SMB properties trend up in value

(CNS): A drop in the Caymanproperty market in 2008 was part of a downward trend and the global financial crisis has so far been less of a factor than the longer term pattern, an analysis by property consultants Charterland has found. However,  most of the Seven Mile Beach condominiums continued to show a steady increase in values on previous years and, as of the end of 2008, demonstrated no signs of a slowing of this rate of increase, a review by property consultants Charterland has found. (Left: review authors Ian Barnard, Simon Watson and Stewart Connolly)

Overall, the value of properties, which has been trending down for the past three years, remains significantly higher than pre-2005 figures, though the total number of property transfers was lower in 2008 than any year since 1995.

According to Simon Watson, the main author of the Cayman Property Review 2008 and Charterland Director, the Cayman Property Market really consist of two parts: the SMB properties which had not demonstrated a downturn, as of the end of 2008, and the more local market where there certainly seemed to be a peak in 2006 and generally more of a market stabilisation since then, which has resulted in a decrease in values in certain sectors. “This decrease was most prominent in the two-bed town house sector, which I think most people in the profession saw coming, due to the large numbers of similar properties being developed, in recent years, creating an oversupply,” Watson said.

“The current slow-down is certainly part of a longer pattern, going back to a peak in 2006; however, it should be noted that because of the time-lag between sales contracts being agreed and the actual date of the registration of these sales at the Land Registry, from where our data is obtained, it may be that the full impact of the financial crisis in the last quarter of 2008 would not have been reflected in the transfers registered by the end of that year,” he said.

The report comes in the wake of the passing in the Legislative Assembly of amendments to the Customs Tariff and the Stamp Duty bills in a bid to boost development and the real estate industry. Duty on construction materials is to be reduced by 5% and stamp duty is being cut across the island by as much as 2.5% for buyers in the Seven Mile Beach area and 1% elsewhere.

This means that the stamp duty has been reduced for SMB properties from 7.5% to 5%, Watson noted, adding, “A few years back it was 9%, so this is a very significant difference.”

According to the report, the total number of property transfers in 2008 fell by over 5% from 1,786 in 2007 to 1,691 in 2008. This drop was the third annual drop in a row since an all-time high in 2005 of 2,640: a total drop in transfers of over 35%. The slow-down in the property market in 2008 is also reflected in the decrease in the total value of properties being transferred for a monetary consideration. 2008 saw a total value of transfers of CI$489 million, down nearly 11% from 2007 and nearly 25% from the highest on record.

The review is not intended to predict future trends but to be a fact-based unbiased retrospective, Watson told CNS. The information on which the analysis is based is taken directly from government departments, including the Land Registry, Valuation Office, Planning Department and Economic and Statistics Office, rather than third party sources, he said. For the review, they collated all the information and presented it in an easily readable format.

While the overview is based on all transfers, the report only focuses on areas of the market where there are a significant number of sales, such as Seven Mile Beach and condominiums in the George Town area. In areas where there are relatively few sales, such as the Sister Islands, the limiteddata available can be easily skewed by a small anomaly, Watson noted.

However, the data did show a boost to the Savannah district after the construction of the Countryside Shopping Centre and the new road, indicating that the real estate market benefitted from those two factors. Watson also noted that the higher end properties were still increasing in value, which may indicate that buyers should purchase the most expensive property they can.

Cayman Property Review 2008 can be downloaded from the Charterland website in electronic PDF format.