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2012 - New Year

MARKET REPORT
NEW YEAR 2012 AND PROPERTY LISTINGS
AN HONEST APPRAISAL OF THE CAYMAN MARKETPLACE



Review
In our last issue we noted increased volume over 2010 YTD but we stated that we did not expect to do appreciably better than the previous year due to continuing economic uncertainty especially in the US, unless our local programs had ramped up before years end. The market activity has been a bit stronger than we expected especially toward years end. But no local projects have ramped up.

General Outlook
The number of properties sold is up about 6% YTD but the dollar volume of those sales is up almost 50%! Listings and listing value are both up and Pending sales contracts are down 37%. What does all that mean? It means that more properties in the higher priced categories sold this year than last as a result of Sellers becoming more realistic with pricing. The property supply continues to expand slightly but current pending contracts are considerably fewer which normally signifies a Real Estate Market continuing to slow. And yet in November and December we have seen a definite up tick in sales activity. We have units at the Ritz, Silver Sands, and Castaways all of a sudden contracted and/or sold, plus some commercial/industrial property. Our take on this is that prices on many properties have dropped to the point that they are now very attractive and buyers who are making offers are getting further reductions - making a purchase a 'no-brainer'.

Residential
15% more homes have been sold YTD over 2010 and the average price is up 23% with marketing time actually decreasing slightly. While it is a very good thing that there is more activity, the fact that the average price is up so much does not necessarily mean prices are rising. In fact it means more luxury property owners have been willing to accept less so those properties are beginning to sell. For you potential home buyers and sellers out there, the fact of the matter is that the home sales being made now are at levels which are generally lower than the cost to build the same structure. Thus the buyers motivation to buy rather than build. If you have a choice, it is a far better time to buy than sell.

Condos
12% more condos have been sold YTD over 2010 and the average price is 6% higher than last year with marketing time decreasing slightly. The much anticipated and recently touted resurgence of top end Seven Mile Beach condo sales is not borne out by the sales data I'm afraid. We have seen some increase but the figures used are YTD. As we enter the Winter Season we will definitely see more top end sales activity than we have over the past 6 months, but most sales from here on will close in 2012 and thus become part of next year's data.

In terms of existing luxury units, by far the best deal out there is a penthouse unit in Mandalay which is a luxurious property with only 6 units on the North end of 7 Mile Beach. This beautifully furnished unit has just been reduced to US$3,795,000!

Progress continues on Cayman's finest 7 Mile Condominium project and its first nine-story complex. The WaterColours will include 60 private luxury residences constructed to the highest specifications ever on our beach. In addition to spacious three- and four-bedroom floor plans starting at US$2.95 Million, WaterColours is now offering three exclusive superior Grand Residences, featuring 6 bedrooms, 6 full baths and two half baths, starting at approximately 7,200 square feet. One of these has already been sold by Coldwell Banker. The amenity list is extensive. Call us for a private tour.

Commercial/Industrial

In uncertain economic times Commercial/Industrial projects are generally put on hold until business activity picks up. However, when times are tough and prices fall, forward thinking companies often look to land bank property for future use. With the By-Pass to the airport now a certainty, purchasing a large tract for Commercial/Industrial use makes good sense. There is currently a 10 acre parcel available right on the By-Pass south of Dart's property and just North of the WCML building. This property is priced below all other available land and the owner may consider subdividing. Please call Coldwell Banker for full details.

Raw Land
25% fewer Raw Land parcels have been sold YTD over 2010 and the average price is up 77%, but marketing time is up 43%. This scenario is similar to the phenomena in the Residential Sector above. Some people are stockpiling attractive parcels of Raw Land and those are higher priced properties.

Little Cayman
Condos have been selling well this year on Little Cayman and we have just listed a 2 bedroom, 2 bath garden view unit at Neptune's Berth. The asking price is an attractive US$250,000 which is lower than anything that has been available in the complex for some time. Raw land sales have still not picked up much but prices continue to be reduced so more movement is expected over the Winter season. One oceanfront parcel on the north side of the island that had an asking price of US$199,000 is now down to US $155,000! This is for 100 feet of nice sea frontage totaling 0.45 of an acre. Call us for the best buys.

Cayman Brac
Cayman Brac continues to give great value for money with the lowest priced beach front condos in the Cayman Islands eg Carib Sands 2 bed, 2 bath for US$239,000, MLS 090240, or a 3 bed, 3 bath for US$299,500, MLS 088725. Also beachfront lots are a bargain starting at US$250,000. The always popular bluff acreage, with or without ocean views, are still available as well as individual lots; inland from US$30,000 and Bluff edge from US$118,000. We have everything from luxury homes with a view to quaint cottages on the sea.

Shetty Hospital
The news is good! The Shetty group now has access to 200 acres at Half Moon Bay with options to buy more adjoining property as needed. Joe Imparato is/was the landowner and will serve as co-developer to build support facilities as opposed to the actual medical facility. Phase I will be a small hospital but the other elements included in the original plan will come in later phases. Construction should start in early 2012.

