(CNS): With the cost of residential rental accommodation already sky-high in the Cayman Islands, a local realtor is warning that rents could go even higher this year. Micheal Joseph, from Property Cayman and a veteran real estate agent, has said in his predictions for the property market over the next twelve months that the current environment of high inflation and increasing interests rates will make it more difficult for people to borrow to buy a home, which will increase the competition for rentals.
After almost one billion dollars worth of real estate was sold in 2022, most realtors in their annual predictions believe Cayman will only see a slight drop in demand for property next year. But with interest rates on mortgages and home loans running at over 7% and inflation still increasing, Joseph said that this is impacting everyone, regardless of income or type of property, and it will have a direct effect on renters as well as those wanting to buy or sell their homes.
“It has led to difficulty in acquiring financing for buyers and caused some hesitation,” he said. “But with the current environment making it more difficult to borrow, more people who may have been interested in buying will have to rent for the time being. This will increase the demand in the rental market.”
Even though there are indications that the runaway property market in Cayman may be slowing down and the number of properties available increasing, this does not mean people are likely to see any bargains. Property prices are forecast to increase by a further 5% in 2023.
At the end of 2022 there was an increase in the number of properties available for sale, with around 1,030 active listings in the last week of December compared to 688 during the year-end week in 2021, but Joseph said this is still not really a large amount. Most of the properties are also at the higher end of the price range and properties listed under $500,000 are still scarce.
Last year the average value of properties sold was over US $1.3 million, an 11% increase on 2021, which was a record-breaking year for the Cayman Islands when property sales exceeded US$1 billion. Last year saw the number of sales fall from 1,068 in 2021 to 872 in 2022, but with prices remaining high, the drop in numbers was almost outpaced by the increase in prices, with a decrease in total sales value of around $100,000.
The government has created a task force to address the housing crisis and is working on ways to help people access funding at lower interest rates using the Cayman Islands Development Bank. But in the short-term, local people are being priced out of the property market and most ordinary workers are not paid enough to cover the average rental rates. Several politicians are also suggesting that the pitch from developers for taller buildings with more storeys could provide a solution to the shortage of affordable homes.
With even one-bedroom units hard to find for less than CI$1500 per month, there is increasing anecdotal evidence that people are living in dire conditions, crammed into rental units where landlords are installing bunkbeds and converting kitchens into dormitories to accommodate the growing number of work permit holders.
High rents are being fuelled by a combination of factors, especially the surge of expatriate workers returning after the reopening of the borders and the fact that property owners are turning to lucrative short-term rental platforms such as Airbnb, which means there are fewer on the long-term residential market. The cost of property is also inflated by the acquisition of luxury accommodation as an investment by wealthy foreign buyers, many of whom do not live in their properties or even lease them out.
Canada introduced legislation last year, which came into effect on 1 January, banning non-Canadian citizens or permanent residents from buying residential properties and there have been calls for a similar approach here.
Cayman’s property market is distorted by its immigration system which makes it almost impossible for a foreign worker to get permanent residency without buying a home. This has undoubtedly helped fuel demand for property here over the last two decades but it is extremely unlikely that any government would contemplate a ban even if it is considering removing the link between the two things.
Banning overseas investors from buying property is also unlikely to curry favour with any politicians given the pressure from the real estate sector and the dependency of developers on selling to very wealthy foreign investors to maximise the profit on any given project, especially along Seven Mile Beach.
