Market Report - Year End 2007

REVIEW

In our last issue we predicted a slowing of market in general and a slower summer pace. That is exactly what occurred.

General Outlook

Brac Haven Villas True to our predictions we did have a slower summer, culminated by the threat of Hurricane Dean chasing away mid summer tourists and providing us all with an unwelcome reminder of Ivan. In general, available property supply is down 6% over last year YTD but the value of those listings are up 3%. That is wishful thinking and contrasts with the sales figures YTD which are about even with last year in terms of number of properties sold, but the dollar value of properties sold has decreased by 5%. This trend appears to want to continue as unclosed sales on the books are down 10% in number and 22% in dollar value YTD over last year. As a result, we should expect some further price reductions over the coming year.

The problems in the US continue on several fronts: the US dollar continues to lose ground, while at the same time credit is tightening. The US Government will no doubt try to ease the credit crunch in an election year, which will certainly help in the short term. But that is just a band-aid and won’t solve any long term problems. The stock market is getting scary again and while it may push more people back into real estate, they may not have as much money to spend when they get there.

Tourism seemed to be up over the Thanksgiving Week which bodes well for the Winter. There seems to be a steady healthy pace to the market. Virtually all our sales agents have a deal or two in the hopper. Christmas bookings are strong for available units and we hope (again) to reach and exceed the 2004 Winter Season air arrival figures but only time will tell.

RESIDENTIAL

Sold figures show a 16% reduction in the number of properties sold YTD over last year. The value of those sales however increased by 29%. Current listings are down 10% over last year in terms of numbers and down 7.5% in terms of pricing proving values in the detached home market are retreating somewhat. The good news here is that we are still seeing new companies relocating to Cayman and with supply also down the choices on the market are limited so we do not see the prices falling too far.

The Ritz has now announced sales of its homes on the waterways to be called the Deck Houses. They are to be detached homes of 6,300 sq. ft. with a great floor plan including boathouses on finger piers having access to all the Ritz amenities. Prices start at US$3,500,000. Contact us for further details.

CONDOS

The number of sales in the condo marketplace are similar this year YTD as they were last year. The value of those deals is about 8% lower which confirms price reductions in this part of the market as well.

Three Seven Mile Beach complexes are still under construction and all still have units available as we enter the Winter Season. They are all Butler Developments: Beachcomber, Renaissance and South Bay Beach Club. It is likely that most of that inventory will be absorbed this Winter. Call us for current availability in these projects.

In terms of 7 Mile Beach pre-construction there is only 1 project in the works and that is Water Colours, a Fraser Wellon project slated for the Beach Club site. This will be an ultra luxury 40 unit development with units starting at US$4.25M. The finest project ever by Fraser to be built on the heels of very well regarded and just completed Water’s Edge, Water Colours suites will be 3,600 sq. ft. and will have separate guest quarters available on property. Call us for an updated price and availability list.

Several other 7 Mile complexes considered re-development at their recent General Meetings, but all voted them down even with the prospect of significant financial gain – why is that? The Strata Law says a decision which has financial repercussions on any owner has to be unanimous. Since many of our condo owners bought to enjoy the Winter here, they are reluctant to give up 2 years of use while their property is re-developed. Further, many people also bought here because of the low density provided by 3 storey properties. To make re-development financially feasible – you must at least double the # of units on the new development and that requires 6-7 stories. This is not palatable to many of our older owners. With the current business climate we think these properties have probably made a wise choice – at least for now.

The Residences at the Ritz-Carlton have the reputation as the finest of all Ritz properties world wide, and yet until recently there has been very little sales activity at the Ritz for the past year. The main reason for this is the pricing. With few sales the year before you would have thought owners who wanted to sell would have reduced their prices. However, the resale market appears to be willing to let the Developer take the lead in setting the pricing and have listed based on other listings not actual sales. None of the 3 Developer sales made in 2007 were beachfront, but all had the added benefit of a nice furnishing package and the ESP (shared use of a car and boat) included in the deal. As most resales are unfurnished and the ESP is not transferable on resales, we think there will be some price reductions this Winter, and the best example is #506 which is a fabulous beachfront unit on the fifth floor. Already well priced, the owners have told us this unit must to sell this Winter and they are prepared to owner finance 50% or negotiate a lower price to ensure that happens. Call us for photos and more details.

