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2015 New Year

MARKET REPORT
2015 NEW YEAR WINTER REPORT
AN HONEST APPRAISAL OF THE CAYMAN MARKETPLACE

Notes
2014 was unique for us as we produced our usual Mid-Year Report, but then did a Fall follow-up due to some subsequent data that was not available for our mid year report. That is rare, but when it does happen we restrict the length to 1 page, publish the update locally in the Cayman Compass Journal, and post it on our website to avoid the cost and time lag associated with another printed report. This could happen again in the near future if the market moves as quickly as it might. Therefore it is good to have at least a quarterly look at our website to check for any updates.

Review
In our last Mid-Year Report and Fall update, we mentioned the sales momentum which had built-up earlier in 2014 because of an increase in sales activity. We expected this momentum to continue with a further increase in sales activity. However, we cautioned that the prices hadn?t really risen much yet and although we expected sales activity to increase, we did not expect to see prices rising much before early 2015.

General Outlook
The data bears out our projections for the last half of 2014. The total volume of sales YTD over 2013 is up a whopping 52%! Much of that increase occurred within the last Winter season although November 2014 was also very strong. The number of active listings is down 5% over last year but there are more and more listings coming on lately. Perhaps it is the prospects of higher prices, or maybe those who have been struggling with their payments have finally run up the white flag. Certainly the number of forced sale properties is increasing. It is likely a combination of the two.

While we think the ?tide is turning? to favour the Seller finally after 7 years of a Buyers Market, this will be the first season where that is the case. So while we do expect to see more properties listed at increasingly higher prices (and that is already happening), we don?t expect the buyers to step up and swallow huge increases with all the worldwide financial uncertainty. However, we will no doubt start to see sales at higher levels.

Condos
There has been a 24% increase in the # of units sold but in this case we are also seeing a similar increase in the average sales price for condos over last year. Currently condo inventory is down 20% and the average listing price is 4% higher YTD. The drop in inventory is a good sign for potential rising prices. Three times as many multi-family properties were sold this year than last which indicates a considerable demand for income properties.

The Watercolours is now completed and they have sold 43 of the 57 units. This property achieves a new level of luxury for Cayman both in terms of design as well as amenities. This project can hold its own with any which have been produced anywhere. Call us for full details and unit availability.

Residential
The detached homes sector has seen a 41% increase in the number of sales. However, the average price achieved is off by 25%. The largest increase in number of sales is in the larger homes bracket which indicates prices for luxury homes did not rise in 2014. The figures for existing listings show a 5% increase in listing price, and 4% in number of listings.

Coldwell Banker will be listing an extraordinary recently built beachfront residence on 1.83 acres in Frank Sound. It is called ?Oceanus? and is an 11,000 sq. ft. contemporary structure on 4 levels. The 70+ pilings in the foundation and 12? poured concrete walls allow for a wide open floor plan and 23? ceilings. An amazing array of unique fruit trees and flowering plants make this property a horticultural delight. The land on the inland side of the road provides further development options. Call us for full details.

Land
The number of land listings is currently 11% down and the average listing price is down 7%. That may be related to the fact that the land sales are up 14% and the average selling price is up 6% YTD. The Sister Islands land sales data is up 100%, however, the starting point was very low, so it is still relatively slow going there. One of the more interesting land parcels on the market is the waterfront 1.25 acre parcel adjacent to the Grand Old House. There are 5 buildings on the property which generate rental income. However, it?s best use would be as a redevelopment parcel using its Beach Resort Zoning which would allow condos, apartments, a small hotel, and even some Commercial applications. The location is excellent, the views are spectacular, the price is negotiable and the owners may be willing to do some owner financing. Call us for full details.

Commercial
The Commercial Market for Grand Cayman remained steady for most of 2014. The demand for Office and Retail space increased but was met with excess space held by many tenants at their current location. Many office suites were backfilled by new hires filling spaces that had been vacated during the recession. Improving numbers in cruise and air traffic helped the Retail Sector but not enough yet to lead to additional space demands to justify new construction. For these two reasons, in addition to excessive office relocation costs (improvement costs, moving costs, and extended construction periods) for tenants, Cayman experienced limited movement in the market this past year. Forecasted continued long term growth in Grand Cayman and improved traffic from tourism should help to improve demand in these areas leading more activity for 2015.

Commercial Lending remains tight for the smaller individual business owners and investors which has kept small business expansion flat throughout the year.

The Investment Market remains cautious as those affected by FATCA adjust to new transparency laws in Grand Cayman and elsewhere. While many good opportunities remain offering returns of 8% or better with no local taxation on rental income, investor activity was slow with available lending options limiting opportunities to some smaller investors. 2015 should bring continued improving conditions to Grand Cayman which typically follows behind the larger economies of its neighbors. The Hard Rock Caf� is back open on the waterfront under new ownership after a long term lease was negotiated for the Property owner by Tracy and Cody Moore of Coldwell Banker
For further information on market vacancy rates, availabilities, and investment opportunities contact Todd Younghansin our office, the only SIOR and CCIM qualified Commercial Specialist in Cayman.

