Rollover and how it affects the first home market
One area of the real estate market that has been exasperated by the government’s seven year term limit policy (commonly known as the “rollover”) has been the price range under US$500,000. Professionals coming on to the island who have invested in such properties in the hope of obtaining permanent residency and making a life for themselves in Cayman are finding that, in the event that they have to leave, they are being forced to place their properties on the market.
This end of the market has been affected also by the economic slowdown in Cayman, as with the rest of the world. The end result has been more inventory on the market competing with new construction, forcing developers to contract their inventory two-fold: because of the economy and also because of the artificial pressures of rollover. Furthermore, this has had an adverse effect on the rental market in the US$2,000 per month or less area.
Going forward, developers who cater to this market are going to have to be more concerned that they ensure that absorption rates are there, as they are competing with the existing inventory that is also increased due to immigration policies. Though the rollover may be a necessary evil, it is something that should be considered when buying this type of property.
The debate as to whether to buy or rent has been an on-going one over the years. The general rule of thumb was that if you intended to stay for longer than three years it was worth investing in a property as you would have enough time to recoup your costs and you would have also built equity that you would retain upon sale. I would still say that this is true and the market has had to adjust itself, with developers reducing the amount of inventory they put onto the market in this price range. The new inventory market has slowed but there is still a great deal of inventory of existing properties that are available, so sellers have had to get aggressive with their pricing, leading to some excellent bargains. Location is especially important because this determines the ability of a property to resale in the future. Even in this current difficult economic environment, a good location would maximise the potential for a sale over other properties.