Cayman real estate hits record-breaking $1.054 billion sales in 2021

To say that the real estate market is booming in the Cayman Islands is an understatement. In 2021, for the first time in our history, sales exceeded $1.054 billion. I thought I’d take this opportunity to provide a recap of the Cayman Islands real estate market in 2021 with respect to inventory, transactions, and volume, as well as provide some insight as to where I believe our market will be heading in the next year.

Lowest inventory in years

With respect to inventory in the market, there are currently 1,408 active listings in CIREBA of which 403 are pending and 317 are pending/conditional which means there are only 688 listings available for sale.

Even with new developments coming on the market especially over the last three years, inventory continues to decline. When you look at the overall inventory over the last three years, we averaged 1,470 per month in 2019, 1,542 in 2020 and 1,454 in 2021. That’s a 5.7% decline from 2020 to 2021 plus the average number of active listings in the last half of 2021 is 1,427 which leads me to assume that inventory will continue to decrease throughout 2022.

Value of inventory continues to increase

In 2019 the monthly average of the inventory in the market was $1.7 billion, which increased to $1.75 billion in 2020 and to $2.1 billion in 2021. In December 2021, there were 1,407 active listings representing $2.216 billion which means the average price per listing was $1.575 million that’s up from $1.16 million in 2019 and $1.13 million in 2020. The value of all inventory exceeded $2 billion in May 2021 and has continue above $2 billion ever since hitting a high of $2.216 billion in December 2021 even though inventory numbers are reducing.

New listings up

When you look at new listings, we saw a total of 1,523 new listings in 2019 spurred mostly by several new developments coming onto the market. This number dropped to 1,318 in 2020 and rose slightly in 1,349 in 2021. The drop in 2020 is not unexpected given the market slowdown during our lockdown between the end of March and the beginning of June that year.

To break this down further, if you look at new listings on a monthly basis there were an average of 127 new listings per month in 2019, 110 in 2020 and 112 in 2021.

The value of these new listings is a different story. In 2019, new listings were $1.49 billion and in 2020 that only went down by 1.4% to $1.474 billion. In 2021, the 1,349 new listings amounted to $2.06 billion, up 39.9% year-over-year for an average of $1.53 million per listing in 2021. The average price for a new listing in 2019 was $981,687, which went up to $1.19 million in 2020 and up again in 2021 to $1.53 million.

Sales are up

In 2019, we saw 831 transactions close. That number was down in 2020 with 703 but bounced back in 2021 with a total of 1,045 closings; a 48.6% year-over-year increase.

When you look back at 2019 and now with the numbers for 2021, 2020 was a unique year. When the pandemic began to affect all of us back in March 2020, our borders closed from the end of March to early June, which impacted every industry including real estate.

Even though the number of transactions were down in 2020 compared to 2019 the volume was up. In 2019, we saw $640.3 million in sales and in 2020 that jumped to $693.9 million. During that time, we saw several record-breaking residential sales that impacted those numbers as well as several more multi-million-dollar properties selling as many people were looking for a safe harbour from COVID-19.

In October 2020 monthly sold volume exceeded $100 million for the first time and did so again in March, April, May, July, and August 2021.

Sales volume in 2021 set a record at $1.054 billion which was up 51.9% from 2020 and 64.6% from 2019.

The future of real estate in the Cayman Islands

There are several factors which are going to impact real estate in the Cayman Islands for 2022.

Inventory and sales correlation

When looking at the overall sales volume for the last quarter of 2021, the numbers are down. From March through June 2021 sales exceeded an average of $116.5 million per month but the last 3 month of sales in 2021 averaged $74.5 million.

The slowdown in sales is linked to low inventory which is driven by fewer new listings coming on the market. This situation is not unique to the Cayman Islands. Many parts of the US and Canada are experiencing the same challenge.

I also suspect that our open process, which was changed numerous times, resulted in our industry not seeing very many new buyers. These people were not being able to access our islands easily versus other countries in our jurisdiction. Families not being able to travel with unvaccinated travellers, as I’ve mentioned in previous articles, also had an impact on our inbound visitors.