Sister Islands
Cayman Brac - Contributed by Irene Scott-Thornton our resident Cayman Brac Agent ? Properties available in Cayman Brac remain in good supply. Ocean front lots and homes are at very good value with several prices lowered in the past four months. The closing of The Alexander Hotel resulted in 35 fewer overnight accommodations, with the trickle down effect of visitors choosing rental homes as a viable alternative. A high end beach front condominium development is scheduled to break ground in 2015. Currently, beach front homes are available in the $850K to $985K price range, with one to two bedrooms beach front condominiums priced between US$145K to US$210K. Ocean front properties for single housing range from US$175K to US$325K. With no crime, no crowds, no traffic, and pristine reefs for diving, Cayman Brac remains an island that is secluded and peaceful, with all the benefits of being in the Cayman Islands.

Little Cayman - Contributed by Wes Dangerfield our resident Little Cayman Agent ? Although 2014 was not a record breaking year as far as sales of property goes, there was continued growth in new building. At any given time, new houses were and are under construction, but not so many to change the small island feel that those who live here have come to love. There are properties available for those who want raw land as an investment or to build, houses in different price ranges, and condos (which are becoming more and more difficult to find on the market).

Development
The construction of Dart?s Kimpton Hotel continues at a rapid pace. The recent acquisition of the Kimpton Chain by the UK based International Hotels Group may lead to more British and European visitors. From 2012 on, Dart has invested more than $62 million of the $240 million Kimpton construction project. Five levels of the hotel structure are complete, taking it to the halfway mark and the condo building is well underway. Preliminary estimates indicate that the Kimpton project will have a total economic impact of more than US$284 million during the construction phase, and once operational will have annual total economic impact of more than US $45 million. Dart has also spent $7 Million over last two years (2012-2014) on the Cayman Islands Yacht Club Renovation.

There are a number of projects on the books at Planning however, there are not a lot of other large projects which are actually under construction. As we begin to find our way out of this recession which has dogged us for nearly 7 years, has anyone considered what our economy might have been like had Dart not been developing in Cayman? Dart?s Investment in Camana Bay through the end of 2010 had a local impact of $826 million. Construction of Camana Bay generated more than 60% of the Islands? construction activity from 2006 ? 2008. The economic impact in 2011-2012 was approx. $100 million per year, plus another $30M investment for the most recent commercial building. Surely that was a significant % of our overall GDP. And you will note the Kimpton is being built in accordance with the agreement between Dart and the previous Government, but that agreement still has not been finalized or renegotiated by the current Government.

Immigration
Mr. Joseph Hew , Councillor for Tourism and Transport, reported recently that a number of changes to the immigration regulations have been made which are expected to make life easier for visitors, business people and property owners coming to the Cayman Islands. Policy directives that were recently approved by Cabinet will allow business travelers to remain in the country for up to 10 working days without the need to obtain a work permit. It will also allow those who own property in the Cayman Islands and can demonstrate their wealth, to stay for up to six months without having to visit the Immigration Department for visa extensions. This directive was announced in October and was published in the Government?s Gazette in December. Both are very welcome and long overdue changes to Immigration Policy and will be implemented shortly.

Tourism
You can feel the difference this year. It felt like we have had more tourists on the island and the figures bear that out. Our Air Arrivals have been up this year every single month over last year. We are expecting about a 20% YTD increaseonce the yearly figures are tallied. And we expect a similar increase (and possibly larger) in the cruise ship YTD arrivals. This is, of course, very good news for our retail businesses and our economy in general. The USA still accounts for 76% of all our Tourism.

Medical Tourism
Health City has become more and more active, attracting patients from other jurisdictions (and even locals) for their Cardiac care and Orthopedic departments. And the Perseus PCI Cancer Facility is also finishing up its first year of treatments in Cayman. For those who are not aware of this facility, Perseus is running clinical trials on immunotherapy for solid tumors and is located in the Professional Centre on Smith Road (the Parent Company is Orbis out of Carolina). Perseus takes cells from a patients tumor and develops a serum which is re-injected into the patient and delivered to the T cells which then fight the cancer from within using the body?s own immune system. Immunotherapy is recognized as the new direction of cancer treatment because it is less invasive and has virtually no side effects. The unique delivery system developed by Dr. Tom Wagner of the Perseus Group sets itself above the other immunotherapy systems in existence. Their results have been extraordinary in that over time they are experiencing about a 27% success (10 year cure) rate with stage 4 Melanoma cancer patients. Patients come here from all over and their needs are catered to while they are in Cayman. Having a state of the art facility, welcoming friendly staff and a pleasing environment to relax in, make the treatment that much more attractive (see perseuspci.com on the web for further info). 

Infrastructure
During the aftermath of Hurricane Ivan and during the recession a large number of people left the island. That eventuality added to our economic problems. Subsequently, it was postulated that an influx of about 10,000 people would have a needed positive effect on the Balance Sheet. While we do not doubt that is true, has anyone noticed how bad the traffic has gotten lately? The islands road system as it is, would have grave difficulty being able to handle a large influx of drivers/cars, not to mention exacerbating the unemployment situation. Adding more population will be a good thing, only if our infrastructure can handle it.

Forecast
Our Market had an increase in sales activity in early 2014 for the first time in years. That slowed during our summer, which is more in line with historical norms than recessionary times. November and December were good months and prices are rising. We expect our Winter Season to continue the sales momentums demonstrated last Winter. Limited supply in some sectors will likely lead to multiple bidder situations on some properties and prices should continue to rise. But we will see some stalemates in cases which Sellers expectations have out-paced the market. Therefore we expect mostly sunny skies this Winter with occasional clouds.

We at Coldwell Banker Cayman wish all our readers a very

Merry Christmas and a Happy and Healthy New Year.