are definitely not ‘back to normal’ but welcome you all to the new normal…😷
Scroll down for new showing protocols and FAQ ⬇
Update 17th July 2020: Property showings are in full swing and all properties are able to be viewed safely. Whilst restrictions have eased, we are still taking safety precautions- wearing masks, social distancing and sanitizing. Prospective buyers and sellers are no longer required to complete contact tracing forms.
Property Showing Protocols –Prospective Buyers
Property Access and Contact Tracing Forms to be completed and signed by every Prospective Buyer.
Maximum of 2 adults persons named on the PACT form shall be present at the property along with the agents.
Prospective Buyers will be required to meet the agent at the property and will not be driven to the property by the agent and must remain in their vehicle until called to enter the property by the Agent.
Everyone will wear a protective face mask(s) before entering the property.
Everyone will maintain 6 feet distancing at all times.
The viewing is contactless, and will not touch anything whilst in the property.
Everyone will sanitize their hands with hand sanitizer upon arrival to and departure from the property.
Neither the agent, nor the buyers will use the washroom facilities during access.
If prospective buyers should develop symptoms of the COVID‐19 virus, or are later diagnosed as having the COVID‐19 virus, they will contact the CIREBA agent immediately, so that the agent may follow the necessary procedures which could require testing and quarantine, to protect any parties that may be involved.
Property Showing Protocols –Sellers/Occupiers
Wherever possible, we will ask that properties are vacated for the duration of the showing.
If properties cannot be vacated, occupiers must stay 6 feet from the agent and Prospective Buyers at all times. The best way to achieve this is by staying in one designated room for the duration of the showing, then leaving that room when they need to view it.
Properties where someone is shielding, self-isolating, or has any symptoms associated with coronavirus (a fever, a new & persistent cough or flu-like symptoms) will not be shown.
We ask that occupiers leave all internal doors open, to minimise the need to touch any surfaces.
If the property is vacant the Agent is to disinfect the lockbox, all doorknobs, surfaces, light switches and counters with antibacterial/germ killing cleaners after Prospective Buyers have left.
A record will be kept containing the names of those who have visited the property.
I am interested in buying or renting a property, am I able to view it?
Short answer yes, long answer below.
Viewings are only permitted on your corresponding day based on your surname. A-K being Mondays, Wednesdays and Fridays and L-Z on Tuesdays, Thursdays, and Saturdays.
We also strongly encourage prospective buyers to exhaust all digital and virtual options before scheduling a viewing. There are lots of steps to buying a property, and most of these can and should be thought about before ever stepping foot in a property. Click here for a helpful list of considerations and questions that will help get you started.
What steps must I take before viewing a property?
Contact your agent for the required forms to be signed prior to any viewing.
You must not be showing any flu like symptoms. If in doubt, stay home and reschedule the viewing for a later date.
You will be required to find your own means for transport to the property, wear a mask and disinfect your hands prior to entering the property.
I would like to sell my property. Can I work with an agent in the current climate?
Yes. Our agents are able to meet via phone, video or in person to discuss the listing process. All documents required can be submitted digitally.
The majority of our industry has exemptions to operate so we are also able to get professional photos, videos and virtual tours done, in order to showcase your property in the best way possible.
My house has been listed for sale/rent and I am worried about having potential buyers/tenants coming through. How do I handle the situation?
Your safety is our priority. In adherence to the Public Health Law we have implemented strict safety measures for all property showings. See details above.
We also offer virtual tours as an alternative to in person showings. The virtual tour will only require one person to enter your home to shoot the content which will then be made available to any prospective buyers or tenants. Reach out to your agent if you would like to schedule a virtual tour.
Is your office at 51 Fort Street open?
For the next few weeks, our office hours will be Monday – Friday from 9:00 AM to 4:00 PM. The reception door will be locked in order to control the flow of traffic in the building so please try and call ahead.
Our preference will be to schedule meetings in an open environment outside of the company’s premises.
If a meeting has been scheduled within our office, we ask that proper hygiene and safety precautions have taken place prior to entering, masks or face coverings must be worn and social distancing must be respected.
Amidst uncertainty, we do know that this too shall pass. It may be weeks, it may be months, however, if we remain proactive to these changes, it will never be years. And know this — We are strong and able to overcome these challenges as any nation on earth.
