IRG's Hurst Reviews the 2011 Real Estate Market

Online, February 9, 2012 (Newswire.com) - After hitting the floor in 2010, theCayman Islands real estate market rebounded this past year, thanks in part to high-dollar deals by large developers.
Jeremy Hurst, president of the Cayman Islands Real Estate Brokers Association, expects the positive impact of the major projects to continue through 2012, which will also be marked by low price points and more assertive actions by financial institutions.
Mr. Hurst, broker and owner of IRG, said, "2011 was the turning point the Cayman real estate market and economy needed after a disastrous 2010. Whilst the rest of the world markets with the exception of a few hotspots were heading south, the Cayman market rebounded significantly with sales volumes not seen since 2008."
He said total sales in Cayman from January to November 2011 were $540 million, compared with $307 million for all of 2010.
According to the Lands and Survey Department, in the first 11 months of 2011, the total value of freehold land and property transfers (which includes but is not limited to sales) was $613 million. The total value of freehold transfers in 2009 was $397 million and $558 million in 2008.
Big deals, big numbers
Nearly one-quarter of the $613 million in transfers for 2011 was posted in February alone, which had a record $141 million in transfers, the most for any one month since at least the beginning of 2006 - a period of 71 months. Three other months in 2011 were extraordinary for the sheer volume of transfers: March had $73 million (seventh-most); June had $93 million (fourth-most); and July had $70 million (ninth-most).
Moreover, six months in 2011 ranked in the top 10 for the average value of transactions, with February again topping the list with an average transaction amount of nearly $640,000.
As drivers of the high-level transactions, Mr. Hurst pointed to deals such as the acquisition of embattled developer Stan Thomas' prime Seven Mile Beach property by the Dart Group, as well as the purchase of Joe Imparato's High Rock acreage by backers of Dr. Devi Shetty's proposed medical tourism hospital. Dart announced its acquisition in January, while Shetty developers announced their land purchase agreement in August. More important than the actual sales, though, is the projects' future economic potential, he said.
"[T]he great news is that these acquisitions are linked to real projects, which are about to break ground and will be a tremendous boost to our real estate industry over the next few years as well as provide some much needed diversification to our economic base," Mr. Hurst said.
Will the rest of the market follow?
"If 2011 was the turnaround year fuelled by mega-sales, 2012 promises to be the year that the normal market sectors rebound," Mr. Hurst said. "Particularly, townhouses, Seven Mile Beach condos and home lots."
Residential sales are being supported by new longer-term work permits and prices that have been reduced to the point they are becoming irresistible to buyers, he said. In October, Governor Duncan Taylor signed changes to Cayman's Immigration Law that created a new Term Limit Exemption Permit and a 10-year work permit for high-ranking employees. The Term Limit Exemption Permit allows a foreign worker to stay beyond the usual seven-year limit on residence, for a maximum of two years - which will not count toward permanent residency qualification, officials say.
"We've already seen the positive effects of the suspension of the rollover policy in this regard and we feel this will continue during 2012," Mr. Hurst said. "The other silver lining from the recent recession is that there are some great opportunities out there pricewise - sellers are pricing their properties very realistically and this will create some great opportunities next year for buyers, especially those with funding in place."
Not all roses
Although he's optimistic overall about the coming year, Mr. Hurst did predict financial institutions will be more aggressive in dealing with mortgages in default, meaning more forced sales of properties. Mr. Hurst was one of two lead agents for the 19.3-acre "Barefoot Beach" property in East End that was put up for auction 16 December. The bank-forced sale of the property - listed at $14.8 million - was the largest such event since the November 2010 auction of luxury home Casa Coyaba, which was nixed due to ongoing legal wrangling.
"[T]he banks are going to be looking very closely at their bad loan books in 2012 with a view to cleaning them up, which will unfortunately lead to more foreclosures in both the residential and commercial markets," Mr. Hurst said.
Another soft part of the real estate sector has been office space - outside of the highest-end of the market, such as that offered in Camana Bay or Cricket Square. Mr. Hurst hopes those properties will be bolstered by the planned Cayman Enterprise City. The development calls for the construction of a low-rise business campus somewhere east of George Town, but before the campus is completed, participating companies can rent office space in George Town in the meantime.
"The vacancy rates in the class B office space market has been of concern lately; however, hopefully Cayman Enterprise City's plans will start to have a positive impact during the latter part of the year," he said.