2013 - New Year

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Market Report
New Year 2013
an honest appraisal of the Cayman Marketplace

In our mid-year issue we predicted “mediocre but slowly improving activity, supply beginning to shrink, with prices beginning to firm a bit by years end”.

General Outlook
That’s pretty much what has happened. YTD supply is down 5% and sales prices are about even. Overall sales volume is down about 7.5% both in terms of # sold and total value but these figures were compiled with 2 months to go in the year. In addition both the number and value of pending sales YTD are up about 50%! So we estimate the year-end figures will be close to last years and we will likely see an improvement in 2013 first quarter results over 2012.

With regard to specific market sectors:

As of this writing, the Single Family Home Market YTD shows an increase of 6% in terms of # of sales and a 4% increase in terms of average sales price. Proprietors are selling at an average of 89% of the ask but time on the market has increased by 23%. These properties which are left on the market have had a harder time selling over the last year plus the market supply of homes has grown by 8% YTD over last year.

A recent listing which is worth noting is Villa Casuarina in South Sound. This is an absolutely exquisite modern islandy indoor/outdoor home. We have never seen anything in Cayman as stylish. Extraordinarily well constructed is this 8,120 sq. ft. home sited on 1.8 acres of lavishly landscaped grounds. If you want a home with 4 bedrooms, 4 baths and 2 dens plus a 3 car garage with an apartment above, you owe it to yourself to have a look. There is nothing like it. Call us for more details and a private viewing.

In the Condominium Sector we find that the average price hasn’t moved much in a year but there were 17% fewer sales in this market sector. Sales are happening at 93% of the ask but marketing time has lengthened by 20% in this sector as well. Supply has been static.

With the slowing down of sales in the condo sector many of our sellers are coming down a little more in price – especially in the top end. We have a lovely 4 bed on the second floor in Water’s Edge which is now at US$2.850M unfurnished. And a Great House 3 bedroom apartment with 60 ft. of beach frontage at US$2.995M. Neither should last much longer. Oops, sorry, the Great House is now under contract.

The Ritz-Carlton Hotel and the remaining developers condos were auctioned in November and purchased by the creditor for US$177.5M. Since there is no foreclosure provision in our legal system many creditors use the auction method to get total control of an asset from the defaulting owner. That seems to have been the case here as a spokesperson for the purchaser has told us that they plan to make the needed upgrades to the property, reorganize the condominium (strata) section and wait until the market improves to sell their condo inventory. This bodes well both for the existing condo owners and Cayman tourism in general.

More auction news: The Sea Breeze complex on the North end of 7 Mile Beach will also be auctioned on February 1, 2013. This attractive new five storey 9 unit complex of 4 bed units will first be offered as a whole, and then as individual units if the sale of the entire building is not accomplished. The only way to participate is to register for an auction package with Coldwell Banker on or contact J. C. Calhoun or James Butterworth at Coldwell Banker Cayman Islands.

With regard to Residential Raw Land we find that the number of sales are about even with last year YTD. The average price has dropped about 7% though, with buyers purchasing at 87% of the ask. With prices down, sales have been happening 20% quicker than last year.

Commercial Space
Considering the slow economy compounded by the new Government Administration Building pulling approximately 100,000 sq. ft. from the private sector to fill itself, it is no surprise that there is a lot of empty commercial space in George Town. This is mostly class B and below. The class A space always seems to be rented in Cayman. There are some very good deals to be had right now if you are looking; give us a call. Rates are now roughly:
A US$45 and US$14 CAM
B + US$30 and US$11 CAM
B – US$25 and US$11 CAM
C US$20 and US$11 CAM

Sister Islands
As might be expected the Sister Islands have suffered even more than Grand Cayman due to the US recession. Cayman Brac has been hit especially hard with few transactions happening. Irene Scott-Thornton and her husband Monte are now handling all of our business in the Brac if you need information on that specific market. Meanwhile, Little Cayman has been a bit more active and Wes Dangerfield is still handling all our business there.

Stop the Presses!
Premier McKeeva Bush was arrested on December 11th by the RCIPS Financial Crimes unit on suspicion of theft in connection with financial irregularities relating to the illegal misuse of a Government issued credit card, breech of trust, abuse of office and conflict of interest. The fact such an arrest was necessary makes this a sad day in Cayman’s history, however, the actual arrest sends a strong message that appropriate action will be taken to ensure Cayman remains an attractive place to live and do business. Calls for the resignation of the Premier were made but were not heeded. A vote of no confidence was taken which passed with 5 UDP Members agreeing and the Premier has now been removed from his position by the Governor. The Deputy Premier Hon. Julianna O'ConnorConnelly will be acting Premier temporarily presiding over a minority Government. Cayman elections are coming up in May of 2013. We have many of the same overspending/debt problems prevalent in the USA. Besides the 2 existing political parties there is a new Coalition for Cayman (C4C) which is an Advocacy Group which will identify and support deserving independent candidates in an effort to get more leaders elected who are fiscally responsible and are willing to put country before self. More leaders like that can only be good for Cayman.

