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This article originally appeared on International Man please click here to read on the original website. 

Pop quiz: can you name this free-market jurisdiction in the Western hemisphere? 

Here are some of its attributes: 

Personal income tax: NONE 

Corporate income tax: NONE 

Capital gains tax: NONE 

Taxation of dividends: NONE 

Taxation of interest: NONE 

Withholding taxes: NONE 

Payroll tax: NONE 

Social Security tax: NONE 

Wealth tax: NONE 

Inheritance/estate tax: NONE 

Property taxes: NONE 

Compared to the levels of taxation in the US, Canada, and Europe, to say the above is a breath of fresh air would be a major understatement. 

Now, there are only three jurisdictions in the Western hemisphere that do not levy property taxes, so that should narrow the field. The mere existence of property taxes is a ridiculous notion that should offend anyone with a respect of property rights. I have already covered this topic here in case you're interested. 

Those three jurisdictions are the Cayman IslandsDominica, and Turks and Caicos Islands

All three are worthy of discussion, but as I just returned from a speaking engagement at the Grand Cayman Liberty Forum, I want to focus on Cayman today. 

(By the way, locals pronounce it like cay-man, not cay-men. It sort of rhymes with the way you would say 'hey man.')

There is one absolutely crucial feature that distinguishes the Cayman Islands from other low-tax jurisdictions: a culture and history that is vehemently opposed to direct taxation -which has never existed in Cayman. 

Over the years, every proposal that has had even a whiff of a possibility that it might lead to direct taxation has been driven out of town, along with the foolish politicians who sponsored it. It's proven to be a great deterrent. 

This dynamic has been fostered by the fact that Cayman is a small place where everybody including the politicians know each other. The political system in that sense remains very personal. The legislators go to the same restaurants and live in the same neighborhoods as their constituents they cannot easily hide. This sort of personal accountability is impossible in large countries. It helps keep Caymanian politicians in check. 

Give an Inch and They�ll Take a Mile



The aversion to even the concept of direct taxation in Cayman is extremely important. Because once the principle is conceded and you give politicians an inch it's only a matter of time before they'll take a mile. 

You'll recall that when the federal income tax was introduced in the US 1913, those making up to $20,000 (equivalent to around $475,000 today) were only taxed at 1% that's ONE PERCENT

The top bracket kicked in at $500,000 (equivalent to around $12 million today), and the tax rate for it was only 7%. 

Of course, once the principle was conceded in 1913, the politicians naturally couldn't resist ramping it up until we have the monstrosity that exists today in the US tax code, which most Americans passively accept as 'normal.' 

In my view, it's Cayman's unique culture and history that's opposed to the very principle of direct taxation, which is the best guarantor it will continue to be a beacon of light well into the future. 

Judge Me by My Enemies


But not everyone is as thrilled about the Caymanians love for low taxes as I am. 

Spendthrift politicians the world over have long despised Cayman something that should be taken as a badge of honor, as far as I'm concerned. 

This is because productive people and companies gravitate to places where they're treated best. And it's hard to find a place where you'll be treated better with respect to taxation than in Cayman. This dynamic is called tax competition

Naturally, politicians in countries with uncompetitive tax policies don't like this because it means fewer productive people to fleece, which helps puts a limit on their wasteful spending. 

Consequently, Cayman has long been pressured. A prominent Caymanian professional told me about how the US government used to fax over laws to the Cayman government and demand that they adopt them. Imagine a situation where China arrogantly faxed over a new law to the US Congress and demanded they adopt it and you'll know how the Caymanians felt. 

Fortunately, these methods were never really that successful. In fact, they've made Cayman stronger. Now the jurisdiction is battle-hardened and knows how to handle the pressure. 

Another way Cayman has been pressured is through demonization in the media and popular culture as some sort of shady money-laundering center. Never mind the fact that unlike murder, robbery, and rape, money laundering is a victimless make-believe crime invented by politicians. 

Here's what Lew Rockwell said in a post titled The Totalitarian Notion of 'Money Laundering'

Normal people " are outraged and astounded to know that using your own cash, honestly gained and (dishonestly) taxed, can be a major-league federal felony. Spending $10,000 or more of your own cash without filling out a federal form is a crime. But get this: spending smaller amounts can be a crime too, if they add up to more than $10,000. We are told that this police-state measure is necessary to fight terrorism. But when the evil Reagan administration pushed all these laws through, the excuse was to fight the drug war. Of course, neither is true. Such surveillance is part of the federal effort to tax and control every dime you have and spend. Need I mention that only one public official, then and now, fights for our privacy and property rights in this area? Ron Paul battled Reagan, Bush I, Clinton I, and Bush II on the victimless crime of money laundering." As Ron says, freedom means governmental transparency and private opacity, not the reverse. 