As a final word, we say in unison, thank you, to our exceptional medical community, to those who wake up every day with the mission to be a helping hand, the people who are risking their health in providing essential services, and our political leaders at all levels, who are working tirelessly to keep us safe. The Cayman Islands owe you all our endless gratitude.
Photo credit: Courtney Platt | www.courtneyplatt.com
We all seem to have a love/hate relationship with COVID-19 related news. We love the camaraderie, hate the negativity. Love the creativity, hate the dramatics. As another week in lock down passes, we feel that the dust has settled enough for us to take a look at the data and numbers and provide you all with a meaningful, factual, un-sensationalised statistical review of the Cayman real estate market. Our analysis covers how COVID-19 has been a catalyst to the changes we are seeing and those we anticipate looking forward.
Whilst there is undoubtedly a ‘COVID-Confidence-Crisis’, the true value in real estate is its long-term stability.
Whilst there are short-term tactics that we can employ, our advice and guidance remain the same….this storm too shall pass. We will get to more of that in a moment, but first lets deep dive into facts & figures…
(All figures are in US$ and data is as of 28th April 2020)
1438 active CIREBA listings: 749 Condos ($39,000 – $8,500,000) 234 Homes ($170,000 – $39,900,000) 431 Land ($26,000 – $10,800,000) 24 Commercial ($18,000 – $31,500,000)
Compared to Q1 of 2019, this active listing count has only decreased by 3.8% for the same period. Now having said that, bear in mind that April and May are the final and slightly slower months of high season so the impact isn’t as it would have been if the pandemic unfolded in October instead. Overall, we maintained a strong market until the ‘COVID-Confidence-Crisis’ prematurely ended our 5-year momentum.
Looking forward we can expect a gradual increase in supply to as much as 2,000 – 2,500 by the end of the year. Changes in employment, income and lack of tourist rentals will attribute to reasons why properties will come to market. Whilst each sector will react differently at different stages, we can expect investment apartments and condos to come to market from early summer onwards.
Equally, life continues. There will be marriages and babies born (watch out for the ‘Coronial’ generation in 9 months), new jobs, returning residents, graduating students and new opportunities will saturate some of the anticipated surge in supply. We should acknowledge some recent and very sizeable sales in CIREBA, ($18M development land,$14m private home, US$7m vacation home and on and on) demonstrating that despite this ‘blip’ there are a number of property investors still 100% interested in Cayman. They can see past the short term disruption.
For the time being, sellers are standing firm on their asking prices and buyers are not (yet) confident enough to enter the market. The resulting effect couldsee us return to a buyer’s market with new supply, decreased demand and consequently a decrease in values. By how much? Well, not as much as you’d like to think...
The Foreclosure Forecast – It’s not what you might expect.
The 2008/9 Great Recession was a lesson learned and this time around, banks have promptly activated a 3-month mortgage holiday. Thus, protecting their clients and ultimately safeguarding all property values. This has relieved a tremendous amount of pressure and bought time for the storm to pass us by.
Furthermore, banks will make every effort to avoid foreclosing on their clients to the extent that after the mortgage holiday you can expect their willingness to consider case by case payment plans moving forward.
With all this said we aren’t expecting a flood of foreclosures and if they do foreclose, we don’t expect to see this until the beginning of 2021. At that stage the courts set a precedence in that foreclosed property values must remain comparable. So, you can’t expect steals and deals.Overall, it’s good news for the individual, the banks and the market place!
This is an impressive 516 different transactions under contract at various stages in the selling cycle. 62% of these contracts are Pending/Condition (conditions still to be waived). This high figure reflects the numerous pre-construction contracts yet to complete. Despite a plethora of pressures, we anticipate the majority of these to complete unhitched.
At the time of writing, CIREBA is surveying all banks, so stay in touch with us for a comprehensive summary of all bank offerings. In a nut shell,Banks are still lending. What is evident is that they will review applications with a little more caution to mitigate their exposure. This helps applicants ensure they aren’t over-extending themselves. Meanwhile, the prudent investor with access to capital will see through this and use it to their advantage.
March and April saw a significant decline in new sales contracts due to the lockdown restrictions. The knock-on effect of this in Q2 and Q3 will be a reduced number of actual closings with sustained, potentially increased inventory. The irony is that we are still closing with attorneys and Government departments more efficiently than ever before.
