2023 Real Estate Market Review

Buying & Selling, Featured

As we welcome in a new year, I thought I’d take this opportunity to provide a recap of the Cayman Islands real estate market for 2023 with respect to volume, transactions, inventory, and overall pricing as well as provide some insight as to where I believe our market will be heading into the new year.

Please note that all figures included in this article are taken from CIREBA and are quoted in US dollars.

A look at sold transactions and volume

In 2023, the total number of sold transactions was 702, which is down from 936 in 2022, a 25% decrease. With respect to volume, 2023 saw $921,816,517 in sales, which is down from $1,033,882,894 in 2022, a 10.8% decrease.

At first glance, one could say “the numbers are going down and that’s not good,” but there are several factors contributing to the overall decline that I think are imperative to explore.

It is important to keep in mind that 2021 was a record-breaking year for real estate in the Cayman Islands. It was the first time in our industry’s history that we hit over $1 billion in sales volume. In fact, Cayman was not alone, globally the real estate market started booming beginning early in the pandemic.

This continued through the beginning of 2022 where we had sales exceeding $100M in each of March, April and May. Not surprisingly, sales started to slow down as interest rates started to climb and inflation rose.

The fact that our year-over-year volume is down 10.8% versus 25% for transactions is a clear indicator that prices are continuing to increase across all sectors of the market.

New listings

When you look at new listings, we saw a total of 1,591 new listings in 2023. This number jumped very slightly from 1,565 in 2022, a 1.66% increase. With respect to the value of these new listings, 2023 saw $2,719,607,415, which is down from $2,838,673,756 in 2022, a 4.2% decrease.

It would be easy to look at those figures and say that prices are coming down, but it’s important to remember we are a small market and that a substantial number of lower priced properties will affect the overall numbers. In fact, I listed 73 units in December alone at Lakeside with prices ranging from CI $249,000 to CI $339,000. Those listings alone represent almost 5% of the total listings that hit the market in 2023.

Average price per listing – solds and new listings

The average price per sold listing has been increasing year-over-year. In 2019, the average price per listing was $770,492. In 2020, that climbed to $987,131 a 28% year-over-year increase and in 2021, that climbed again to $1,016,433 a 3% year-over-year increase. In 2022, that number rose to $1,097,337, which is an 8% year-over-year increase and a staggering 42.4% increase in just 3 years.

In 2023, the average price per sold listing was $1,313,128 a 19.7% increase over 2022.

When you look at new listings, we are seeing the same trend with respect to pricing. In 2019, the average price per new listing was $981,687. In 2020, that climbed to $1,119,016 a 14% year-over-year increase and in 2021, that climbed again to $1,528,875 a 37% year-over-year increase. In 2022, that number rose to $1,830,883, which is an 19.8% year-over-year increase and a huge 86.5% increase in just 3 years.

In 2023, the average price per new listing was $1,709,369 a 6.3% decrease over 2022 but as I stated above this is not surprising given the impact the 73 units at Lakeside had on the overall market. If you pull out the 73 Lakeside units the average price per new listing is $1,775,103 in 2023, which is only a 3% decrease year-over-year.

Inventory is up

The average monthly number of active listings at the end of 2023 was 1,618 compared to 1,490 in 2023, which is an 8.6% increase. As of writing this article, there are currently 1,791 active listings of which 316 are pending and 293 are pending/conditional which means only 1,182 are actually available for sale.

In markets generally, when inventory levels go up, the market turns into a buyers’ market due to the softening of prices as there is more options for buyers. The Cayman Islands real estate market is not acting in this fashion. We’ve only seen a marginal increase in inventory year-over-year and when your cross reference that with our population growth this level would seem normal.

Our population continues to increase, and it currently estimated at over 84,000+ which is a huge jump over the last few years. In the year of 2021, the population grew by 8,000 people which had a tremendous effect on the market and continuing today. Also, all 73 of the Lakeside units are now under contract.

So, yes, year-over-year, there is slightly more inventory in the market, but the population size is increasing, and we know from experience that many people when they move to Cayman start out as renters and eventually purchase property.

 The value of existing inventory

Not surprisingly the value of the active listings in the marketplace has continued to rise. In December 2022, the value of active listing inventory hit $3 billion for the first time in our industry’s history. Ever since then this number has been climbing higher and higher and increased to over $3.4 billion in December 2022.

2024 and beyond

2023 was a year of transition with respect to the Cayman Islands real estate market as it was on a global basis. The pressures of increasing inflation, rising construction costs, and rising interest rates impacted all sectors of the market.

In mid-December 2023 the US Federal Reserve held its key interest rate steady at 5.25%-5.5% for the third straight time and set the table for multiple cuts to come in 2024 and beyond. Along with the decision to stay on hold, committee members penciled in at least three rate cuts in 2024, assuming quarter percentage point increments.[i]

Now, this doesn’t mean we are going to drop back down to record-low interest rates. It is anticipated that the rate drops will be probably in the quarter point range at a time with “four cuts in 2025, or a full percentage point. Three more reductions in 2026 would take the fed funds rate down to between 2%-2.25%, close to the long-run outlook, though there was considerable dispersion in the estimates for the final two years.”[ii]

Similar good news comes when we look at inflation. Inflation has “eased over the past year” while maintaining its description of prices as “elevated.” Fed officials see core inflation falling to 3.2% in 2023 and 2.4% in 2024, then to 2.2% in 2025. Finally, it gets back to the 2% target in 2026.”[iii]

2024…supply and demand

There are several reasons we are not seeing price drops but ultimately it comes down to supply and demand and right now the demand for property in the Cayman Islands will continue to grow.

As I’ve touched on in several articles, the Cayman Islands has a unique real estate market. We are a very desired location and people are continuing to relocate for numerous reasons but the most common are:

  • Our incredible lifestyle.
  • Investment opportunity including the relocation of family offices.
  • Our tax neutral status.
  • Employment opportunities as so many of our cornerstone industries including banking and legal services continue to grow and expand.
  • Safe.
  • Geographical location.

The more people who move here, the more demand for housing, but the supply of new housing is slowing down.

As explored in several previous articles, the need for a national development plan for the Cayman Islands is key. The lack of a national development plan has made many developers warry to proceed with potential new developments. This of course will affect new listings coming the market and our overall inventory level. In addition, planning is another area that effects us greatly as they are understaffed and their turnaround time is having huge impact on the cost of building.

Like most industries, the real estate industry in the Cayman Islands will go through changes throughout 2024. When buying or selling property, it is important to work with someone you can trust, who is an expert in their field, who has multiple years of experience especially with major economic transition periods like we saw in the early 2000s and are experiencing now. If you have any questions regarding buying or selling property in the Cayman Islands or anything related, please do not hesitate to reach out to the Bovell Team at +1 345 945 4000.

[i] CNBC December 13, 2023

[ii] CNBC December 13, 2023

[iii] CNBC December 13, 2023