One of my recent articles focused on many of the changes in the Cayman Islands real estate market that are happening along Seven Mile Beach from the Grand Hyatt superstructure going vertical to the official announcement that the redevelopment of Lacovia has been approved by the current owners.
It’s easy to see the changes that are happening along Seven Mile Beach just by driving down West Bay Road, but what many people may not be aware of are the challenges and delays that many of these developments are facing.
I thought I’d take this opportunity to highlight some of these challenges and delays and explore how these are impacting not only the developers themselves, but property buyers, as well as the effect this will undoubtedly have to our islands in the future.
Ongoing lack of a national development plan
The ongoing lack of a national development plan, as outlined in an article from back in September 2022, is continuing to impact the Cayman Islands real estate market not only projects currently in pre-construction or construction but even as early in the planning phases.
In that article I noted that “the National Planning Framework (Plan Cayman) document, which sets out a proposed development map for the islands, will be moving forward in the upcoming fiscal year, the Planning Ministry has said” with the first phase consisting of a review of the Seven Mile Beach corridor. That quote was pulled from the Cayman Compass and originally published on September 5, 2022, which means “the upcoming fiscal year” ends at the end of December, 2023.
As far as I am aware, nothing has been announced since this time which is over a year ago now.
The challenges with planning
One of the biggest challenges in the Cayman Islands real estate market that developers and even people trying to build a single-family home face is getting through planning. Given the number of developments in pre-construction and construction, as well as the ones that are being planned for development over the next 3 to 10 years, the reality is that the planning department is understaffed.
For example, Seacrest was held up getting its occupancy approval through planning. Not only did buyers have to wait to finally close on their units, but the Stamp Duty then missed the July date and fell into the wrong financial year.
Planning delays such as Seacrest can have a huge impact on buyers. As new developments come close to completion, buyers will have arranged financing. Many will have locked in mortgage interest rates, but depending on the terms of their agreement with the bank may have to pay a higher interest rate upon finally closing if the occupancy is delayed as interest rates have, until recently, been increasing on a regular basis.
Planning is involved in every step of the way with respect to new development. Our islands are still growing and there is a huge knock-on effect when unexpected delays are caused by further planning delays. Many buyers become concerned about the property they’ve put up to 20% down on and get frustrated that dates are missed time and time again.
Of course, with ongoing inflation the cost of materials could be impacted. The longer it takes for a development to get its required approvals through planning the more expensive the build could be, which creates a domino effect. The longer planning takes the more both the developer and you, the consumer, could pay either with increased built costs or higher interest rates.
The domino effect
Right now, the current national development plan was established in 1997. It is completely outdated, and decisions are being made on a one-off basis in an attempt to keep moving developments ahead, but without having a larger picture of the direction the country wants to head in, we could be in trouble.
Without a true understanding of the infrastructure needed, such as roads, schools, sewage and more, to accommodate new developments, especially when we start building further out East, we could be in trouble. Anyone who commutes in from the East already knows that traffic is a nightmare especially during rush hour. This will continue to get worse and worse without a national development plan.
The second major impact of not having a national development plan is continuity. Instead of having a thought-out plan of how land can be used we will have a hodge podge of developments, single family homes, commercial projects, duplexes and businesses that have already been approved as individual projects without thought to the overall plan.
As of today, if planning says “no”, there is no recourse. It is just dead and goes away. For example, if you apply for planning approval on a certain site, for example to change zoning, planning can just say no with no reason and there is no ability for the developer or builder or even landowner to fight this. It’s done.
If you apply and get approval to put up a strip mall, planning has approved the strip mall but doesn’t necessarily change the zoning which leads to properties being used for one reason and zoning being used in another way. This will further create a mix match of properties side by side.
Right now, the Cayman Islands is in dire need of a national development planning, as well as increased staffing at planning to ensure projects are moving forward in a timely manner.
We need to find a way to move forward as a country considering the housing need, the environment, affordable housing concerns and the infrastructure needed to handle not only the population, which just reached 83,000, we currently have but in the future.
We need to grow and prosper, and development is a key component, but we need to determine what types of developments are needed and where. We need to work together to build a true a development plan that works for all of us today and into the far future.
Do you have questions about the Cayman Islands real estate market? Please visit our website or contact myself or anyone on my team at +1 345 945 4000.