Market Report - Year end 2005
| Review In our last report we predicted an improving Real Estate Market through the Summer and Fall. |
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| Outlook As we approach the end of the year, more than a year after the most destructive physical event in our history, Cayman has changed in many ways. But in other ways it remains the same. Our foliage will take years to recover its pre-Ivan beauty, but it is coming and our beaches are in most cases in better condition now than pre-Ivan. Many people left the island for good right after the storm, but the influx, which has occurred over the past 6 months, has more than made up for that. Some restaurants will never reopen but several brand new good ones have already opened. Crime and traffic congestion are back worse than they were before, but the new Government has recognized them as problem areas and is taking steps to address them. Large numbers of Status grants were made by the previous Government which has significantly changed the labour dynamics in Cayman, but this excess has led to a completely new Immigration Policy which lets foreign workers know right where they stand. Large expensive capital projects advocated by the previous Government have been scrapped, but other less onerous solutions are being studied to alleviate the infrastructure deficiencies. In short, many of the excesses exposed by Ivan have forced changes in Cayman which will ensure Cayman is better post Ivan than it was before. Consider the Real Estate Market. Much of our condominium inventory was built between 1978-1990. While many of these units have had facelifts and some developments had redone their exteriors, Ivan has forced all of the Strata Boards to completely re-landscape their grounds and reroof and recoat their exteriors. The majority of individual unit owners have had to completely redo the interiors with up to date materials and furnishings. Ivan has acted as a purge: “out with the old and in with the new.” This cannot help but improve our tourism image. As would be expected comparing today’s market place to 1 year ago we find much more activity. Six times as many properties were sold this month than this month last year, yet we are still 50% off a similar Pre-Ivan month. Predictably there are more active listings on the market now (20%) than there were a year ago. However, our sales volume for the year will be 30% below 2004’s year end figures. So although our market is active, we are still behind our Pre-Ivan performance during the hurricane year. That is truly an amazing statistic and it underscores just how strong a sales year 2004 was prior to Ivan. The statistics, will also show lower average sales prices for homes, condos and land in 2005. This however, is not a result of discounting by the sellers. What this indicates is a different type of property being sold since Ivan: inland as opposed to seafront. The strength of our market in 2005 has been the local market which is a good thing because our tourist figures have been off over 50%. The Department of Tourism is concerned about the upcoming season but with the damage in Mexico we suspect we will be fine; we are still not near full capacity in terms of available accommodations anyway. New and renovated construction projects mean millions of sq. feet of buildings to be built, finished, furnished, managed and rented or sold which will all provide significant spin off prosperity to our private sector. The public sector will also benefit through increased stamp & import duties and development fees. This increased flow of money in circulation will super heat our economy and generate more business for all sorts of industries as well as pushing real estate prices higher. The laws of Supply and Demand say it just has to happen. A decrease in supply has forced prices to rise already and before too much new supply can be put on the market, our high season is now upon us which will increase demand further. We have already seen new sales records set in a number of complexes earlier this year, but this is just the beginning. For those who are looking and waiting for lower prices, what we have right now are the lower prices. And in retrospect, a year from now, those deals will look like bargains. The increased income will allow our market to absorb the increased costs and again provide reasonable returns vis-Ã -vis other investment opportunities.
Residential The detached home market is quite strong. By years end we will have sold about the same number of homes as in 2004 but the average price is down about 20%. Keep in mind however, that most of these were inland properties, or if they were on the sea they were likely sold damaged “as is.” We have to mention a new listing here called “Far Out.” It is the finest home for sale in Cayman. With a great location on a secure high rocky promontory with beach below this 13,500 sf home on 2.5 acres in East End is spectacular. Have a look at our website and also check out our Pease Bay Beachfront Residence while you are at it. They are wonderful top quality seafront properties. In terms of Condos the story is the same. Similar quantities sold between last year and this year but the sales average is down about 22%. Again, the bulk of the sales were to local residents and occurred in inland complexes where prices are lower. Seafront condos are also selling but typically they were the ones which had more difficulty getting insurance settlements which in turn made sales harder to transact and so fewer sales were completed. Thankfully most claims have now been settled. The sales figures for 2006 & 2007 should be much higher with all the preconstruction sales coming up. There are several new projects which are all pre selling at the moment in the high $1M to $3M ranges. It is expected that the incoming Ritz visitor may help reduce the inventory of these properties which is approximately 50 units. Speaking of the Ritz-Carlton, we are fortunate to be handling a beachfront second floor 4 bedroom suite which is priced about $1.5M below the developers units. Check our website for full details. Land Hotels The Links Course at Safehaven is undergoing a major refit changing its turf to a more salt resistant variety. Don’t expect that to be playable until the summer, but when it reopens it should be a much improved track. The Ritz is much closer to opening now. They are still promising to be open December 15 but that will very much depend on the definition of the word “open”! Construction and Infrastructure All this projected revenue is welcome news to a Government facing lots of needed infrastructure projects and not enough money to do them. Keep in mind any money spent on capital projects will not alleviate our over stressed infrastructure for several years so we must all be prepared to live with the continued frustrations and expenses which go hand in hand with a rapidly growing economy. If we can keep our sense of humour and be patient for a while it is possible for us all to reap the benefits of an improved Cayman. But, a word of caution: That will be a lot easier said than done, and a social fabric which unravels under the pressure can undo all the projected good in a very short time. The infrastructure of Grand Cayman is taxed to the limit. The telephone service behaves much like it did in the early 80’s. That was good quality then – but not now. Utility costs are very high and drifting higher. The consumer price index for the 3rd Quarter of this year was up 8.4% over last year mostly due to housing costs which are also very high – but actually declining. The traffic situation reminds us of the tides. It comes in starting at 6:30 AM and goes out starting at 4:30 PM allowing only an hour of slack tide at 10:30AM and again at 3:00 PM. Government plans to push the By Pass through the Hyatt Property this month, but that won’t help until it is completed North of the Ritz. Looks like another Winter Season of apologizing to tourists about having to sit in traffic to get anywhere. Certainly not good for repeat rental business or sales. The bureaucratic infrastructure is also strained. Immigration is facing an almost insurmountable task of processing over 20,000 work permits this year with insufficient resources. Applications at Planning Department are also backlogged. In short the schedule for getting anything done in Cayman has taken a step backward and the phrase “soon come” is now back in fashion. But we are trying to keep our sense of humour. In fact a Labour Board officer came into a small company in Cayman the other day and claimed the owner was not paying proper wages to his help. “I need a list of your employees and how much you pay them” demanded the officer. “Well there’s my secretary who’s been with me for 10 years & I pay her $1000. per week. And the sales staff has been here for years and I pay them 50% on all their sales. Then there’s the half-wit who works here about 18 hours a day. He makes about $10 per week & I buy him a bottle of rum every Saturday night”. “That’s the guy I want to talk to” says the agent, “the half-wit”. “That would be me” replied the owner. Kudos We would also like to acknowledge Cayman’s newest newspaper The Cayman Observer. It is a weekly publication with focus on the islands business. It features fair and balanced reporting and is a very good barometer of what is happening in Cayman. For a subscription call 345-946-6000. Sister Islands Forecast As we in Cayman continue to rebuild, we give thanks to God for our Blessings and ask Him for patience and strength going forward. Merry Christmas from all of us at Coldwell Banker Cayman Islands Realty. |
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