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2014 - New Year

MARKET REPORT
NEW YEAR 2014

 

Review
In our last report we predicted some improvement in the Real Estate Market but described a lot of “IFS” – some international and some local. Nothing significant has happened to bolster our economy either domestically or internationally. Internationally, the entire world is in some sort of turmoil and locally, unfortunately, there has not been much to recommend either. We had a pretty rainy summer.

  • General Outlook
  • Condominiums
  • Residential
  • Commercial
  • Sister Islands
  • Development
  • Health City in High Rock
  • Forecast

General Outlook
The steamy days of summer have finally given way to traditional Cayman Winter weather with fresh Christmas breezes and sparkling clear sunny days. It is amazing how days like this can lift your spirit. Having said that, since our last report the PPM Government are now aware of just how bad things are in terms of the lopsided balance sheet and needed reforms. Whether they will be able to effect real change is still unclear.

They are making an effort to cut spending which is laudable, however much of what we see are financial band-aids compared to the bold wholesale changes required to actually solve the problems long term. Businesses are hurting badly and in that regard it is as bad as it has ever been. When you look at the P&L’s of large well regarded island businesses and see net incomes of less than $10,000 for the past year, you know things are bad. And you also know the owners of those firms have to be wondering why they put up with the hassle of running a business in Cayman, for negligible profits.

In the Real Estate business, up until October/November it was the same story: increasing showings, and some deals being written, but many falling through. However, just since October we have seen an uptick in not only interest, but purchasing.

There is a definite freshening in the market. Unfortunately this will not be reflected in the 2013 year end figures because many of these deals will not close until after the new year. But there is a definite increase in activity. Reinforcing that feeling, the dollar volume of pending transactions is up 13% YTD over last year. Hopefully what we have seen in 2013 is a reflection of the old saying “it is always darkest before the dawn”.

Tourism is up again making it the 3rd year in a row for tourism increases and now we are finally back to pre-Ivan stay-over tourism levels as we project the final 2013 figures to top 350,000. Restaurant and hotel bookings are up, as are car rental reservations. 2014 is looking good on paper. And our resident population has also now rebounded to pre-Ivan and pre-recession levels. About the only numbers which are not up are the cruise ship numbers, and with the pain being experienced by the US middle class, that may not soon change.

Specific Market Sectors:

Condominiums
Since the start of the recession, condo sales have been slower than usual due to the shrinkage in our foreign buyer pool. Prices have come down in many complexes, even on 7 Mile and so sales have begun to pick up. There have been some excellent purchases made.  Now we are starting to feel a tightening of the market. YTD average prices have moved upward by 7% in this sector. Plus there have been a number of purchases made owner to owner within complexes lately, and so the CIREBA figures are probably a bit lower than the actual full market data. That would indicate that those who still have faith in Cayman as opposed to other places to vacation and put their money, are doubling down. That is always a good sign.

The remaining units in Sea Breeze which were not purchased from the creditor by the Developer, or sold to arms length buyers, have now been listed for sale with Coldwell Banker. Prices on the four remaining beachfront units range from US$1.5M – US$1.75M. Keep in mind these are all 4 bedroom plus den, 4.5 bath units of 2,967 sq. ft. with all the luxury amenities. They are all currently rented and will be sold unfurnished. Give us a call for specific details and a private viewing.

Residential
The Residential single family home sector has been leading the Real Estate Market for several years now and 2013 was no exception.  Prices are about even with YTD 2012, but there are some truly spectacular homes on the market not the least of which are La Buena Vida on the cliffs in Spotts and Villa Casuarina tucked away amidst the pines in South Sound. Both have had price reductions since our last report. We also have an impressive new listing on the cliff in Beach Bay called Sea Spray which is worth a look, and an inland home in the Highlands which may well be gone by the time you read this.

 Commercial
As reported last issue Todd Younghans now heads the Coldwell Banker Cayman Commercial Division. Todd has just completed his course to achieve the demanding and coveted CCIM designation to add to his SIOR designation. Todd is the only Commercial agent in Cayman to have any professional Commercial designation whatsoever. His brief report follows:

The Commercial Office Market in Grand Cayman is the largest of all the offshore financial centres in the Caribbean. At over 3 million square feet, the Cayman office market tends to mirror many coastal markets offshore and follows the trends of the worldwide economy.

