As published in the Caymanian Compass, 06 February 2013
Positive moves in government equal better economic forecast
As I have said in the last few market updates, if you are keen but hesitant to commit to buying real estate right now, I would definitely encourage you to take a leap of faith. If you don’t make a move now I suggest that it will be too late in a few months’ time, as I forecast a rise in property prices, a move that has already taken place at the WaterColours development on Seven Mile Beach, which last month saw a 5 per cent hike in the price of its luxury oceanfront residences and may see another increase this year.
It was heartening to hear Bill Emmott, former editor of The Economist, speak at last month’s Cayman Business Outlook Conference, when he predicted a cautiously optimistic future for global growth, which would mean an increase in house prices in the US in particular, as well as better employment figures, all positive moves for the US economy which in turn should positively affect Cayman’s economy.
Currently, I see the greatest real estate opportunity in properties valued $600,000 or less. There are still good choices and much inventory available in this price range; properties are undervalued and I believe prices will rise quickly this year as population increases.
Broadening the local economy
On a local note, it has also been heartening to see an increase of around 1,000 more work permits into the Cayman workforce, and I only see this figure increasing over the coming year. The Cayman Islands economy is small enough that it is able to rebound quickly from economic pressures, but it needs the support of Government if it is to do so rapidly and effectively. The knock-on effect will undoubtedly positively influence Cayman’s real estate market.
Recent discussions on the reduction in numbers of civil servants is also a positive move and I commend the Deputy Governor Franz Manderson, for spearheading this initiative. More movement to privatisation of government services is badly needed; it makes sound economic sense for government to outsource, only using services when it needs to, rather than paying permanent staff year round and most importantly reducing long term liability. Streamlining processes will undoubtedly improve quality of service.
We have also seen a rise in recent month in enquiries about property from overseas investors, no doubt as a result of the rise in both air and cruise arrivals into the Cayman Islands in 2012. Air arrivals were actually their highest in 11 years, while cruise arrivals were up â€¨on last year’s numbers.
Last year, 321,650 tourists flew into Cayman, an increase of 12,558 people or 4.1 per cent over air arrivals in 2011. Cruise arrivals were also up, with 1,570,370 people arriving by ship last year, an increase of 7.6 per cent on 2011. This is heartening news for our tourism industry which then has a direct impact on our housing market. I would also say that a big driver has been that the US and European financial environment has encouraged more buyers to consider investing off-shore.
The three big development issues of the day – the dump, the dock and the airport – are still hampering growth by their lack of progress and need to have the full focus of the Government right now. I believe it is time for a shift in how these issues are tendered for, with the inclusion of an independent consultant employed on a case by case basis to make the decision as to who gets the tender, rather than leave these vital decisions to local Boards. Hiring such a consultant would only add a very small cost to the overall costs of these huge projects and take the liability of the decision-making process away from local individuals who could be viewed as being conflicted in one way or another.
Other developments worthy of note that are seeing headway include the extension of the West Bay Road bypass, which is seeing exciting progress. I hope that West Bay is ready for a real estate price appreciation. Once this new road extension has been completed, areas such as Salt Creek, Vista del mar, the Yacht Club, the Highlands, the Shores, Barkers and other areas of West Bay will become much more desirable and accessible to new investors and thereby see increases in property values.
And if there is still any debate about the turnaround in property prices this year, I am delighted to advise that RE/MAX Cayman Islands has just closed out its second highest year ever in sales volume, a testament I believe to the growing strength of our market.
May Cayman’s market continue to grow.