Investing in Cayman Islands Real Estate

To get an independent overview of how things are standing in the property market, we asked Fleur Peck from Blue Point Consultants who produces a quarterly market report on the Cayman Islands to advise us.

Overview

According to Fleur Peck at Blue Point Consultants, prior to the COVID-19 pandemic, the Cayman Islands’ real estate market experienced steady price growth for most property types in the years between 2010 and 2019. Most notably there was a steep increase in the number of transactions between 2017 and 2019. As a result of the COVID-19 pandemic, 2020 was the first year that showed a decline in both the number of transactions and the value of freehold transfers. As shown from the data below, the total number of open market transfers registered with the Land Registry for 2020 was 1,920 compared with 1,922 in 2019, only a slight decrease of under 1%.

However, the total consideration in CI dollars was CI$770,551,070 in 2020, compared to CI$816,438,256 in 2019, representing a decrease of 6% by value. This is a surprisingly small reduction considering the Island has had closed borders and was under a national ‘stay-at-home’ lockdown for a period of three months. During this time the value of each individual transaction has increased by just under 15% from CI$427,000 to CI$490,000. There are several factors that have contributed to the increase in property values and demand over the last few years.

Interest rates have been low and this has significantly contributed to the rate of borrowing, especially for people buying real estate as an investment. Local banks are offering (as of October 2021) 4.25% interest mortgages and up to 90% loan-to-value. This has made lending finance attractive both for new purchases and for existing property owners to either re-finance their homes/properties for improvements or purchase a new property for investment. On the commercial side, this has also opened up opportunities for investors to buy commercial real estate, either for redevelopment or leasing. An example being the highest transaction of 2020, which was the purchase of a redevelopment property - the site of a former hotel on West Bay Road called The Cayman Islander, which was purchased by the late Sandals owner, Butch Stewart, for CI$15,120,000 or CI$61.22 per square foot.

A second driver for the Cayman Islands real estate market has been the low community COVID-19 transmission environment and safe and clean living conditions it offers. As a consequence, Cayman has seen a large demand in ultra-luxury properties where cash-rich investors have purchased, in some cases, sight unseen. An example of these transactions is the purchase of the Watermark penthouse by an Asian investor for a reported US$19 million in 2020, and the transaction to a New York hedge fund owner of a 7,000 sq ft house on South Sound Road for a reported US$13.5 million.

Lastly, Cayman saw a notable increase in demand for lower value properties, both land and residential for under CI$500,000, by locals who took advantage of the opportunity to extract money from their pension funds, which was a measure introduced by the CI Government in the summer of 2020 during the COVID-19 pandemic to stimulate the economy.

With the national borders being closed, and strict protocols for re-entry throughout 2020 and 2021, Cayman has had a unique situation whereby residents, a great many of whom normally travel abroad regularly, have spent more time in the Cayman Islands and are therefore looking for local, rather than overseas investments.

There is however, a concern about the supply of property, and the sheer number of residential and commercial developments currently under construction and in the pipeline, and what impact this will have on the increasingly bad traffic situation and importantly, the environment. Many feel that Cayman’s planning policy needs to be reviewed to ensure that we follow a more sustainable path of development, and take into consideration the negative impact of over-development, plus the risk of what a rise in interest rates, or a global recession, could do to our local property values.

Land values in certain high demand areas such as Crystal Harbour and Grand Harbour have almost doubled in the last five years, whilst more recently, low value subdivisions in the outer region such as Savannah, East End and West Bay have also been selling at a fast pace.

In the built residential sector, there remains strong demand for the ultra-luxury accommodation on Seven Mile Beach, with several high-value Kimpton Seafire apartments recently selling and the newest condominium developments such as Watermark attracting record figures of over US$1,700 per sq ft during 2020. Likewise house prices in popular areas close to town, such as Snug Harbour, Crystal Harbour and South Sound have been increasing at a significant rate, as desirable land available for construction becomes scarce.

In regards to the commercial property market, at the beginning of the COVID-19 pandemic in 2020, there were early signs of rent reductions Cayman-wide, and defaults on leases in major office complexes as the trading level of some businesses were impacted. However, the financial services and legal industries remain strong and continue to expand which has meant that many of the prime offices have been able to retain their tenants, despite the increasing number of employees working from home. We have also seen cash rich investors such as Dart purchase commercial buildings which has boosted confidence in the market. Recent freehold office sales include Commerce House, Bermuda House and Elizabethan Square, the former HSBC building, and various class B office buildings in the centre of George Town. The former HSBC building was the highest commercial sale in 2020, selling for CI$14,025,602 for 44,477 sq ft of office, retail and restaurant space, equating to $315 per sq ft.