With any downturn in the Caribbean and US economies, Cayman follows right behind and tends to lag behind once things begin to improve. Class B and C product have clearly been affected the most while demand for Class A space holds firm.  However, concessions are still needed to attract and keep good tenants.

The big driver for the office market continues to be the financial and legal sector which have begun to show some slow growth again in their demands for space. The big drivers for the retail sector are tourism and locally expendable income like everywhere else. Both of these have felt the pinch of a worldwide slowdown and have been slow to follow the recovery but are improving. Several projects are on the horizon in Grand Cayman that offer an optimistic outlook for the commercial market which rely on the island accommodating new growth. Airport expansion, port docking facilities and the Health City Project, among others, are expected to assist in creating and sustaining demand for new space. Please contact us for a full market report on either the Office or Retail sectors on Grand Cayman.

Sister Islands
The business recession plaguing Grand Cayman has been even more in evidence in Cayman Brac and Little Cayman for the past 5 years. In Cayman Brac sales have been extremely slow until recently when the Cayman Brac/Safe Harbour Marina program jumped onto the front burner. Just this past November a group of local businessmen led by Cleveland Dilbert (with Real Estate values supplied by Irene Scott-Thornton of Coldwell Banker in the Brac) presented a very well conceived strategic outline to Government.

It includes the dredging and reclamation of the South Side West Pond, the addition of a protective breakwater, a riprap lining for the Marina, and a Commercial Barge facility. The South Side West Road would be cut to allow ocean access to the Marina and traffic would use an extension of Bluff Blvd to get back to the South Side West Road via Rebecca’s Cave Road. Besides providing a much needed secure anchorage both for Commercial and Recreational use and relieving the pond smell issue, further tourist related development will occur along the shoreline of the Marina.

Public docking, fueling stations, sewage treatment, water supply and free public wifi are just some of the expected amenities. This deal hinges on the Cayman Government committing to purchase CI$3.5M of fill material excavated from the pond at CI$16/cu. yd. (which is 30% lower than market price) and which will be needed for Brac infrastructure purposes over the next 5 – 7 years anyway. The economic benefits, both public and private, of this project are estimated at CI$13.0M. This is a win/win proposal and we urge Government support.

In Little Cayman, the recent and unexpected passing of long time Realtor Perry McLaughlin has saddened the entire community. Perry was very well liked and Wes Dangerfield and our entire staff join in offering our condolences to Perry’s family, and our assistance in any way possible.

Coldwell Banker in Little Cayman has just seen some exciting new listings come on the market with an interior 34 acre parcel asking CI$525,000, a 3 bedroom beachfront home asking US$899,000 and a large 4 bedroom, 4.5 bath iconic home known locally as “The Pizza Man’s House” asking US$1.6M.

Development
There is planned re-development at Britannia with the inland portion envisioned being a 140-room Business/Conference Hotel facility. The Beach Suites have applied for Planning Approval to add 2 more floors, and we are sure to see new flags on these hotels.  The Golf Course, which at one time was the islands finest, will also undergo a serious face-lift.

The other significant Hotel Development already underway is the Kimpton Hotel being developed by the Dart Group on the old Marriot Courtyard site. However, with the closing of West Bay Road at the Public Beach (and for ¼ mile north) this hotel will now be beachfront and will boast over 250 rooms at a price tag in the $200M range and scheduled to open in about 2 years.

Besides the obvious importance of about 400 new hotel rooms on the beach which will increase our capacity by more than 20%, the creation of jobs and spin-off income into the local Community is coming just in the nick of time. Our local economy is seriously hurting and we really could use the jobs and spending that will come with the finished products. But at least some industries will benefit during the construction phases and it gives us a light at the end of the tunnel.

