As we close out the third quarter of 2022, I thought I’d take this opportunity to provide a recap of the Cayman Islands real estate market with respect to transactions, volume and inventory, as well as provide some insight as to where I believe our market will be heading throughout the rest of year and into 2023. Please note that all of these figures are taken from CIREBA.
There were 274 sold transactions in Q3 2021 versus 204 in 2022, which is a 25.5% YOY decline. Yes, when you look at year-over-year numbers the sold transactions are down, but we need to remember that we saw a huge boom in the real estate marketing in 2021 with more than 100 sales closing in August 2021 alone which we haven’t hit since on a monthly basis.
When you look at statistics on a quarter-by-quarter basis, you will see that there is a slowdown. There were 255 sold transactions in Q2 2022 versus 204 in 2022 which is a 20% drop.
Of note, when looking at 2019 numbers for Q3 we saw 211 sold transactions illustrating that when looking a pre-pandemic market, our numbers this quarter only down 3% compared to 2019.
Sold volume and average volume per transaction
For Q3 2021 we saw $262,726,189 in total sold volume compared to $211,965,297 in 2022 which is a 19% drop.
I think it’s important to look at where we are year-to-date. For the first three quarters of 2021 we saw $836,762,885 in total sold volume compared to $780,363,125 in 2022 which is only a 6.7% drop.
But it’s important to overlay these numbers with a value per transaction number to get a better picture of the overall market.
On a per transaction level, for the Q3 of 2021 we were at $958,854 compared to $1,039,045 per sale in 2022, which is an 8% increase. So even though we are seeing some overall slowdown in the number of transactions which obviously has an impact on the overall sales volume we are not seeing any decline whatsoever when looking at a value per transaction basis.
Of note, when looking at 2019 numbers for the first three quarters of the year we saw $428,127,785 in sold volume. These represent pre-pandemic numbers. Compared to the first three quarters of this year, which was $780,363,126, our numbers are up 82% compared to 2019.
Pending transactions and volume
For the Q3 2021 we had 190 transactions go pending versus 126 for the same period in 2022, which is a decrease of 33.6% year-over-year. When looking at volume, those 190 transactions in 2021 amounted to $193,705,513 versus $190,413,242 for 126 transactions in 2022 which is only a 1.6% decline indicating that prices per transaction overall are continuing to increase.
New listings transactions and volume
In Q3 2021 we had 305 new listing transactions that amounted to $409,649,236. For the same period in 2022, we had 336 new listings transactions, up 10%, that amounted to $482,028,187, up 17.7%.
This statistic is very key. It shows that even though our new listings are increasing unit wise the percentage of the value of those homes are outpacing the units. This indicates that we are not seeing a drop in the market value of property in the Cayman Islands.
The average price for a new listing in Q3 2021 was $1,343,112 compared to $1,434,607 in 2022, a 6.8% increase.
With respect to inventory, our numbers have gone down slightly quarter over quarter. There was an average of 1,567 active listings per month in Q2 2022. That number has decreased to an average of 1,490 active listings per month in Q3 2022, which is a 4.9% decline.
As of writing this article, we have a total of 1,505 active listings in the market.
It’s important to keep in mind that not all these 1,505 active listings are available for sale. Of those 478 are pending and 196 are pending/conditional leaving only 831 units available for sale.
Where are we heading?
Overall, the real estate market is seeing some slowdowns that started in Q2 2022, but it is also important to note that these slowdowns should be completely expected given how hot the real estate market has been. Things are slowly getting back to normal.
In a pre-pandemic world, it was not uncommon to see a slowdown at the beginning of summer which traditionally picks up again during high season. It is also important to note that many of our purchasers come from overseas.
Although our tourisms numbers are up, they are not back to pre-pandemic norms. Between January and July of 2022, we had only 146,612 air arrivals in the Cayman Islands compared to 332,294 during the same period in 2019, which less than half. This is principally driven by the delay in opening in October.
Many people who were planning to visit cancelled their plans to visit Cayman due to the unpredictability of our opening plans and booked vacations elsewhere like Turks and Caicos which was open as of July 2021. We were also late in opening up to unvaccinated people which also hurt tourism overall.
When tourists begin to return in larger numbers this Q4 it would not be surprising to see an uptick in our overall real estate numbers. Interestingly, I originally thought that the uptick in the market would start in November of this year, but in fact I am seeing more movement since September.
The lack of tourism isn’t the only thing effecting the Cayman Islands real estate market. Like real estate markets in other countries, increased interest rates compounded with continuing global economic issues and the war in the Ukraine are all having an impact on the global markets including real estate not only today but will do so into the future.
As for the Cayman Islands, increasing interest rates is one of the biggest factors on the property side for those requiring financing which represents a large portion of our overall transactions. When it comes to overall volume interest rates are not having a huge impact given that many high-net-worth buyers are buying with cash, which I don’t see changing going forward. I would estimate that 40-50% or less of our sales volume is financed.
For example, one transaction at $8 million is equivalent to as much as 10 to 20 transactions when looking at the average transaction in our market. In fact, the continued slowdown of the global economy and related factors will drive people to invest further in the Cayman Islands especially among high-net-worth individuals.
In addition, with respect to interest rates and how this impacts the local (residents of the Cayman Islands) market I see ultimately this as being something that will take time to be absorbed and I see the market then continuing to grow. I see this for a couple of reasons.
Number 1: everyone has got very comfortable with cheap money and so it takes time for the marketplace to accept and acknowledge they’ve had a “free ride” for a long time. Interest rates are normalizing. Our parents had to deal with 16-20% interest rates so you can imagine what that was like financing property.
Number 2: most importantly as I outlined in an earlier article there is no real estate bubble. We are still short of inventory and even with rising interest rates our inventory is down quarter-over-quarter. We are not alone. Many parts of the world including the US and Canada are short on inventory. The US was short approximately 2 million units pre-COVID and that has jumped to approximately 4 million.
If the above statistics show anything it’s that it would not be surprising to see Cayman’s overall market to continue an upward trajectory with respect to pricing. If you are considering buying, I would recommend you start that process sooner rather than later. As always, me and my team are here to help you along the way. Please contact us with any question at +1 345 945 4000.