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2010 - New Year

MARKET REPORT
NEW YEAR 2010 AND PROPERTY LISTINGS
AN HONEST APPRAISAL OF THE CAYMAN MARKETPLACE

REVIEW
As you will see by the figures below, prices have continued to fall as predicted and the sunny patches predicted were provided in September largely by the local market.
 
General Outlook
We saw an increase in sales activity in September (+18%) and then a corresponding drop in October (-16%) which indicates an additional market surge caused by the Government Stamp Duty discount and the CIREBA Purchasers Rebate which expired September 30th. It is difficult to say if these initiatives caused a net increase for Government Stamp Duty or the Realtors, but we suspect not. All the major indicators are down with the exception of the stock market. However, the owners who 'must sell' are not nearly as numerous as in the US, and as a result, the market has been able to absorb these units. This has meant substantial discounting on units here and there, but no free fall of prices as has occurred in the USA.

RESIDENTIAL
The figures on home sales are exactly where they were 6 months ago. Sales volume is the same as last year at this time and prices are 27% below what they were a year ago. That is good news because that means the deepest discounting of prices occurred 6 months ago and things seem to be leveling off a bit. The discounting may not be as deep going forward. But do not be fooled into thinking this is a healthy market. The demand side is still weak and it will still be mainly the best deals which are purchased for the foreseeable future.

CONDOS
The volume of condo sales is still off considerably, down 23% compared to this time last year, and yet the prices have fallen only 70% during that period. Up until recently sellers have been holding the line on prices, but we are seeing a few more break ranks in order to be the next one sold. We suspect we will see more of that as the recession wears on, so have your Agent keep their eyes open for the truly motivated sellers that will likely appear in each property.

Commercial
We have seen a number of financial service providers from other jurisdictions looking for space in Cayman. This is a result of the new regulations which require these types of companies to have a physical presence here. For once perhaps the international tax police are actually doing us a favour.

Companies are still wrestling with the decision about renewing leases where they are or moving to new quarters like Camana Bay. Camana Bay is an excellent physical plant and the location on the bypass is more convenient for many than downtown. However, the cost differential has been the deciding factor for most and with many being able to renew at the same or 10% less than the previous rates, in this recessionary time most have decided to stay put. In the long run, however, there is no doubt Camana Bay is a winner.

RAW LAND
With the defeat of Property Tax (yet again) within Government as a source of revenue, raw land sales are back on the front burner. We locals have never stopped purchasing raw land as a savings initiative. In fact if the Pension Plans purchased land in Cayman instead of stocks & bonds, we would all be better off!

Sister Islands
Cayman Brac marked the one year anniversary of Hurricane Paloma on 8 November, 2009. The island is well on its way to complete recovery and will see the full capacity of hotel rooms come online by early 2010 with the reopening of Brac Reef Beach Resort and Carib Sands Beach Resort. For now visitors enjoy the luxury of the new Alexander Hotel and other complexes which are now reopened for business.

Fortunately, Cayman Brac has not lost its ambiance of peace and tranquility. It is clean and relatively crime free and a great place to raise children and give them a first class education. The Brac continues to offer modern conveniences without all the hassle.

Cayman Brac is looking to capitalize in the real estate market with its inventory of affordable luxury. The "Brac" has everything to offer from beach front lots and condominiums, to high elevation bluff land and executive style homes. With the stamp duty still being waived if one buys raw land and builds within two years, and the further savings of duty free building supplies-it has never been a better time to invest in this affordable island jewel.

Premier Bush has promised to fast track the development of the pond behind the Alexander Hotel into a Yacht Basin. One of the biggest obstacles to Brac development has always been a protected anchorage. Development of this area should jumpstart the Brac economy and give purchasers more reasons than the islands elevation, tranquility, and hospitality to spend time here.

New Projects
There haven't been many of these to write about recently and so this is a good sign! The Seaview Project has been a breath of fresh air; finally a new style and design graces the Cayman seafront! The developers of the new and very well regarded Seaview Condominiums are now sold out and are ready to proceed with the Construction of their new project called Oceana. Oceana will be built on the ironshore waterfront just down from Eden Rock and the project will feature 13 - 15 Luxury apartments of 2500 sq. ft. and larger. It has been described as top quality European contemporary design.These units are truly walking distance to town and will likely be favored by local professionals and frequent visitors. The convenience of the location is underscored by the rental rates at Seaview which are bucking the islands downward trend at US$6,000/month for long term and as much as US$35,000/mo. (actually received) for short term! Give us a call for pricing and reservation opportunities at Oceana.

Fraser Wellon has just announced his Watercolours project on the Old Beach Club site is now a 'go'. Demolition of the property is beginning with construction starting as soon as the site is clear. The project will have 39 units of which 13 are already under contract. Watercolours will be an upgrade over Water's Edge which is, in our opinion, Cayman's finest condo development. This should be spectacular! Pricing starts at US$3.95M. Call us for further details and availability.

