Looking ahead, even with the lower inventory we are seeing in the marketplace especially along Seven Mile Beach, I anticipate the real estate market especially with luxury properties in the Cayman Islands will continue to boom not only this year but for years to come.
Already in 2021, many new developments have or will be coming to market including Aqua Bay and Lacovia on Seven Mile Beach. At the end of December, Aqua Bay was released to the market and I am seeing extremely robust sales even within the first 4 weeks with more than 65% of the available villas already under contract. Similarly, Lacovia was just released to market and interest is also extremely high.
Even with these new developments, I anticipate that inventory levels, especially along the beach, will continue to remain at low levels and that prices will continue to rise as outlined in the 2020 real estate market report.
This is all driven by market demand. The number of people interested in purchasing along the beach is continuing to grow both by local and international purchasers. Adding to this, very few people are wanting to sell along the beach especially among international owners who are recognizing, even more than before, how safe the Cayman Islands are given the Covid numbers that are still ravaging much of the world.
With respect to pricing, especially among pre-construction along Seven Mile Beach, I am seeing substantial increases. I am now seeing prices at The Watermark, as an example, pushing through US$2,000 to US$2,200 per sq. ft. for new condos in the 4,000 sq. ft. range and I anticipate that US$2,500 per sq. ft. will become the norm in the luxury Seven Mile Beach condominium market.
The process and timelines for these new developments are extremely long and the amount of work in building these is immense. I anticipate that prices will continue to increase beyond US$2,500 per sq. ft. by the time owners can take possession of these luxury condos.
From a foreign real estate investment perspective, Covid will remain to have a big impact on Cayman in a variety of different ways.
As of today, the Cayman government is planning to open our borders to tourists in mid-April but is maintaining either a 14-day quarantine period or is requiring proof of vaccination from all visitors with a pre-test before arriving.
Given the current rates of immunization in the US and Canada, the two largest sources for our tourism base, it is unlikely that many tourists will be vaccinated by mid-April or be able to quarantine for that period of time. Vaccination roll-out timelines are just being announced in these countries and many areas are not anticipating mass vaccinations to occur until the Summer.
What’s even more challenging to a family of four looking to come to Cayman on a vacation is that most vaccination roll-out plans, at this point, do not include children under the age of 16 or 18. This will have a direct impact on potential buyers many of whom want to come and see both our islands and specific properties before making a purchasing decision.
On the other hand, as Cayman continues to grow, employment opportunities will continue to expand with many employers looking for highly skilled and professional workers.
Additionally, the Global Citizen Concierge program, which allows digital nomads the opportunity to live and work remotely in the Cayman Islands for two years, is bringing new people to the islands. Both of these have and will continue to have a positive impact on both the rental and sales marketplaces.
Similarly, the trend of foreigners looking for a safe and secure country to either relocate, retire or semi-retire, or purchase a second home or investment property will continue into the new year and most likely will have a bigger impact on the real estate market than it did in 2020.
Our islands are very attractive for a number of reasons including our tax neutral status, safety, strong and stable government, health care system, lifestyle, schools, our close proximity to the US and Canada and of course of sunny, tropical weather, among many other factors.
Historically low interest rates in 2020 have helped with affordability enabling many first-time home buyers to enter the market sooner than anticipated as well as allowing many people to upgrade their current living situation. Although these low rates won’t be around forever, I expect them to be around for much of this year if not into next year making buying attractive and possible for many people.
Another contributing factor to last year’s sales volume increase was the pension withdrawal program. More than 36,000 applications for withdrawals were approved amounting to more than $443.5 million. The pension withdrawal program ended in 2020, which spurred many local buyers to enter the market sooner than anticipated while others took the opportunity to use those pension funds to upgrade their homes.
I anticipate that local investment in real estate will continue in a robust fashion as it did in 2020. In 2020, I saw many locals investing in Cayman real estate. This was across the board in all sorts of different types of properties. This is a big statement by our local population as to what they believe our country has to offer.
Additionally, the Stamp Duty savings which many buyers took advantage of in 2019 has been extended to June 30, 2021. This means that for purchases on many new developments including Montage at South Sound, buyers will pay reduced Stamp Duty which could amount to hundreds of thousands of dollars in savings.
Other factors will impact pricing in the real estate market including the overall cost of construction which traditionally increases year-over-year as well as the slowing of many supply chains.
The Cayman Islands are not alone with respect to the boom in new developments. The same growth is happening in many, if not most, popular areas in both the US and Canada. This, coupled with the overall slower production levels impacted by Covid, has definitely affected supply chains of construction materials to the Cayman Islands meaning many developments will take longer to complete than originally projected which will obviously impact pricing.
All in all, I anticipate the current trends in our real estate market to continue into 2021 and beyond. New development is flourishing with more than US$1.7 billion of new developments that are currently in or about to start construction, offering many new investment opportunities. Additionally, as Covid vaccinations continue to be implemented worldwide, we will begin to see our tourism industry rebounding and hopefully by the end of the year we will be back to record-setting stayover tourists many of whom will become real estate investors.