Cayman Enterprise City
This project has been under the radar but is now ready to 'fly'. This is a Special Economic Zone much like in Dubai which is a specified area for designated industries wherein concessions are granted by Government. For the qualifying industries and individuals work permits, Trade & Business Licenses, Caymanian partnership and import duties are waived and replaced by flat fees, 5 year certificates and a 12 business day turnaround of applications. The laws are just now in place to facilitate this and the property has been purchased east of George Town (but not yet announced) where 1,000,000 sq. ft of office/commercial space will be built over 2 phases. For years large international companies looking for a tax free zone which allowed them a physical presence in the Western Hemisphere have previously looked at and rejected Cayman due to our bureaucracy, red tape and regulations. The potential is absolutely enormous, both in terms of inward investment of business and local spin off.

Great Deals?
People are always asking what are the best deals out there and how do you find them? Well, in some cases the sellers listen to good advice and lower their prices to levels which will attract an immediate sale. You can find them simply by searching the MLS (we have a couple right now). But these are a small percentage of the deals out there. The next source of really good deals are the properties where negotiations have proceeded to an agreed point and then the deal has not been signed or has not closed. In these cases we know what the bottom line is and most sellers, who have already agreed a price once and lost the deal, are more than happy to take the same from another buyer. You have to talk to your Realtor to find out about these (we have a couple right now).

Lastly and more likely is that in this market you may well find a great deal on almost ANY property. But to find it you first have to 'make an offer.' Many sellers will not indicate their bottom line in a listing price or even in the first round of a negotiation. But when facing a cash offer from a qualified buyer they often take less than even they themselves thought they would. You can potentially find these deals everywhere, but you have to make an offer to uncover them. Surfing the MLS will help you find a property that interests you. But only making an offer will bring a great deal to fruition.

Government Concessions
No matter how well meaning, Government programs to try to increase business activity rarely pan out. The Government recently passed a law which allows residents to withdraw $35,000 from their pension to purchase Real Estate. It sounds good, doesn't it? However when you read the fine print and discover it has to be paid back within 2 years or penalties accrue it becomes onerous. Further, for someone who doesn't have a job which will allow him to pay the mortgage on a purchase, putting that $35,000 down as a deposit leaves him worse off than he was before. His deposit is gone and he will eventually lose the property too! This is the same concept that led to the sub prime mortgage crisis in the US: pushing people who cannot afford it to try to become homeowners. While being a homeowner is a very worthy goal, to try to buy a property you cannot afford is much like jumping out of a plane without a parachute. The ride down is exciting, but the end result is very painful!

Misrepresentation
It has come to our attention that a couple of land 'development companies' out of the UK are selling lots in Cayman the attributes of which have been greatly misrepresented in their marketing. While admittedly, marketing is often about 'creative exaggeration', this is not pushing the envelope, rather more like shredding it. The biggest misrepresentation is stating that these residential lots sales qualify for a UK self invested pension fund investment. Since pension funds can only be used for Commercial Properties that is simply not true. Further, full price is sometimes being paid for these lots on a land contract when the 'developer' has not done any of the land works or infrastructure required for a parcel to be issued to allow title to be transferred. This sounds like an accident waiting to happen and if it does, not only will the unwitting purchaser be hurt, so will the reputation of Cayman and its Real Estate Industry.

International Marketing
With the economic difficulties in the US which is our main source of business having severely reduced our buying pool, a firm which is serious about selling its clients property has to become aggressive in looking for new sources of potential purchasers. In October and November Coldwell Banker Cayman Islands attended property expositions in London and Beijing. Contacts have been made and business relationships are currently being finalized which will allow us to bring referral business to Cayman from both locations. There are financially qualified persons in both locales who are looking to diversify and Cayman has something to offer. We have found that a safe environment and a liberal and consistent immigration policy are the biggest attractions for foreigners. These can both be Cayman strong suits again if we continue to push the recent activity in both these areas. But if we backslide on these issues, no amount of marketing will help. It remains to be seen how quickly these connections can be turned into visits and sales, but it is an exciting opportunity. We'll keep you posted.

Forecast
Things are improving in Cayman. The market has been more active in 2011 than in either 2009 or 2010. And most companies have cut their expenses drastically. The combination of the two has allowed some small profits to be made. Further, with 2012 being an election year in the States there will be the inevitable political pump priming between now and next November. That is the good news. The bad news is that nothing substantial has been done to alleviate the debt crisis in the US or Europe and especially in Europe we look for a very rocky road this coming year. And with China slowing down as well as the US Real Estate Market still in trouble, we can expect very little help from outside investment.

Our best hope for positive growth continues to lie right in Cayman. First, with the capital projects with which we have been teased for some time. If a couple of those projects got going, and if Government can trim its budget (read bureaucracy) then we may be pleasantly surprised by our business activity. Further, local purchasing is being driven by lower prices and those with the available funds are taking this opportunity to upgrade their property portfolio, even if it is just their residence.

Our guess is that our projects will not move as quickly as they could except perhaps Enterprise City, which could be a huge economic step forward for Cayman. But world economic conditions will somewhat dampen any real positive local economic influences for 2012. We look for another year similar to 2011, so continuing partly cloudy skies are forecast.

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