REVIEW

In our last report we predicted partly cloudy skies with occasional showers.

General Outlook

We have indeed had showers, both physically and metaphorically, and with the US economic meltdown they have been more than occasional, especially lately. Overall year to date sales in 2008 are down 9% in number of transactions and 15% in Dollar volume over 2007. Most of this decrease has occurred in the last half of the year.

RESIDENTIAL

The detached home market is still reasonably healthy, as year to date the number of sales is actually up 25% but the average sale price is down 8%, and marketing time is longer by 22%.

We are still seeing sales being made locally to long time resident middle management couples, Government employees and also teachers and medical personnel. Canal front homes seem to be particularly popular of late. The interesting thing here is not just the continued confidence of the local market (we have said before – owning your own home is always a priority regardless of the market conditions) but also the fact that in Cayman the Banks are still lending. In these particular cases it was Cayman Fidelity First Caribbean, Cayman National, Scotia and Butterfield, and the customers were very happy with the service. Depending on the qualifications of the customer the rate has been about prime plus 1/2% with 10-20% down required. As we all know it is the lack of available mortgage money which is one of the major problems in the US right now. Thankfully that is not the case in Cayman.

CONDOS

Condominiums sales prices have dropped a further 4% year to date since our last report and the number of sales has dropped 11%. Prices of inland condos continue to fall as we have predicted. Seven Mile Beach condos are still selling but the market has not been as active as usual.

Pre-construction sales are still slow. Very few of the sales made this year were in Beachcomber, Renaissance, or South Bay Beach Club. This will be the first time in memory pre-construction units on Seven Mile Beach will not have been all sold out prior to completion. Perhaps 3 projects at one time was just expecting too much! It looks as if Watercolours will go ahead on the Beach Club Site, with approximately 30% pre-sold. This will be Cayman’s finest condo complex when completed with innovative luxury features never before incorporated into a Seven Mile Beach project. Call us for sales availability.

Resales on Seven Mile continue to be a staple item and Coldwell Banker has offerings across the board at Plantana, Pinnacle, Discovery Point, Silver Sands and others. There still is no better beach in the Caribbean. Call us to find the perfect unit while the prices are down.

We are pleased to have sold Ritz-Carlton Residence #506 the latest in the line of beachfront units sold at the Ritz by Coldwell Banker Cayman Islands Realty. This unit was a 3 bed, 3bath, 4960 sq. ft. fifth floor unit which sold for just over US$5.0 M. While not as much as the sellers had originally expected, they were reasonable and it sold for market price, which (for the information of the Appraisers at Lands and Survey) is what something sells for 99.9% of the time.

Following in the vein of reasonable pricing is Ritz-Carlton Residence #102, a 2 bed, 2 bath of 2500 sq. ft., which has just been listed at US$1,990,000 fully furnished! Just steps away from the pool and all the amenities and still very private. This is only $800/sq. ft!

Commercial

A number of businesses are still trying to reorganize and get their storage and retail operations into the same buildings. Many with storage in the Industrial Park would like higher ground and easier vehicular access for the retail operation. Just such an opportunity exists on the Eastern side of Grand Harbour where the developer is going to offer condominium sized spaces in addition to the purpose built possibilities on very well priced land parcels. Those who need larger accommodations with trailer access can have their own land and building while those with more modest size and budgetary requirements can go the Commercial Condo route. The architecture will be consistent with the existing theme and light commercial applications.

We are looking for the right boating repair and storage operation to provide service for Grand Harbour Residential development as well as other businesses which would gain from the excellent vehicular access and exposure, low land prices, and relatively high elevations.

Two units have now been sold at Trinity Square and there is space still available from 640 sq. ft. to 20,000 sq. ft. The occupied units provide about an 8.5% return for an investment purchase while others could be purchased to be owner occupied. Aren’t you getting tired of having to get permission to make changes to the interior of your rental space or wondering what the rent will be next year or whether the Landlord is going to want your space for his own use??? The only real solution is to own your own space.

Raw Land

As the developers of The Lakes in South Sound now have only a relatively small number of lots left to sell they have decided that they will consider a significant reduction on the next few sales. Some of these lots are right on the lake and are great homesites. So if you have been considering purchasing a lot for your future home, you cannot find a more convenient location, and the only thing high about the next few sales will be the elevation! Call us now!

