Are Real Estate Prices Dropping?

One of the most frequent questions I am getting right now is “are real estate prices dropping”? I thought I’d take this opportunity to delve into this question further, provide some insight into the overall market, discuss the unprecedented year-over-year price increases we’ve been experiencing and analyze the increase on the number of reductions we are currently seeing in the market and what this means.

So, are real estate prices dropping in the Cayman Islands?

Yes and no, but we need to delve into this further as it’s not a straightforward answer.

As I’ve touched upon on in previous articles, the Cayman Islands real estate market, like much of the world, has been experiencing unprecedented price increases over the last few years.

The average price of a sales transaction in 2019 was $770,492. In 2020, this increased to $987,131, a 28% year-over-year increase and in 2021 this jumped to $1,016,433, a 3% year-over-year increase. In 2022, this number once again jumped to $1,097,337, an 8% year-over-year-increase.

A 28% year-over-year jump from 2019 to 2020 is not only huge but unprecedented. We’ve never seen this kind of increase. It’s important to keep in mind that in 2019 there were 831 solds compared to 703 in 2020, a 15% decrease.

With respect to Cayman Islands real estate 2020 was not a normal year. We saw record-breaking sales at the highest end of the market spurred on by international buyers seeking a pandemic-free refuge in our islands as well as buoyed by the retirement withdrawal program which allowed many local buyers to “buy up” with these additional funds.

I think what’s even more surprising is that even with a huge 28% jump from 2019 to 2020 our average price per sold transaction jumped again by 3% in 2021 and then again by another 8% in 2022.

This level of growth is not only unrealistic but unsustainable in any real estate market including the Cayman Islands.

Increase in reductions in the marketplace

There can be the impression that due to the increase in the number of reductions in the Cayman Islands real estate marketplace that prices are coming down. It’s easy say at first glance that, “prices are dropping” and “we are in a buyer’s market”. This is not true.

Real estate prices are continuing to increase but not at the level they have been over the past 4 years. The last 4 years have seen rapid appreciation and the market is cooling off a bit.

What is happening is that we are seeing new listings coming onto the market where pricing is overzealous in anticipation that the appreciation will continue at the rate that we’ve been seeing over the last few years. This means that some properties are being overpriced which leads to them remaining on the market longer and eventually having price reductions.

So, has the market dropped?

No, the market has not dropped. In most instances transaction prices today are still higher than the previous transition with respect to similar properties. The market is still appreciating, and we are still in a seller’s market primarily due to the limited amount of inventory in our marketplace especially at the lower end of the price spectrum.

With respect to inventory, we had 235 new listings hit the market in January and February of this year, but our inventory is lower now than it was last November, December and this January. In fact, from November through February we had 485 new listings hit the market and our inventory has dropped from 1,585 to 1,542.

With respect to the increase in listings that are being reduced, the message this is sending is that vendors need to list their properties in a manner that is realistic to the market and not based on the huge price increases we’ve seen over the last 4 years.

Buyers are very sensitive to pricing and as the seller if you are not realistic to the market then purchasers won’t move forward. On the other hand, purchasers need to know that this is a still a very strong market. The market is still appreciating but not at the level we have seen in the past. Although this is only 2 months of data, the first two months of 2023 saw the average price per sold transaction increase to $1,147,482 which is a 4.6% growth compared to all of 2022.

In closing, as both a seller and buyer, it is important to work with an agent you trust. Someone who has the experience and knowledge and can guide you through the marketplace as any purchase in the Cayman Islands is substantial. Please do not hesitate to reach out to myself or my team at +1 345 945 4000 with any questions you may have.