(CNS): With the cost of residential rental accommodation already exorbitant in the Cayman Islands, a local real estate agent warns that rents could rise further this year. Micheal Joseph, of Property Cayman and a seasoned realtor, said in his forecast for the housing market over the next twelve months that the current environment of high inflation and rising interest rates will make it more difficult for people to borrow to buy a house, which will increase competition for rentals.
After selling nearly $1 billion in real estate in 2022, most real estate agents in their annual forecasts believe Cayman will see only a slight drop in demand for property next year. But with interest rates on mortgages and real estate exceeding 7% and inflation still rising, joseph said that this affects everyone, regardless of income or property type, and will have a direct effect on renters as well as those looking to buy or sell their homes.
“This caused difficulties in obtaining financing for buyers and caused some hesitation,” he said. “But with the current environment making it more difficult to borrow, more people who might have been interested in buying will need to rent at this time. This will increase demand in the rental market.
Even though there are indications that the out of control real estate market in Cayman is slowing and the number of available properties is increasing, that doesn’t mean people are likely to see bargains. Real estate prices are expected to rise another 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 end of the year week in 2021, but Joseph said this is not still wasn’t really a large amount. Most properties are also at the higher end of the price range, and properties listed under $500,000 are still rare.
Last year, the average value of properties sold was over US$1.3 million, an 11% increase from 2021, which was a record year for the Cayman Islands when property sales topped 1 billion US dollars. Last year, the number of sales fell from 1,068 in 2021 to 872 in 2022, but with prices remaining high, the decline in the number was almost exceeded by the increase in prices, with a decrease in the total value of sales of around $100,000.
The government created a work group to address the housing crisis and is working on ways to help people access finance at lower interest rates using the Cayman Islands Development Bank. But in the short term, local people are excluded from the housing market and most ordinary workers are not paid enough to cover average rents. Several politicians are also suggesting that developers’ rhetoric for taller buildings with more floors could provide a solution to the affordable housing shortage.
With even one-bedroom accommodations hard to find for less than C$1,500 a month, there is growing anecdotal evidence that people are living in difficult conditionscrammed into rental units where landlords are installing bunk beds and turning kitchens into sleeping quarters to accommodate the growing number of work permit holders.
High rents are fueled by a combination of factors, including the influx of returning expat workers after borders reopen and landlords turning to lucrative short-term rental platforms such as Airbnb, which means there is less in the long-term residential market. The cost of ownership is also inflated by the acquisition of luxury homes as an investment by wealthy foreign buyers, many of whom do not live in their properties or even rent them out.
Canada introduced legislation last year, which took effect on January 1, prohibiting non-Canadian citizens or permanent residents from buying residential properties and there have been calls for a similar approach here.
Cayman’s real estate market is skewed by its immigration system which makes it almost impossible for a foreign worker to obtain permanent residency without buying a home. This has no doubt helped fuel demand for goods here over the past two decades, but it’s extremely unlikely that any government would consider a ban, even if they consider removing the link between the two things.
Banning foreign investors from buying property is also unlikely to win favor with politicians given pressure from the real estate industry and the reliance of developers on selling to very wealthy foreign investors to maximize profit from any given project. especially along Seven Mile Beach.
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