What is Available For Sale
From the breathtaking canal front properties tucked away in the North Sound waterways, to the new developments popping up in almost every district of Grand Cayman, it is safe to say that our property market is pretty much on fire! The trend is now on building for a more sustainable future with eco-friendly building designs incorporating solar panels, low-flow plumbing, high efficiency appliances, LED lighting and shade trees, all designed to reduce our energy bills and be more gentle on the environment.

Go West to discover new developments long the Seven Mile Beach corridor and into West Bay. These include Ocean 9 Villas in Boatswain Bay, which offer nine 4-bedroom homes elevated 12ft above sea level in a gated community with a single detached garage each. Prices start at CI$553,900. Located at the end of the Esterley Tibbetts highway in Batabano, The Meadows will offer 1 to 3-bedroom, energy efficient, solar ready, hurricane and earthquake resistant townhomes. Prices start at CI$290,000. Located just north of Seven Mile Beach, SeaDreams, an exclusive boutique condominium development has 4 storeys and only 2-units per floor. Residents will enjoy large living spaces, with a pool and a BBQ area. The Grand Hyatt, a 10-storey resort located at Pageant Beach will feature 167 residences and is now more than 75% sold. Located up at Conch Point, Blue Palms will be a private gated community comprising of eight contemporary 3 and 4-bedroom condos. Pre-construction prices start at CI$889,000. Eleven Parc, situated on the Seven Mile Beach corridor, features 17 new townhomes priced at CI$795,000 for 1,800-2,000 sq ft. There is also Dolphin Point Club which is located at the tip of North West Point in West Bay, where 38 eco-friendly, luxury open-plan 1, 2, 3 and 4-bedroom units are being built. Catalina Bay Seafront Residences, located near the George Town Yacht Club, will feature 2 and 3-bedroom seafront condos and is expected to be completed in late 2023. Kailani – Curio will offer 2 and 3-bedroom luxury wellness and boutique condos that will include a thermal spa, sauna and hydra pool. Lotus, located at Canal Point, will comprise of 20 townhouses starting at CI$895,000.

Go East to purchase a condo at Ocean Vista in High Rock located on Seaview Road. Ocean Vista offers 2 and 3-bedroom units priced at CI$300,000-CI$345,000. The Silver Reef Residences, located in North Side, are a new collection of 12, 3-bedroom garden or roof top beachfront condos. Pre-construction prices range from $870k to $1 million. The Rum Point Club Residences is a luxury boutique hotel with thirty one 1 to 4-bedrooms located on Rum Point Drive.

Go South to snag a boutique property in South Sound. In keeping with surrounding luxurious homes and upcoming developments, The Mantras is an apartment complex with 50 units, ranging from CI$495,000-CI$525,000. The 4-bedroom South Sound Collection each come with private rooftop terrace featuring a swimming pool and a kitchen.

Grand Harbour is quickly becoming a desirable neighbourhood with eight developments being built. These include Harbour Walk, the newest of the bunch, which will feature 1 and 2-bedroom apartments with shops and offices on the ground floor. Pre-construction prices range from CI$293,000 to CI$609,000. There is Aura, a collection of 39 luxury 2 or 3-bedroom apartments, and a gated community called Grand Palmyra, also near Grand Harbour. The latter are 3-bedroom townhouses, over 3 storeys with a garage and a den. Prices start at CI$675,000. Paraiso, located at the end of Lord’s Way in Red Bay, boasts 12 modern canal-front homes. Expect a private dock and plunge pool per unit. Pre-construction pricing starts at US$870,507 for a 3 bed, 3.5 bath, and separate den area. Allure is a 26 unit canal front development in Tropical Gardens offering 2 and 3-bedroom apartments starting at CI$470,000.

Structuring Property Investments

If want to diversify your investment portfolio and invest in property in the Cayman Islands, then you will need to work with a specialist that can find you the right investment opportunities. If you are looking to structure your property investments in the Cayman Islands, we suggest you contact the following companies and they will help you choose the best ownership structure.