But let's set that argument aside and assume that money laundering is indeed a real crime. The people who demonize Cayman never mention that New York and London are some of the largest money laundering centers in the world. Cayman is squeaky clean in comparison with tight 'know your customer' and other banking controls. 

Here's what the New York Times has said:  

A study last year by the Colombian economists Alejandro Gaviria and Daniel Mejia concluded that the vast majority of profits from drug trafficking in Colombia were reaped by criminal syndicates in rich countries and laundered by banks in global financial centers like New York and London. 

What this all means is that the popular (mis)conception about Cayman being some sort of unique and illicit jurisdiction is nothing but propaganda from proponents of big government. 

The reality is that Cayman is a highly sophisticated and professional financial center that stands out because of its unique history and culture opposed to direct taxation. For people looking to make the most of their personal freedom and financial opportunity, Cayman checks a lot of boxes. 

If we judge Cayman by its enemies, I'd say it's a wonderful place. 

Before I sign off, I'd be remiss if I didn't mention the latest issue of Crisis Speculator. In it, I have an in-depth discussion with the legendary Jim Rogers on investing in productive farmland in a crisis market that both he and I are very excited about. It's a region that happens to contain some of the most fertile soil in the entire world. Jim recently became a director of a company that operates in the area. 

Crucially, I have found a way for US investors to easily access this opportunity with a retail brokerage account. If you're interested in scooping up productive agricultural real estate in arguably the most fertile area of the world at crisis-driven bargains and with the ease of buying a stock in your US brokerage account I'd suggest you check out the investment pick in the latest issue of Crisis Speculator.

 
Our new Mid Year Market Report has just been printed (about a month behind schedule) and is now on our website www.coldwellbankercayman.com. But that delay, plus the lead time to do the research and get it written and printed, means the figures used are now at least 90 days old.  

Normally this would not be significant, but this year it is. There is no doubt in my mind that the mood of the market has improved over that period, as has the frequency of showings.  

The conclusions and projections of the report are positive and accurate. However, the data collected since then further supports, and strongly emphasizes, those conclusions. 

Looking at the CIREBA MLS figures, over the past 90 days alone, 127 properties have closed (sold) and another 150 or more are newly under contract with a 'Sale Pending' or 'Pending Conditional' designation. 

That's 277 properties either under contract or sold within the last 90 days when a total of 442 were sold in all of 2013. If we extended the time to close all of these properties to be as much as 180 days in total, that would still be an increase of 25 percent over 2013. 

Meanwhile, although the total inventory on the market continues to increase in value (now at roughly $1.75 billion), if we look at individual sectors, the supply is getting very thin. For example, on Seven Mile Beach, there are no condos for sale from US$1 million to US$1.3 million. There are other sectors, like forced sales on inland properties, which are adding to the supply. 

If you are a fisherman or boater or diver, you know what a 'slack tide' is. It is the brief period between the changing of the tides when the water is no longer falling but hasn't yet started rising. You can't really tell what is happening unless you are in the water, and even then it is hard to tell until the water actually begins to move the other way.  

In applying this tidal analogy to real estate, there are two terms to consider: sales activity and pricing. In moving from a down/buyers market, which we have been in since about 2009, we must first have increased sales activity. In terms of sales activity, 'slack tide' ended and the tide began to rise around last October when a noticeable shift in sales activity began. That is what we were referring to above. The tide is certainly now rising in relation to sales activity. 

With regard to pricing, the data above tells me that we are just coming out of 'slack tide' and the tide is starting to rise. The CIREBA MLS figures will not demonstrate this for another couple of months, but it is already apparent to those of us on the ground. 

Sellers are becoming more reluctant to sell for what the last few comparable properties sold for, but the historical data does not support higher prices yet. So we have gaps in the supply between the sold prices and listed prices.  

It is only a matter of time until those gaps are filled with sales that represent a compromise between the two - which amounts to a rise in prices. 

How soon, and how emphatic the shift will be, nobody really knows. But speaking as somebody on the ground, the compromise sales should be in evidence anytime now. And how dramatic the move will be is dependent upon the amount of demand in each market area. Buyers are unlikely to pay silly prices again after being burned so recently by the recession.  

Notice that above I said 'compromise' deals. At this point in the market cycle, it is imperative that sellers are not too stubborn about getting back to previous highs immediately. That's not how it works. The upward movement of prices is a process that happens as buyer confidence grows and purchases continue to be made at slightly higher but ever increasing levels. But keep in mind, real estate values were discounted 20 percent to 30 percent from previous highs in Cayman during the recession, so purchases made before that discount disappears will be good buys. 

On the heels of the information above, the next question is probably, Why is this happening now? The short answer is that a lot of people have been holding on to their money for a number of years, but there are no traditionally safe investments giving any return. Banks and bonds are hardly worth the trouble, and stocks get riskier every day, it seems. Staying in U.S. dollars is also scary. 

