At the moment real estate agents find themselves in a bizarre situation: we are missing inventory on Seven Mile Beach. There is hardly any inventory to be sold; in fact, the availability of one, two or even three-bedroom properties for sale is very limited indeed. If we thought we had low inventory before, that is nothing compared to the limited supplies now.
The reason for this lack of available inventory, I believe, is the fact that condo owners are pausing to see if their condominium complex can be redeveloped in the same way that the Lacovia residents are proposing. They are waiting to see if they, too, can realise the potential gains that the owners of this property anticipate will come their way, and rightly so as there is a real opportunity for redevelopment.
However, the challenge is to get it to the point that the Lacovia owners are at present, a point that can take anywhere from three to five years. And that is before any ground is broken for the actual redevelopment. There is a great deal of work to be done before the agreement to redevelop can be reached, all of which takes time, such as information gathering, communications with owners, notices required, agreements to be made at strata meetings, also consider if they would have any tax implications from their home base, and so on. A 70 per cent majority of a Strata’s home owners is needed to pass such an agreement but the law has yet to be tested in this area, so a unanimous agreement would be preferable, all of which may take considerable time. Condo owners need to consider whether they like their condo development the way it is, whether they want what is being offered and whether they can afford the upkeep of the new property, which will no doubt be bigger and therefore costlier to run.
In addition, and critically, prospective redevelopers need to be aware of where this new product is likely to penetrate the market. If we take a look at new three and four-bedroom units coming online now they are priced at over $3 million. At this price level there is a small market of limited purchasers able to acquire these types of properties.
I believe there is still some road ahead for the Lacovia property because until the new units evolving from the redevelopment are sold, it will be hard for the developer to move forward as these funds will be needed to pay for the new structure.
Because property owners are looking at such a long time frame before profits can be realised in these types of developments, they must endure the cycles that real estate prices and economies in general, inevitably go through. It is my opinion that owners need to keep in mind that when they eventually go to market, they need to be able to make the sale at the end of the day. I urge owners to think about the time frame, about considering market conditions not just today but in the future as well, and the stress involved in the process, not to mention other activity in Cayman’s real estate market.
If you are willing to play the long game, the opportunities look really good and certainly in the long-term things can be very rosy, but now is an excellent time to realise gains that owners may have been sitting on for the past five to 20 years or more. Now is an excellent time to go to the marketplace. As an example, we have multiple purchasers who are willing to pay $3 million for a property on Seven Mile Beach that they would have been willing to pay $1.8 million for 12-18 months ago. Is it worth waiting for redevelopment, if you can get a good enough price today? Just a thought.