Factors impacting inventory

Throughout 2022, inventory will remain low due to two key factors. The first is driven by new development. Many new developments have been slowed down due to not only supply chain issues but rising costs and an uncertainty surrounding costs to build both now and into the future. In fact, some developments are not releasing units to the market until they have a better idea of costs and others are building first and then once final costs are in will be releasing them to market.

The second factor is what I’d like to call the “COVID effect”. Beginning in August of 2020 we saw larger numbers of new listings come onto the market. COVID and being locked down made almost all of us re-examine our living situations. This is when a house which used to be a place to sleep and eat became a home or a “hub”. They became home offices, classrooms, gyms and since then have become centres of several activities.

In Cayman, many people took advantage of the pension fund withdrawal program and used those funds to either upgrade their home or to enter the marketplace for the first time. Many people realized they could work remotely full or part-time. Some people in Cayman moved further out to places such as Rum Point where their dollars went further especially for waterfront homes and other people moved from densely populated cities to Cayman.

People are reimagining their choice when choosing houses and are looking for something that fits seamlessly into their new lifestyles. Although there was a big push in mid-2020 and continuing into 2021, I believe this will continue into 2022 but not as robustly as it has been.

Growth segment: Land

As inventory continues to remain low and new listings will not be as plentiful as in the past, the options are becoming less available. Many people will look to buy land. Much like developers who are grabbling with the cost to build, some people may not build right away but want to ensure they purchase the land they want before prices will undoubtedly increase.

Some people may look even further with respect to land purchase. Throughout 2021, land in the Sister Islands, which is much more reasonably priced compared to Grand Cayman, saw an unprecedented boom. In 2019, there were $3.46 million in land sales in the Sister Islands and in 2020 that jumped to $5.9 million and in 2021 skyrocketed to $29.1 million, which is a 393% year-over-year increase.

Even with this boom, land prices are still reasonable. After almost 2 years of working remotely, some people are moving to even more remote, secure, private, and affordable places such as the Sister Islands. In addition, there were several large land purchases finalized in the Sister Islands in 2021 with many of these earmarked for resorts and developments in the future making land purchases here even more desirable.

Real estate as security

Owning a home is no longer just an aspiration, it’s an essential means of security. It’s something tangible that is an investment for the future. People want to put their money into something real versus rent. We are seeing that baby boomers are implementing their retirement plans earlier and first-time homebuyers especially millennials are buying much sooner than previous generations. Prior to the pandemic many millennials had little interest in owning property. As a group, millennials were more careful with their money. It is believed their cautiousness was driven by the realities of the 2007 Great Recession.

Interest rates

For the last few years record low interest rates have fueled the real estate market on a global basis including the Cayman Islands as mentioned in previous articles, but after several years of record low industry rates, it is expected that interest rates will increase in 2022.

On January 10, JPMorgan Chase & Co CEO said the US economy is generating so much inflation that the Federal Reserve might have to raise short-term interest rates more than four times this year.[i] In Canada, the Bank of Canada has already signalled it will likely start raising short-term interest rates in Q2 2022. These changes will undoubtedly affect mortgage rates particularly variable rates although to what extent is unknown.

Unfortunately, as interest rates increase and real estate prices continue to rise, the affordability gap will continue to expand seeing some people having to put off buying a bit longer to save up a larger down payment or buying something in a lower price range than they had originally planned.

Summary

In summary, the Cayman Islands real estate market will continue to be robust in 2022 but several factors will contribute to potentially lower sales transactions from higher interest rates to longer timelines for new developments. People will continue the trend started in 2020 of looking to find and/or build their ideal home, new buyers will enter the market sooner, and land will become more important as inventory levels for homes and pre-construction remain low. Real estate in the Sister Islands will continue to be strong as people look to land bank for future development especially with the future resort and developments being planned. Foreign investment with relocation will also become more prevalent as we move through the year as people wishing to enjoy the benefits of our tax neutral status need to relocate to our islands.

[i] Reuters, January 10, 2022