The Cayman Islands welcomed in a new government this month set amongst a growing global economic uncertainty, as well as key challenges at home.
I thought I’d take the opportunity to discuss some of these challenges our new government faces with respect to the Cayman Islands real estate market as well as explore the impact of tariffs on our real estate market and how all of this has led to a “let’s wait and see” effect.
The new government and real estate
I’m sure every industry on our islands has their priorities for what our new government should focus on, but creating a new National Development Plan needs to take priority as it impacts how our islands move forward as a country.
Almost 3 years ago in September 2022 I wrote an article “Lack of development plan has huge domino effect”. The last development plan for the Cayman Islands was created back in 1997. That is 28 years ago. That’s the year Titanic was the #1 movie, and The Spice Girls topped the charts! That very outdated plan remains the current plan although there have been attempts to update it over the years.
Just keep in mind, we are working with a development plan that is 28 years old when our population was approximately 42,000 and our population is probably double that today.
The erosion of Seven Mile Beach also needs to be a priority. As I’ve focused on in numerous articles as far back as October 2022, Seven Mile Beach is Cayman’s golden egg. The erosion of Seven Mile Beach will affect each and every single person living in the Cayman Islands. It is not just a tourism issue. It is not just a wealthy landowner issue. It is an everyone issue. Whether directly or indirectly we are all impacted by the quality of Seven Mile Beach. It is that simple.
The planning department and how planning handles duty concessions also needs to be addressed. Right now, many planning fees to developers are given as an exemption and thus raise no funds for our country. We should explore changing this to a tax break on duty concessions allowing planning fees to be deferred instead. This would mean that the fees would be due at the point of CO being issued or not till the fees were paid. This is also when they collect the stamp duty on all sales.
The planning department is also understaffed, which slows down the entire planning approval process and thus construction timeline, and this impacts every real estate development on our islands from huge developments to single-family homes.
The domino effect of tariffs
Tariffs on imports have long had ripple effects across the broader economy, and the real estate sector is no exception. These impacts are being felt in several key areas, including higher construction costs, shifting property values, rental price pressures, and more expensive financing.
Tariffs on critical construction materials like steel, aluminum, and timber are pushing up the cost of building homes and developments throughout the U.S. As US Census Bureau Data shows that 80% of all goods imported into Cayman in 2024 came from the United States these tariffs will not only impact the real estate industry but almost everything we consume.
In response, many developers and builders are being forced to pivot and revise their budgets. With inflation already squeezing margins, some projects are being scaled back, postponed, or even scrapped entirely.
According to the US National Association of Home Builders, the cost of materials has jumped 34% since December 2020, making it much harder for new homes to remain affordable. They estimate that the newest round of tariffs could raise construction costs by US $7,500 to US $10,000 per home—yet another burden on an already stretched industry.
The domino effect of tariffs – supply chain
U.S. ports are seeing a sharp drop in shipments arriving from China, raising concerns about empty store shelves and a potential recession this summer as tariffs begin to take effect.
Even if trade deals with specific countries are reached quickly, many economists and industry experts warn that the damage to American supply chains has already begun—and it could have an impact on par with the COVID-19 pandemic.
The Port of Los Angeles, a key gateway for goods from China and Asia, is bracing for a major slowdown. For the week of April 27 to May 3, imports were expected to fall by 30% compared to the previous week, and by 13% from the same time last year. Projections for the following week are even worse, with a 35% year-over-year drop anticipated.
What’s particularly concerning is that shipping capacity between Asia and North America is being pulled back even more aggressively than during the peak of the pandemic—a time when both product availability and pricing were severely disrupted.
Wait and see
If you Google “wait and see” you will find hundreds if not thousands of news articles focusing on the global economy from US interest rates to the foreign film industry to real estate purchases and investments.
Trade tensions and tariff uncertainties are impacting cross-border investments in real estate. The unpredictability of U.S. trade policies, including recent tariffs, is prompting investors from all over the globe to reconsider or further delay investments in global real estate as they assess the short- and long-term impacts of these tariffs on market conditions and returns, as well as their own cash flow projections. I am already seeing this impact in the Cayman Islands real estate market particularly among foreign investors.
Tariffs are expected to exacerbate the already inflationary environment, which has led the US Fed at the beginning of May to further pause rate cuts. As a result, interest rates could remain higher for longer, increasing borrowing costs for developers and investors.
Cayman Islands real estate
As it always has been and always will be the Cayman Islands is a top real estate destination due to its tax-free environment—no property, capital gains, or inheritance taxes—and strong legal protections under British common law. Foreigners can easily own property, and the market offers solid rental returns thanks to high demand from tourists and expats. With a stable economy, luxury lifestyle, close proximity to the US and Canada and easy accessibility from Europe, and no restrictions on foreign ownership, it’s an attractive choice for both investment and personal use.
So, should I “wait and see” when it comes to buying Cayman Islands real estate? Everyone has a different answer and my advice to you would be to sit down and consider all the factors, meet with an expert in real estate, your financial advisor and bankers and make the decision that is right for you.
I see that due to these potential cost increases for new and preconstruction it will give existing properties an opportunity for further appreciation as there is no risk of those effects from the tariffs.
It’s important to remember that buying a property now can help you lock in a price before further appreciation, especially when buying pre-development. You can start building equity instead of paying rent and take advantage of available inventory before potential interest rate increases or market competition intensifies.
If you have any questions or would like more information on real estate in the Cayman Islands, please do not hesitate to reach out to me or my team at +1 345 945 4000.