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Mid Decade Boom-May 2013

Publish Date : 08 Jul 2013

The real estate market in the Cayman Islands currently has some of the best opportunities that we have seen in many years.

Much of this has been set up over the last four years, from the end of 2008 up to the end of end of 2012.  During that time, real estate activity in our market slowed, prices kept being reduced, and development activity ground to a halt.  Many purchasers were just not comfortable investing in real estate.

After a substantial fall off in investment confidence and real estate prices, up to 20% or more in some markets, real estate prices have mostly bottomed out.  Sales activity that was generally flat is showing signs of slow recovery.  That trend has been continuing, from late last year to well into this year.

While we still seem to be slowly coming up from the bottom of this real estate cycle, large scale commercial and development activity is foreshadowing much better times ahead.  We are a small island and our local economy is not that large, so it does not take a whole lot to impact our economy when there is major improvement to our country’s infrastructure.

If you consider all the development currently underway, it is staggering, despite the fact that it is hard to see much impact from it, right now.  However, our current market conditions of slow growth are not the new normal.  There is a vast expansion that has just vigorously started, late last year and it will have a huge positive impact on Grand Cayman.

Yet, in some cases, prices are at levels not seen in about 10 years.  On the surface, it appears that the effect of the global recession on our economy and the drop in development activity has caused an over correction in our real estate market and prices.  A lot of the projects that could have started years ago have been “back loaded” into the last year and are all starting around the same time. 

What a great time to take another look at investing, now that the global recession is tapering off and there is a tremendous surge of improvement to this country’s infrastructure.

A shining star that has been an exception to the lack of development, over the last several years, has been The WaterColours on Seven Mile Beach.  This magnificent development started just prior to the global financial crisis and continued all the way through it, with completion planned for late 2013 to early 2014.  It is comprised of 60 ultra exclusive three and four bedroom beachfront residences, within a property featuring services and amenities that go far beyond what has ever been offered before in a residential development.

Additionally, a new hotel will be redeveloped from the former Hyatt Regency Hotel site, at 170 suites initially (there are also plans to develop some residences).  With two persons per suite, on average, tourism would increase by almost 100,000 at an 80% occupancy rate.  That would add about a 25% increase to our current level of stay over tourism.

Another property being redeveloped into a new hotel is the site of the former Marriott Courtyard Suites.  If we estimate at least 200 suites, rooms, and residences – although, there will likely be more than this – and use the same projection as we did for the former Hyatt Regency Hotel, the impact is substantial, as well.  About 116,000 tourists would be added and increase tourism by another 25% plus.

These two new hotels and residences have the potential to improve our tourism by about 50% in two year’s time.  Anytime we have previously increased tourism by 15% to 20% in a year, our real estate market has boomed.  In this case, by around 2015, we could have two new hotels adding a tremendous amount of demand to our real estate market, predominantly along Seven Mile Beach.  Tourism provides a large part of the demand that we have in this market.

Now, give further consideration to a new tourism product – medical tourism.  This new industry that is developing in Cayman and coming online around the same time as the new hotels, could quickly add another 100,000 medical tourists to the mix within a couple years of the hospital and medical facilities being open.

This is big!  In essence, we could increase tourism by 100%, from around 300,000 tourists a year to 600,000, in about three to four year’s time, around 2016 or 2017.  Fortunately, other infrastructure, like new roads are already being put in place to support this increase in demand.

It is hard to realize just how much of an affect the two new hotels and Shetty medical development will have on our economy.  Statistically, it could be staggering.  We may not even be ready and fully cognizant of this groundswell of demand that will hit fairly quickly, especially after being lulled to sleep over the last few years from depressed demand.  It is mostly going to come all at once.

While a lot can still upset this anticipated boom, like a major global crisis of some sort, there is no question that the Cayman Islands are moving down the road to much better economic times.  The groundwork and foundation for this is already set in place with the start of the two new hotels and Shetty medical facility.  This is naming only three projects, out of many more that are either just starting or still in planning stages.

Investors and visitors to Cayman will be watching the many exciting local events that are taking place.  Now, is not the time to procrastinate, as Cayman is changing for the better and you need to be ready, when these better times hit. 

Economic progress has started and will move very quickly in the next few years, so this is a good time to recognize what is happening and seize the opportunity.  Look around, it is right in front of you.