Savannah Express!

The By Pass extension from Red Bay to Savannah is now open and the time it takes to get to George Town from Savannah has been drastically reduced. As a result property in North Sound Estates is now “close to town” and with shopping centers both in Savannah and Grand Harbour shopping is now easier if you live there than it is in George Town! We have 7 great listings in Savannah and North Sound Estates which with the By Pass opening are now exceptional buys. Houses from CI$325,000 and canal lots from CI$91,000. Don’t miss this opportunity. Check the details on our attached property list and give us a call.

Interior land continues to be a favorite for locals & foreign investors – especially if the price is right. A new sub-division is underway near Bodden Town called “Green Acres” with lots available from CI$45,000. These will be fully serviced on high property with good drainage. Best of all, 10% down is all it takes to contract a lot until completion. Call us for a site plan and availability list.

“Here, there and everywhere”

We have opened a new office just 50 yards down the road which will specialize in Property Management and Residential and Commercial Leasing. Ms. Ann Marie Powell will be heading up that section. If you have been looking for a reputable company to handle this type of business for you, give Ann Marie a call at 345-623-RENT(7368) or email annmarie@cirealty.ky. Coldwell Banker has prime lease space downtown in a perfect location at Butterfield Place right in the cetre of George Town. Prices are a reasonable US$85/per sq. ft. for the retail and US$38/per sq. ft. for office. We also have both retail and office space in Palm Passage Mall on Cardinal Avenue and small office space over the Fort Street Market. This is prime cruise ship retail space. Call Ann Marie for details.

We are also opening an office on Cayman Brac. Stephanie Grizzel is managing that operation which is located at #2 Capt. Jakes Corner, #403 Gerrard Smith Ave. She already has a sale under her belt and quite a few listings. We are now the only CIREBA Firm to have full time offices open on all 3 Cayman Islands. We are very happy to have Stephanie with us. She is personable and efficient and has a great reputation. Her contact information is: 345-623-BRAC(2722) or email stephanie@cirealty.ky.

Luxury Market

Thus far this year out of the 30 CIREBA Member Companies 87 sales have been made in excess of US$1.0M. of those Coldwell Banker has been involved in 27 which is over 30% of the market sales and ranks us #1 in this category for all Cayman firms.

Sister Islands

In Little Cayman Wes Dangerfield says: Little Cayman’s real estate market is fairly close in number of sales for 2007 compared to 2006. The one difference is that after several slow years prices are now increasing for both condo and land purchases. In Preston Bay, we have seen prices rise as much as 20% per front ocean foot on pieces of raw land and at the Conch Club Condominiums selling prices are up about 10%. Other areas around the island have not yet seen the increase, but it is only a matter of time. You can still find properties with asking prices in range of US$2,000/per front ocean foot, and compared to many other markets this would be considered a bargain. Little Cayman is gaining in popularity and word is spreading about this relatively untouched paradise.

In Cayman Brac Stephanie Grizzel says: The Cayman Brac market has been experiencing an upswing that continues since Hurricane Ivan. Interest in bluff land - house lots and acreage – has soared since September 2004 to the point that most bluff edge lots have been sold and now most available edge lots are resales. With the increase in bluff activity, there has also been notable interest in the still very affordable ocean front property. High end homes are coming on the market and currently the nicest residential listing is a 4.5 acre ocean front estate on the north side located in the district of the Rock with a price tag of US$1,500,000.

Hyatt

It has just been announced that Hyatt will not be renewing as the flag for the Britannia Development. This mainly as a result of the property not being renovated by the owner Since Ivan. Although the amenities will remain the same without the Hyatt name the rentability of the hotel rooms and the value of the condos will suffer. It will be interesting if this leads to Cayman’s first Hilton.

