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Home > Five Key Influencers for the Cayman Islands Real Estate Market

Five Key Influencers for the Cayman Islands Real Estate Market

In the decade before COVID-19, the Cayman Islands’ real estate market had experienced steady price growth for most property

types. There was a particularly steep increase in the number of transactions from 2017-2019, making 2020 the first year that both the number of transactions and the value of freehold transfers declined. However, despite the border closure and lockdown measures, the number of transactions between 2019 and 2020 decreased by just 6%. The below indicators are, in our opinion, the key reasons the Cayman Islands real estate market has retained its strength.

• Low-interest rates and the rate of borrowing is always a significant driver for real estate investment. Local banks currently offer 2-3% interest on mortgages and up to 90% loan-to-value. This makes borrowing attractive for both new purchasers and for existing property owners who may re-finance in order to make improvements or purchase a new property. This has also opened up opportunities for investors to buy commercial real estate, either for redevelopment or leasing.

• A second driver for the Cayman Islands real estate market has been the attractive COVID-free environment and safe, clean living conditions it offers. Consequently, Cayman has seen a great demand in ultra-luxury properties, where cash-rich investors have purchased, in some cases, sight unseen. 

• The equity market and global conditions play a large part in the local economy and real estate investor decisions. Even ignoring the pandemic, 2020’s stock market defied expectations. Despite a 34% drop in spring, the S&P 500 index was up 15% by the end

of 2020, whereas strategists had forecasted an increase of about 5%.

• Cayman saw a notable increase in demand for lower-value properties, both land and residential, from locals. This was a result of the government allowing residents to extract funds from their pension funds in the summer of 2020 in order to stimulate the economy.

• With national borders closed and strict protocols for re-entry, many residents who travel regularly in normal times, have spent more time in Cayman and are therefore looking for local rather than international investments.

Whilst these factors have all offset the adverse economic and social impact of COVID-19, some may pose a downside market adjustment risk. For example, interest rates are unlikely to fall further. They may rise but are most likely to stay where they are. As the rest of the world vaccinates and Cayman is a Covid-safe destination, there is a risk of equity markets correcting. The effect of the pension fund release will not be ongoing, and local investments and spending may reduce once international travel from Cayman reopens.

Conversely, the growth and long-term demand may be more sustained as Cayman’s population continues to grow, and new developments are required to meet the demand. The Cayman Islands remains one of the most attractive, economically and politically stable countries in the Caribbean and is therefore well placed to continue to have long-term interest from overseas investment.

To learn more, contact Blue Point Consultants:
Email:
Visit: www.bluepointproperty.com


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