Stamp Duty
On December 11th the Stamp Duty on Real Estate in Cayman was raised to 7.5% which incidentally was where it was back in the 1970’s. The rate has been changed by various Governments to either raise revenue or stimulate business. Obviously this is meant to be a revenue raiser, and it should be since 7.5% has been a widely acceptable rate in the past. The only exceptions are first time Caymanian home buyers who will only pay 2% based on a fairly tight property criteria. Contact us for full details.

Strata Titles Law Revision
The Strata Titles Law has been under review for several years by a committee under different Chairpersons, and a discussion draft was recently produced. Final comments are required by 11th March 2013. However, in the meantime a hastily produced and poorly conceived amendment to the law was passed by the LA which contains, among other things, the provision for the removal of the unanimous consent requirement for redevelopment of condominium properties. As a result of the amendment it will take only a 75% super majority to initiate redevelopment on 7 Mile Beach and 90% in all other areas. Obviously this is an effort to encourage redevelopment of older properties on 7 Mile Beach to help stimulate the economy. But like other things which have been done to artificially stimulate our economy over the years, this will likely be a mixed blessing. The unanimous requirement meant that no individual condo owner could be forced by his neighbors to sell or participate in redevelopment of his property. That provision was quite unique in worldwide property law and was the ultimate in individual protection in a place where individual rights have always been considered paramount. But as the world now seems to pay inordinate attention to vocal minorities, this is no real surprise. Don’t get us wrong, we don’t think one unreasonable owner should be able to block the wishes of everyone else, but in reality peer pressure and additional discussion has always worked quite effectively in the past in that instance, and 25% is a far cry from one intransigent owner. We wonder if an owner is forced to agree to redevelopment and the development group does not buy him out, is he still liable for any potential losses which might arise out of the redevelopment effort? If you have an opinion on this issue, and especially if you own a condo in Cayman, please send your comments to us here at Coldwell Banker and we will make sure they get to the Chairman of the Committee reviewing this important Law.

Many of our clients and customers have expressed interest in becoming Permanent Residents of the Cayman Islands. Much of the interest comes from people who will be residing but not working here. The guidelines for this have been ambiguous or “under review” for the longest time. In November the new guidelines for Residency and Citizenship were released. In summary there is a $500 non-refundable application fee and CI$100,000 fee once the application has been granted. A successful application will include evidence of health insurance for you and your dependents, proof of strong financial standing, evidence of local investment of CI$1.6M in developed residential real estate, a clean police record for you and dependents over 18 years of age from your place of last residence, plus three personal reference letters. Residency now provides a track to citizenship but there is a fairly lengthy time frame since the intermediate next step is UK naturalization. This is a step in the right direction and it makes the process much clearer and more defined which is a big improvement over what we had previous. Kudos to the Committee chaired by local attorney Sherri Ann Bodden for completing the exercise.

There is talk of putting the controversial Environmental bill back on the front burner in the Legislative Assembly. We hope the concerns voiced by a number of professional Associations in the past are addressed before it is reintroduced.

A group of civic minded individuals have set up a YMCA in Cayman. The organization had its launch in November. A very diverse and talented Board of Directors is currently undertaking a study of existing Community Programs followed by a Community Needs Assessment to determine the best areas in which to focus its resources. Considering the continuing economic malaise it will likely be a “Y without walls” for a while. The Y is one of the world’s best known organizations and has been responsible for the invention of basketball and volleyball. It was begun in the UK in 1844 and currently operates in 125 countries with 11,220 branches. Please watch for their Founders event early in the new year, and support them if you possibly can. Cayman will be better for this effort.

US Election
Many of our clients have been asking what the US election results mean to Cayman. It is our opinion that the victory by President Obama will lead to more Americans looking to make investments offshore. We have already seen a significant uptick in late November and early December. People who support President Obama obviously feel that his economic policies will eventually turn the USA around and get them out of recession. Those people, not being worried about the future, will likely continue to spend. Then there are the people who have accepted the current economic climate as the “new normal”. These people will begin to spend again - as soon as they are able. Lastly, there are those who are concerned that the continuation of President Obama’s policies are going to negatively impact any Americans with assets. These are not money launderers or tax evaders but rather people looking for asset protection in lieu of 401K’s and other investments which may no longer be inviolate. In the short term, all this will be a significant benefit to the Real Estate Industry. However, if the US economy does not improve, eventually our market place will be effected in a negative way as has been the case over the preceding 4 years.

Our economy seems to be picking up speed a bit, probably the result of the US elections (see above). But it is hard to ignore the struggling world economy, so unless the Cayman Government makes quick work of the projects on its plate (and for a number of reasons that is unlikely) we can expect more of the same. Yes, we will wait and see how continued spending in the US affects their economy, but there is an old adage which says “the definition of insanity is doing the same thing over and over and expecting a different result”. We see continued partly cloudy skies with some bright patches over the next 6 months.

The staff of Colwell Banker Cayman Islands Realty wishes you a Happy and Healthy New Year!