The Cayman real estate market, like any market, is constantly evolving.
There are ebbs and flows, ups and downs, increases and decreases. It's a natural and healthy cycle.
Over the second quarter of 2022, we started to see the very first signs of a recalibrating market. The change is happening mainly because of seasonal shifts but also in part because of global economics and events.
Make no mistake, the Cayman Islands real estate market is very strong. The current shifts we see need to be viewed in context. That context is that for over two years, The Cayman Islands real estate market has experienced a record-breaking run. And because the market naturally fluctuates over time and real estate is a long-term asset, its analysis should always be by years, not weeks or months.
Increase in Supply
Based on sales, the average property value is up 14%. And the median number of new listings (30), pending/conditional sales (38) and back-on-the-market properties (8), all remained the same compared to the previous quarter. (Read last quarter's market report: https://www.propertycayman.com/blog/cayman-first-quarter-real-estate-review/)
We have, however, experienced a slight increase in active listings. There were 757 listings this last week in June, the most in nearly nine months. May and June also marked the first time the market has experienced consecutive months of increased supply, albeit an incremental increase. Context is important here as well. 757 active listings is still extremely low. In early 2020, that number often was over a 1,000.
Simultaneously we are starting to experience slightly fewer enquiries from potential buyers about those active listings because of the typical seasonal summer slowdown.
What does this mean? For the first time in a long time, supply is up, and demand may be waning very slightly. And this could be an indicator of a small recalibration away from a firm seller's market. Don't panic. The market is still very healthy. The numbers show a minor softening, an inch towards the buyer's end of the market, in a very strong seller market. It is also important to note that this is a normal season shift. It is best to view it as more of a short-lived period before anticipated activity resumes.
Sales Remain Strong
The number of completed sales over the second quarter is well above the total sales in over the first three months of the year as well as the fourth quarter of 2021.
It seems counterintuitive to talk about a possible correction or softening of the market while the number of sales is up. In fact, Property Cayman had a record best month in May this year. Yet, just as we need to view the market in context, it's essential to look at those sales in the true context. The process that led to those second-quarter closings was initiated several months prior — when borrowing was cheaper, consumer sentiment was different, and a number of geopolitical events were just beginning to unfold.
The good news is that we're still seeing substantial sale's numbers, approximately 228 in this past quarter alone, underscoring that the real estate asset class remains robust and Cayman remains a jurisdiction of choice.
Current Market Pressures
Locally, things tend to slow down in Cayman over the summer months. Many residents traditionally use this time to leave the island, and the travel restrictions related to COVID-19 have prompted many to take extended vacations since their ability to travel has been limited for the past two years.
While some restrictions have eased since the start of this year, pre-arrival testing for entry into Cayman and mask mandates were only lifted yesterday, the 30th of June. Quarantine requirements for unvaccinated remain in place. (https://www.caribjournal.com/2022/06/29/cayman-islands-testing-visitors-waives/)
It's also worth noting that testing to enter the US, Canada, and the UK, among other countries, have been removed over the course of the last four months. This is significant because visitors play a major role in the local real estate market as potential buyers or short-term renters. So the island's ability to match its pre-COVID tourism numbers is directly related to the market's success. We've seen places like BVI, Turks & Caicos, Bahamas and Antigua attract visitors that, before COVID, would have made Cayman their destination of choice. Hopefully, with the easing of travel restrictions that came into effect on the 30th of June, we will begin to attract back those tourists and new ones. Spread the word, Cayman is open!
There are also the changing economic policies in the US to consider. North America is Cayman's largest market for stayover tourism. And Cayman's financial services industry relies on US-based clients for much of the island's investment capital. So when the US struggles with record inflation and imposes increasing interest rates to curb costs, we can assume the Cayman Islands real estate market will feel a ripple effect. But let's not forget the 12-17% interest rates in the 1980s. I keep saying it, but context is important — keep the new interest rates in perspective.
The Cayman Islands Real Estate Market Long Term Forecast
Historically, Cayman's property market has shown the ability to weather the storm, figuratively and literally. It's a time-tested fact that the industry as a whole is very resilient.
Whether we go back to events like the 11th of September (2001), Hurricane Ivan (2004), the US housing crisis (2008-12) or COVID-19 (2020), the local market has proven resilient. There may be dips and valleys in various statistical indicators, but we don't see the prolonged market stagnation that can exist elsewhere impacting your overall investment.
It's for precisely this reason that I don't use the word "slowdown." In the second quarter, we experienced the beginning of a pause in the trends of limited supply, surging demand and increasing prices. We see a levelling out of what has been, quite frankly, a red hot market.
It's a healthy recalibration. It's natural, and I expect Cayman's real estate market to continue to sustain its confidence and reward investors for their patience.
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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