Additionally, some buyers’ ROI expectations have been deflated to levels where they are now considering their options and may withdraw from a potential purchase. What buyers need to be aware of is in a graph further down in this report. Housing prices in Cayman have not fluctuated that much over the past 20 years, even during similar economic downturns. As we mentioned earlier, real estate is a stable investment and whether you chose to buy, sell or hold firm, you need to fully consider the short, medium and long term.
246 Listings on and along the Seven Mile Beach Corridor:
178 Condos (US$125K – $8M) 43 Homes (US$900K – $17M) 16 Land (US$290K – $2.6M) 9 Commercial (US$180K – $6.3M)
This is a relatively low number of options along the world-famous SMB corridor. Demand has suddenly disappeared with closed borders and a nonexistent tourism market. The resulting effect is short term rental condos looking for long term tenants,flooding the market with rental inventory and decreasing long term rental rates. As anticipated in our Rental Migration blog a few weeks ago, we are seeing this projection play out. Trends and projections matter.See current rental rate availability below:
111 CIREBA’s long-term rentals: 77 Condos ($1,000 - $17,000/month) 21 Homes ($2,200 - $15,000/month) 13 Commercial ($26 per sq. ft. – $13,000/month)
Rentals by neighbourhood: 55 Seven Mile Rentals ($1,000 - $17,000/month) 12 West Bay Rentals ($2,000 - $4,000/month) 19 GT/South Sound ($2,000 - $15,000/month) 16 Grand Harbour / Prospect / Spotts ($2,000 - $9,000/month)
With CIREBA’s new rental platform consolidating rentals into a central and convenient location, we have seen a sharp rise in rental inventory come available along the Seven Mile Beach corridor. As mentioned, many of these options are traditionally reserved for short-term vacationers, however in the absence of tourists, many landlords are converting to the long-term rentals to sustain income.See our previous blog on The Rental Migration.
159 Sold from January – March 2020 (an average of 53 per month) 83 Condos ($20,000 – $5,400,000) 20 Homes ($170,000 – $7,000,000) 50 Land ($24,000 – $2,900,000) 6 Commercial ($325,000 – $18,000,000)
CIREBA averages approximately 50 sales a month. April demonstrated a 50% drop in closed transactions. 25Solds (April 2020) 13 Condos ($24,000 - $5,400,000) 4 Homes ($180,000 - $14,700,000) 8 Land ($24,000 - $20,000,000) 0 Commercial
We would ordinarily expect a small slow down at the end of high season, however, the Covid-Catalyst has fast tracked us into slow season. What has been a strong and buoyant market for the past 5 years has now lost the wind in its ‘sales’. The easy projections show this trend continuing through summer at which point we can revise projections for the balance of 2020.
As any prudent investor will tell you, trying to time the market is a fool’s game, and nigh impossible. Of course, like any market,pricing will go up and down, however those wishfully hoping for pricing to fall to levels pre-2015 will never enter the market.
Don’t believe us? Look at the pricing levels for condos over the past 20 years. Throughout this period there was 9/11 (2001), Hurricane Ivan(2004), and the Great Recession(2008/2009). Specifically, notice what happened to pricing/values after those key dates. A flattening of the curve for sure, but relatively marginal.
Source: CIREBA and Lands Information Services – Disclaimer: these are approximate figures designed to provide a snap-shot image of the Cayman Islands property market only and are subject to further discussion. If you have a desire to see the specifics as it relates to your personal property journey, please contact us.
In short, real estate is all about using time to your advantage. Buy and hold through the good times and the not so good, but know this:
It is impossible to time the market
Over time, values will increase
Real estate is a very stable asset class
Post any economic downturn, pricing may fluctuate, then it will stabilise and continue to increase
The gains from 2016 won’t be lost
Cayman remains beautifully positively positioned as a safe harbour in a stormy world
The future is bright, although it may not seem like it right now, the property market is secure and as history has taught us, there is no reason to lose confidence.For those not in the market, don’t worry, it’s never too late to get on the ladder. The right time to buy is predominantly predicated on when it is convenient for you. With a concise plan of action, your property plan will serve your family and investment needs very well over time. Secure tomorrow, today!
For over a collective 25 years we have assisted more than 1,000 individuals and families achieve their property goals. We have been through the ups and downs and stood shoulder to shoulder with every single one of our clients. If you are looking to buy, sell or rent you will have questions so, reach out to any one of our agents, irrespective of your budget. No strings attached, just good, honest real estate advice. Establish your property plan, today.