Rentals
As would be expected, rental rates are also down. Residential rates are down approx. 10.5% for long term leases. The rates for tourist accommodations have remained the same. Commercial leases for newer buildings are down about 8% and the older buildings as much as 15%.

Tourism
Air arrivals are down 13.5% YTD from the USA and about 10% from Europe & Canada. Cruise Ship tourism is down 2%. Those figures are no surprise. In canvassing some of the Seven Mile Beach properties, we are hearing projections of anything from same as last year to down from 11-20%.

Government/Finance
The Cayman Government just announced a 10-year Bond issue of US$312,000,000 as a mechanism to repay its recent local borrowings. The coupon rate is 5.95% and the Bonds were available on the London and Cayman stock exchange. The market reaction so far has been very favorable, as it was over subscribed. This is good news for loan repayment but it does not address the budget balancing issues  it just postpones them for a year. If we don't see an increase in revenues with current expenditure, a balanced budget is an impossibility. We know there have been lots of increases in local fees and the results won't be in on that until more 2010. But if the bean counters did not take into account the possibility of a deepening and extended recession, the income projections will be well short. As a result, cutting expenditures is crucial, not only for next year but for the future health of our economy. We fear that the sudden availability of funds might dampen Premier Bush's professed enthusiasm for cutting expenditures. The Civil Serviceis by far the biggest red number and since the Government does hold the purse strings, there is no truth to the argument that they cannot control the size of the Civil Service. If their budget is cut, then each Department itself will be forced to cut back.

Immigration
Premier Bush's Government has been making noises with regard to Residency and Immigration policy which could have significant positive effects on our economy. Mr. Bush is convinced we need to take the long view with regard to foreign investment and Residency and in some cases will need to choose the "greater good" over "local political correctness". This is an area which is ripe for growth especially with the troubles currently being experienced elsewhere. Who knows what other industries or services could grow here if only those who would bring them could be offered some security of tenure?

Special
It is during times like these that local business must be introspective about how they run their business. With competition ever stiffer and profits declining or losses mounting, we all have to ensure our business is being run as efficiently as possible. Due to new regulations forced by the international tax police and CIMA, all of the financial services providers have been required to make changes in the way we do business, however some providers have worked with CIMA to ensure they have not been regulated so much that they can no longer do business in a reasonable manner. We believe local banks have allowed this to go way too far. While the USA & UK continue to be the worlds largest money laundering facilities, our Cayman Banks have made it a "Royal Pain in the Ass" to do what used to be simple transactions. While business is slower, perhaps it is time for the Banks upper management to get down in the trenches and see how difficult it is for the public to deal with their front line service personnel. There are many issues which just require common sense, but failing to understand that, they have taken the hard line with their customers. These are instances which are not a question of money laundering, but rather a question of providing a convenience to a customer. There are those who work from paycheck to paycheck for whom credit cards and even checking accounts are an unaffordable luxury. For these people the restrictions on the use of cash causes serious problems. And heaven forbid you have to deal with a bank in which you have no accounts. Then you are treated like a leper. Any person who has gone through the rigors of setting up an account in a local bank should be given an Eligible Introducers Form to open an account or do business in another local bank. Why are we hamstringing our own residents? We, in CIREBA, have always found CIMA to be willing to consider the regulations in the light of accepted business practices. We are sure CIMA would do the same with the Banking Industry if the banks took the initiative and showed they cared more for the concerns of their customers. We don't have to cave in to the tax police to the extent that it is impossible to do business in Cayman, even though that is exactly the result they are hoping for.

The Local Scene
The Cayman Islands Little League hosted its Annual Auction in November and the results were fabulous! Financially they did as well as they ever have, which is quite an achievement in today's economy. The generosity of Cayman residents continues to shine even more brightly considering current circumstances. In a charitable gesture of their own, Little League raised CI$1,800 for the NCVO which was having its own telethon fundraiser the same evening! Now in its 20th year, the Cayman Islands Little League has never charged for participation and is home to about 1,000 kids and young adults every year. The fields surfaces are in need of replacement which is an upcoming major expense, so if your company is in search of a worthy recipient for a tax deductible donation, please consider the Little League. An anonymous client did just that on Auction night to the tune of US$25,000! Thanks to Managers Bill Messer and Scot Elphinstone of Five Continents for arranging that generous donation.

Staff
We are pleased to announce the addition of Tony Ashmore to our staff. Tony, originally from Dublin, Ireland, has been in Cayman for 15 years and has a very strong marketing background. In fact he was the creative force behind the eCay and Y2K initiatives. We welcome Tony to Coldwell Banker.

Forecast
Even with the reduced tourism reservations we are cautiously optimistic, and a cold winter always helps increase our rental numbers. We also have the good news about the upcoming capital works and the success of the bond issue. Countering that is the understanding that discretionary income in the US is still limited to the wealthier individuals and will be the foreseeable future. Taking all this into consideration, we predict a fair season with continuing trading of the most competitively priced properties. So we see continuing partly cloudy skies with some sunny patches.

We at Coldwell Banker wish all our Readers,
Customers and Clients a Blessed Christmas and
a Healthy, Holy and Happy New Year.