The lone safe haven of precious metals is probably due for another move higher soon. And yet, you can own it, but you can't spend or enjoy it easily. Real estate has become the new darling of investors, more by default than anything else - although the lower prices have certainly also made real estate more attractive. 

Many individuals from foreign countries are looking to geographically diversify their assets. A beneficiary has been the commercial sector, with global investments totaling around US$1.1 trillion, making it the most active year since 2007. Some commercial and residential properties in Cayman are offered with a 6 percent to 8 percent cap rate.  

And even those at 4.5 percent yield much higher returns than banks. In fact, in Cayman, many condos will pay all your expenses with rental income and still allow you to use them as well. 

We believe that this winter we will see a continuation of the trend already begun, and the tide of prices will indeed rise. 

 
JC Calhoun, Broker and Owner of Coldwell Banker Cayman Islands Realty researches, writes and publishes his well known and much awaited Market Report bi-annually. 

In his latest report JC notes a "freshening in the market" and a "definite increase in activity". As realtors and brokers, staying on top of global real estate trends is a vital part of what we do. As we peruse reports we find that, in tandem with JC's predictions and thoughts, investors from the United States, Europe, and Canada have started seeing real buying opportunities and are showing renewed confidence in the Caribbean Market.  

UK, USA and Canadian buyers still represent the largest component of foreign demand across the Caribbean and higher disposable incomes from the mid market are looking at the $2.5 to $4.5 million dollar properties. 

The weak USD has also caused European investor interest in the Caribbean with an increase of enquires from Sweden, France and Eastern European countries. For example, a European investor looking at purchasing a $2 million property in Barbados would have paid $1.53 million in 2010. In 2013, due to currency rates and price movements, the same property would cost the buyer closer to $1.26 million. 

Prime prices softened on Grand Cayman in 2013 but, in tandem with JC's report, activity is rising, which is an indication of renewed confidence and limited new supply. Sales in 2013 were focused on Seven Mile Beach, South Sound and the Eastern Districts. 

It is estimated that prime prices slipped by around 5% on Grand Cayman in 2013 but it is also predicted that price growth will remain fixed in 2014. Sales have been particularly strong in the $1 million to $5 million price bracket with interest from US, Canadian and British buyers as previously noted. 

 
Derek Haines and the Six4Hospice project are well on their way to raising the $1 million dollars needed to build Cayman HospiceCare a new centre with much needed in-patient care facilities. 
The fundraising efforts have just received a large boost with a generous $100,000 donation from the Cayman Islands Real Estate Brokers Association (CIREBA). 
After successfully completing his third marathon in Pamplona, Derek is now half-way through an incredible journey of six marathons around the world in just eight months. His Paris and London races were completed in April and now Pamplona is crossed off the list too. The remaining races take place in San Francisco in July, Dublin in October and finally finishing in the Cayman Islands in December, where Derek's home crowd will be cheering him over finish line. 
James Butterworth, Broker, Coldwell Banker Cayman Islands Realty said "I'm delighted that we, together with our friends in CIREBA could help Derek Haines and the Six4Hospice project with their remarkable fundraising efforts. It's an amazing challenge that Derek is undertaking and one that's going to make such a difference for Cayman Hospice Care, their patients and so many people within our community for years to come. We all wish him the best of luck with his three remaining races."

Every dollar raised for this appeal goes directly towards the Cayman HospiceCare building project. For more information or make a donation please visit www.six4hospice.com 

 
Investing in commercial real estate certainly has its challenges but can be incredibly rewarding too as you can earn a lot of money. It is vitally important that you choose the property and your funding sources wisely. 

The headline location, location, location that you always heart from realtors applies to commercial real estate too. You need to take the neighbourhood into consideration, how it's growing compared to similar areas. A fast growing location is attractive but you don't want the neighbourhood to to stagnate in times to come. 

It would also be wise to keep your focus on one type of property at a time, so for example either office blocks or retail as each type is going to require your undivided attention, also when you focus on just one type you will develop your expertise in that particular area. Look for an investment that has room to grow, for example look at properties that have a large number of units as more units means more cash in your pocket. 

Prior to purchasing, get a surveyor to do an in depth valuation so as to be aware of any structural or aesthetic concerns that could turn into a huge expense once you are the owner. 

Now let's go back to the topic of location and look at investing outside of the area, city or country where you would normally consider. The Cayman Islands as a tax free country, requires only a one time property tax which is payable upon purchase. There is no personal tax and no income tax. As an ever growing offshore financial centre , the Cayman Islands' corporate industry comprises a significant part of commercial real estate. Financial services account for 67% of the GDP. 

Coldwell Banker Cayman Islands has a significant list of commercial real estate listings, and as part of CIREBA's multiple listing system we have access to many more. 

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