Much closer to completion is Phase I of the new Health City in High Rock.
The first 140 rooms are targeted for completion this February, followed by a 150 room hotel also on site. If current plans come to fruition, this project could extend to 1000 hospital beds and 500 hotel rooms.

Medical Tourism has become a significant income contributor in other locations and it should also be so here.  In terms of Real Estate, Health City plans to accommodate as many as possible on their site, however there will be spin-off income as well, especially in the Eastern Districts.

With these projects online or coming online, we hope the Government is mindful of the need to improve the airport and lengthen the runway. That will be difficult considering our balance sheet, however this is a “must do” to be able to handle this expected influx of new visitors.
 
Hamptons Affiliation
Coldwell Banker Island Affiliates, the Master Franchise of Coldwell Banker Real Estate Corp. in the Caribbean and Atlantic Island region, and Hamptons International, a leading estate agency in the United Kingdom, announce their exclusive partnership. This agreement strengthens the scope and reach of both companies enabling them to offer property buyers and sellers a superior level of real estate service on both sides of the Atlantic Ocean. The agreement allows for additional exposure of all of Coldwell Banker Island Affiliates’ property listings to be marketed by Hamptons International and also displayed on their website, www.hamptons.co.uk.

Coldwell Banker Island Affiliates has been in business since 1997, when Coldwell Banker Real Estate Corp. began pursuing their vision of a global real estate company. The islands of the Atlantic and the Caribbean were one of the first areas targeted for expansion of the Brand being just off the shores of the USA. The Master Franchise known as Coldwell Banker Island Affiliates (CBIA) comprises all the islands from Bermuda on the North, Aruba and Curacao to the South, Cuba to the West and Barbados to the East. Today, CBIA has 21 offices covering 15 different countries throughout the Caribbean and Atlantic island region.

Hamptons International is a leading residential agency operating in London, the South of the UK and overseas. With more than 140 years of experience in the property market and a commitment to industry innovation and exceptional levels of customer service, Hamptons International today offers a wealth of award-winning services including UK and international Sales,  Lettings, Property Management, Corporate Services, Residential Development, Development Land and Valuation, and Property Finance. Headquartered in London’s Mayfair, Hamptons International has an international network of more than 85 offices and is a subsidiary of Countrywide, the UK’s largest estate agency and property services group.

Alasdair Hedley, Head of International at Hamptons International, says: “The demand for second homes outside of the UK is gaining momentum and we’re thrilled to have extended our partnership with Coldwell Banker to include Coldwell Banker Island Affiliates.  Traditionally the Caribbean has been a real hotspot for our buyers and we’re looking forward to capitalizing on the opportunities that this partnership will bring.”

Conservation Bill
Struggling to come out of the depths of a six-year recession, the new Cayman Government decided a new Conservation Bill should be one of its first priorities in terms of legislation. Somewhat curious, and yet in a place where water and beaches are the major attraction for Tourism, which supports half of our economy, conservation is surely necessary. The Bill, as written, was poorly conceived in a number of areas demonstrated by the 35 Amendments required to address most of its shortcomings. Kudos to those who pointed out the problems with the original Bill, and kudos to the MLAs involved in getting it adjusted and passed. The Bill passed unanimously.

YMCA
Mr. Greg Smith, who has an impressive resume of many years of service in various capacities in various locations throughout the US, has been chosen as the first Executive Director of the YMCA of the Cayman Islands. With Greg now in place the YCI will shift into second gear and begin to become an active player in the local society. If you have interest in becoming involved, please call Greg at 345-928-5987, or go to the YCI website.

Forecast
As mentioned there are a lot of local indicators which are pointing “up”. However, although these are in process, some will take a while to incubate and provide measurable results. We have been in a deep financial hole for a while and it will take some time to dig ourselves out.

Having said that, there is some good news from up North which always has a positive effect here. If world events don’t go sideways, and if our own Government does not hinder business via inadvisable policies or bureaucracy, we should have a pretty good year.

Accordingly we predict slowly clearing skies and some very welcome sunny weather.

We wish all our friends, clients and customers a very Merry Christmas
and a New Year full of Love, Peace and Prosperity.