Local Financing

We have been hearing that Government is considering letting the “B” Bank charters be expanded to allow them to lend money locally. With the number of Real Estate deals failing due to unsatisfied financing conditions, prospective purchasers and sellers would both welcome this. So would the “B” Banks – but certainly not the “A” Banks. We think it is something which should be seriously considered.

Airport

Work has now begun on the new airport extension. The current building was completed in 1984 and is not quite up to the increasing volume. It will remind you of every other airport in the world now (ie under construction!) Hopefully they will figure out a method of getting people in and out of the facility more easily by the time Christmas gets here…

Proposed Environmental Bill

As in most other locales, environmental issues are in the news. A recently proposed environmental bill would create a new entity to oversee anything relating to the environment. As you can imagine, that could be almost anything. This would be an appointed board not an elected body and while the Governor and EXCO are ultimately responsible, in Cayman Statutory Board often take one life of their own. For that reason the very wide definitions and sworn penalties (which are part of the Bill as proposed) could have serious consequences to many people who had no intention of damaging the environment. Even the concept of what is “damaging” to the environment is way too vague and subjective. We believe this bill should not be supported in its current form.

Golf

The Developer of the Ritz recently purchased the Safehaven Golf Course and surrounding lands. Safehaven had never become a successful residential development due to their reluctance to make the effort to create a residential community on the property. In this case the concept of “if you build it they will come” (golf course) obviously only applies to golfers – not homeowners. No one wants to be the first without a proven ongoing commitment that there will be further residential development – and the old owners of Safehaven were never prepared to make that commitment. The good news is: That will not be the case with Mr. Ryan and his local partners.

The bad news is that within 18 months that course will no longer be played by anyone who is not an owner or guest at the Ritz or who has not put up US$100,000 and signed a commitment letter to consider a Ritz purchase within 5 years. That means tourists will have only the 9 hole Britannia Course as a golf option (unless they stay at the Ritz). This will have a significant negative effect on Tourism. Over Thanksgiving several potential customers told us that the new golf situation has made them reconsider whether or not to buy in Cayman. Golf is an important part of any locations tourism menu. Without it, sadly we slip down a few more notches in the list of attractive Caribbean vacation destinations.

Disturbing Trends

As long as we can remember, it was the Policy in Cayman that Crown land not be sold. Anyone who has owned Real Estate recognizes that eventually it always goes up, so anyone with long term goals in mind should resist selling. What better long term goal than the continued prosperity of Cayman? Lately we have seen several examples of Crown Land being sold – and at questionable prices; land which could have had a multitude of uses in years to come. This is land which could house trade schools which are desperately needed here; land to expand the traffic department and get it out of the center of George Town; land for a new Police Station closer to Seven Mile Beach, etc. etc. The only way selling Crown Land would ever make sense would be if Government made a conscious decision and effort to reduce the Civil Service. In that case they wouldn’t need so much space. But what are the chances of that being the reason behind this? Slim & None!

Staff

We welcome two new staff members. Veronique Bise has recently joined us. She will be involved in sales but will also be offering Concierge type services to our customers including things like: shopping services, a traveling Notary Public and all types of errands. Veronique will also be a member of our sales staff, and being Swiss she gives our staff the ability to converse with customers in French as well as German, Spanish and English. Bob Daigle has also joined our ranks. Bob has been in Cayman for 21 years, is renowned as the islands best known professional karate instructor, and has been involved in sales for the past 7 years. His professionalism, dynamic personality and good work ethic bode well for his future with Coldwell Banker.

Forecast

The influx of more tourists will improve the sales prospects but we do not see enough interest to push prices higher. Although Cayman continues to improve its tourism product and has ostensibly fully recovered from the 2004 storm, the weakness of the US economy has tempered our resurgence. We see some good deals to be had by purchasers who are persistent in looking for bargains but the limited supply in our relatively small market place means they won’t be around forever. All things considered, our forecast is for continued partly cloudy skies this Winter.

We wish you all a Merry Christmas and the very best in the coming year.