We have all heard the expression “buy land, God’s not making any more of it” and it has long been the prime source of wealth and security for most individuals and families.
Despite its place as a key store of value, real estate has also seen boom and bust cycles that tend to be leading indicators as the overall economy goes into and out of recession.
We have consistently seen that in boom times, aided by low-interest rate environments, real estate in all locations tends to move up more or less uniformly. Still, in times of contraction, driven by higher interest rate environments, some locations retain their values and others drop rapidly.
This market reality has, in recent decades, been exacerbated by attempts to commoditize residential real estate during boom times, when excessive amounts of funding chase a limited supply, driving prices up beyond levels justified by underlying fundamentals and then driving them down below those same fundamental based valuations when large scale redemptions/liquidations of positions in certain markets are required.
What all this means, in the end, is that no matter where we are in the cycle, you want to focus on investing/owning in locations that retain their value during downturns and look for the quality in the design and delivery of the real estate product being purchased.
In this sense, knowing precisely how to choose your investment property is key. Searching for experts in the matter will provide you with good guidance and, therefore, make the right decisions.
Image Taken from: ritzcarlton.com
The Cayman Islands has shown exceptional resiliency in down markets
Going back almost four decades, the Cayman Islands has shown exceptional resiliency in down markets.
The same pattern can be observed from the troubled times of the late eighties and early nineties, across the recession of the millennium and through the financial crisis.
When the overall economy is shrinking and interest rates are rising, Cayman property volumes slow down. Still, prices hold whatever level they were at when the slowdown occurred, and when markets improve, they continue to rise in value and volume.
Cayman Real Estate: limited supply
Several factors contribute to this, and their confluence in one market is one of the things that makes Cayman unique.
First, there is a limited supply, given the size and shape of Grand Cayman, there is an extremely limited supply of quality developable land, and this restriction underpins value.
As development has continued year-on-year, this supply/demand imbalance continues to increase.
Low leverage
Secondly, there is a low-leverage approach compared to other jurisdictions and areas.
This is due to both a more conservative lending market in Cayman and the fact, particularly at the higher end, of purchasers with both a desire to use the real estate as a store for their wealth and the financial capacity to do so.
This means that in times of higher interest rates and greater economic stress, there is not the same pressure in the market from people who need to sell their properties quickly since they can no longer afford to carry them.
Cayman has no direct taxation.
Thirdly, there is a lack of ongoing carrying cost, basically meaning the fact that Cayman has no direct taxation removes the ongoing carrying cost that all other real estate attracts globally, further pressuring owners to sell in times of higher rates and lower growth.
Safety comes first
Also, there is the perceived safety of Cayman both physically and financially, meaning that in times of stress, people actively move towards Cayman to invest rather than trying to divest and move elsewhere.
This has been the case for decades, and the recent advent of the Pandemic and ground war in Europe has further enhanced that view.
Fourthly, there is a countercyclical economic paradigm. Due to its place in the world of finance, funds, accounting, insurance, reinsurance, and liquidation Cayman’s professionals do well when the economy is expanding and also when it is contracting to keep the local demand strong.
This is further supported by Cayman seeing inward investment lastly as the safety and enjoyment of the fabulous climate and ever-improving cosmopolitan lifestyle of Cayman. When looking at a world of options, those with means who have discovered Cayman make the choice that this is the place you not only want to invest in but want to be.
When you take all these into consideration, the ongoing strength of the Cayman Real Estate market is easy to understand anytime there is a move in other countries to expand their direct taxation and control of assets.
Enjoy the fabulous climate of Cayman.
Fifthly, there is an ongoing expansion of the population bringing more demand to the aforementioned limited supply in the market.
Lastly is the safety and enjoyment of the fabulous climate and ever-improving cosmopolitan lifestyle of Cayman. When looking at a world of options, those with means who have discovered Cayman make the choice that this is the place you not only want to invest in but want to be.
When you take all these into consideration, the ongoing strength of the Cayman Real Estate market is easy to understand.
Being foreign is no limitation.
Another good thing to bear in mind is that buying property in the Cayman Islands is relatively simple and straightforward.
Regarding foreigners, there are no restrictions to having all legal rights of ownership to whatever parcel of land you are interested in.
Also, a point that means a lot to investors is that there are no income or withholding taxes imposed on individuals in the Cayman Islands, as extensively explained and mentioned before.
So this definitely makes the Cayman real estate market highly desirable for both local and international investors.
Luxury and pleasure
Finally, for those looking for a place to find advanced infrastructure and a high standard of living, this might definitely be tremendously appealing.
These two benefits, luxury, and comfort make Cayman a desirable location for the public that has this scenario as the natural choice for them.