Tourism

Cayman has been remarkably busy during the run up to Christmas. The best restaurants have been very busy with both local and foreign business. And the cruise ship passengers continue to pour in. Perhaps the unseasonably cold weather in the US has had something to do with it. Meanwhile Cayman’s weather has been typical for this time of year ie. temperatures in the high 70’s and low 80’s with a good breeze and plenty of sunshine. And it will be that way through Easter!

Reports of cancelled reservations for some of the big business groups are probably accurate, but if we can fill in the blanks with families escaping the cold we will actually be better off in the long run. If tourism can make just a reasonable showing this year we will be much more fortunate than our neighbors to the North.

Sister Islands

Cayman Brac bore the brunt of Hurricane Paloma in November. This was a very late storm and as is usual in those unusual late season storms it originated in the Caribbean off South America and just drifted north. It made a hard right just South of Grand Cayman and was a Cat 4 hurricane as it cruised along the South shore of Cayman Brac. The North coast where most of the homes are quite old and not particularly strongly built was hit hardest. The damage there is much like we had in Grand Cayman from Ivan; devastating. Ironically it was the same date as the 1932 storm which had been our historical hurricane benchmark prior to Ivan.

But the Brackers are nothing if not industrious. Cayman Brac will soon be ready to welcome visitors in its slightly delayed tourist season with the opening of the new Alexander Hotel scheduled for February 2009. There are new and exciting properties on the market including Ja’zandie Gardens bluff subdivision which is located just a short distance from the new Creek Bluff Ramp. Due to its close proximity to the Creek Barcadere and dock, this ramp opens a portion of the bluff once considered remote to swimming, snorkeling, fishing and watersports. Also due to the closeness of the Creek Dock and warehouse, delivering building supplies to sites near this ramp makes building much easier.

Necessary Upgrades

Now that recession is staring us in the face there is starting to be some serious discussion about what we can do in Cayman to improve our tourism numbers. One thing we have been saying for some time and we will reiterate here is: LENGTHEN THE RUNWAY! We have been limping along with a runway of inadequate length for 25 years! If we want to encourage more people to come here we need to have the facility to accept large planes and direct flights from farther away than New York. Keep in mind the people we want to attract do not necessarily live in a major city and will still have to take another flight even if we have a direct flight from say Paris or Frankfurt or Los Angeles. Visitors will put up with 2 flights if necessary – not 3 or more. This is a no brainer.

Christmas and the Economy

Most of us are being very careful with our spending right now. But we need to recognize that in our already slow market this just makes the problem worse. We are not saying spend carelessly, but in this Christmas Season we should all try to do what we can for worthy causes which provide a needed service like your own Church or Hospice or the Pines or Women’s Crisis Centre to name just a few. Their balance sheet is even more vulnerable than ours, so be as generous as you can.

Special

As always in unsettled times, we are bombarded by both potential sellers and buyers asking what we expect to happen to the market?

To both the sellers and buyers we are saying that most indicators point to a continued slowing of the market and decreasing of values at least in the short term. Now is not the time to sell unless you have to. And if you have to, make sure your realtor is anticipating the market direction in his CMA when he advises you on pricing. The market is not static, it is moving, and you better anticipate its direction with your pricing or you will end up chasing the market which is a most discouraging activity!

If you have the resources to buy there is no hurry. Watch the property availability – that is the key. Keep looking until you find what you want and when you do, don’t be afraid to pull the trigger. Once you have found the right property DO NOT wait to try and buy at the bottom. Think about it; the only way to know where the bottom was is when prices have already risen – so you are going to miss it. Prices are down now so you can be sure there is future appreciation in property. Most important is not to miss the opportunity to get the particular property you have wanted. These opportunities only come in a down market.

Forecast

There is no reason to believe that our market will do anything but soften over the next 6 months. But as those 6 months make up our tourist season we do not expect it to be dead either. Cayman still has a lot going for it both in terms of what tourists want and interest from our local market; so there will be some demand. Further, the other investment alternatives are very low and/or very shaky and so the pool of those looking at Real Estate will widen somewhat. On the supply side we should see more inventory coming on the market which will depress prices further. The combination of the two should make for a market which is more active than we might expect.

President Elect Obama is likely to spend a lot of US taxpayers money and that may well stimulate the American market in the short term. Whether that is healthy for the dollar in the long run is a topic for another day. So our forecast then is for cloudy skies with some sunny patches.