Buy to live in Cayman
The Cayman Real Estate Market is ever growing and evolving as it appeals to local residents and overseas investors, it should not be daunting if you choose the right Cayman real estate agent or property professional.
Buying property in the Cayman Islands is a simple and straightforward process and is for many not just a lifestyle purchase but a safe and sound real estate investment, unlike some other Caribbean Islands. With no restrictions on foreign ownership of a single property, no annual property, income or capital gains taxes to be paid locally on the sale of a property, buying property in the Cayman Islands is an inviting prospect and strongly encouraged by the Cayman Islands Government who guarantee title for all real estate transactions.
For a small family of Caribbean islands there is a diverse selection of real estate in the Cayman Islands, and has proved to be great value when compared to many other off-shore jurisdictions and tropical locations, it has long been a way of creating and securing wealth among the local Caymanian population and it is often the case that expatriates living and working in the Cayman Islands under a work permit will decide to buy property rather than rent. Unlike other countries within the Caribbean, Cayman has no restriction on foreign ownership of a single property. Persons of independent means may also wish to seek residency in the Cayman Islands as part of their tax planning strategy, applying for a twenty five year Residency Certificate, there are certain requirements which must be met in order to attain this, one of which is investment in developed real estate in the Cayman Islands. Contact us for more details on what residency status might suit you.
As with investing in real estate anywhere in the world, key factors for consideration are usually lifestyle and budget, this will then filter down into the type of property you will purchase whether that be a condo or a house, and this will in turn impact the location. There are often more amenities associated with condos such as swimming pools, tennis courts and gyms, some will however prefer the privacy offered by a detached home with its own private garden and perhaps a boat dock.
For the many professionals working in the financial or legal sectors will more than likely have their offices in the central business districts of George Town and the West Bay Road corridor, and will probably seek housing accommodation close to these areas, although expats coming from larger cities are often used to a longer commute, part of the pleasure of living in the Cayman Islands is that even if you spend a long day in the office you can reasonably expect to be home within fifteen to twenty minutes depending on the time of day. Communities within a close commute of George Town & Camana Bay would include Governors Harbour, Salt Creek, Cayman Islands Yacht Club and Vista del Mar, Crystal Harbour, Canal Point, Snug Harbour, South Sound, Grand Harbour, Patricks Island and Omega Bay. Many of these areas would include condo complexes but areas that are predominantly made up of condos are Seven Mile Beach, Camana Bay & Britannia.
Within the Cayman Islands real estate market there are two distinct types of purchasers; the resident buyer and the vacation or non-resident buyer, although there is some crossover as to the type of property that each will buy, generally speaking the vacation buyer will focus on purchasing a condo because there is a lot less maintenance involved than home ownership, and also because most tourist buyers are looking for beach front or water front property there are more condos than houses to choose from on the beach and water.
Buy to let – Investing in Cayman
Another factor to consider is whether to use your real estate purchase as a rental investment, you can find some excellent rental returns on short and long term rental properties. As well as many Seven Mile Beach properties, there are many in Rum Point and Cayman Kai owned by overseas investors, looking for a haven from the uncivilized climate back home-when they are not in residence they let the property work for them. Contact us about making the right move in the Cayman property market.
Buying Guide for Property in the Cayman Islands
Geography & climate
The Cayman Islands is made up of three small islands situated in the Western Caribbean Sea; Grand Cayman, Cayman Brac and Little Cayman, to the south of Cuba and north west of Jamaica. Grand Cayman is by far the largest island of the three, accounting for 76% of the country’s total landmass, and is home to the nation’s capital George Town. The island is made up of five districts; West Bay George Town, Bodden Town, East End, and North Side.
Its popularity as a ‘safe haven’ is evidenced by ex-patriates from the US, Canada, Britain and South America accounting for around 50% of the country’s 58,000 population. As thee are no restrictions on foreign ownership in the Cayman Islands the country continues to prove popular for those looking for a primary or secondary residence.
The year round high temperatures and sunshine, with a relatively small range in temperature, typically from 26C in the peak ‘winter’ season running from January to May, to 32C during the storm season that runs from June to October. The North East trade winds from ensure a very pleasant climate during the popular winter sun season. Thanks to the topography of the Caribbean Sea and natural barrier reefs encircling the coastlines, the islands are well protected from hurricanes and landslides. However, hurricanes do still threaten the islands, and having sustained extensive damage from Hurricane Ivan back in 2004, the country’s Government and business community acknowledged that upgrades in natural disaster management were needed. As a result homes and buildings are now built to even higher standards than before (Miami Dade) using the latest technologies and highest grade materials, insured and prepared to deal with the prospect of future storms.
With one of the largest offshore finance centres in the world and capital of the hedge fund and captive insurance industries, Cayman is considered one of the most affluent countries in the region, Cayman enjoyed considerable economic growth from 1998 to 2007 at an average of 3.1% before the onset of the economic recession. This had a noticeable impact on the economy as figures from the Economics and Statistics Office (ESO) show, with a 6.3% fall in GDP recorded in 2009. However, since 2011 the economy has been in recovery mode and growth of 1.5% was forecast earlier on this year. In the second quarter of this year consumer price inflation slowed to 0.7% from 2.3% in Q1.
There are a number of significant infrastructure projects currently under construction on Grand Cayman that will likely lead to further increases in property demand and tourist arrivals. The George Town port is undergoing redevelopment that will add further berthing facilities for cruise ships and mega yachts.
The new town of Camana Bay, stretching from Seven Mile Beach to the North Sound, is being expanded including 200 new residential units made up of homes and condominiums. The Marriot Hotel located on the southern section of Seven Mile Beach is in the process of a complete refurbishment, re-establishing the hotel as a 4 to 5 star complex. 2016 will see the completion of the Dart development, a 263 room boutique Kimpton resort located in the heart of Seven Mile Beach. The development will include 5 restaurants, a destination spa, 56 residences and 6 beach front bungalows. Finally, by the end of this year the process of extending fibre optic cables across the three islands will have been carried out, bringing the country up to speed with the most advance economies in the world.
The Owen Roberts International Airport (GCM) just outside of George Town is the major gateway for the Cayman Islands, located just five minutes from the banking and financial districts in Downtown, as well as being close to Seven Mile Beach, Grand Cayman’s prominent tourist spot. The islands are very accessible with regular flights to and from 13 gateway cities including London Heathrow, Miami, New York, Chicago and Toronto. Regular services to Jamaica, Cuba and other Caribbean countries also operate on a daily basis. Airlines servicing Cayman include Cayman Airways, Air Canada, American Airlines, United Airlines and British Airways. British Airways operate five direct flights a week from Heathrow to George Town, with flight times taking just over 11 hours. Multiple daily flights from Miami Airport mean that easy connections can be made when flying from Europe. Direct return flights start from £800 in class from London Heathrow. There are two cruise ship terminals on Grand Cayman with cruisers operating from major ports including Miami and New York.
After Offshore finance, tourism contributes around 30% to the Cayman Islands economy with visitors predominantly from the United States, Canada and Europe. In the first nine months of 2014 a total of 1,468,767 visitors arrived, representing a 17.7% increase on the same period in 2013. Arrivals by air accounted for 293,562 of the total number of arrivals, 12.2% higher than last year while cruise arrivals were 19.1% higher over the same period. A new focus on medical tourism has recently been introduced with the construction of the Health City Cayman Islands, a state of the art tertiary care hospital that opened in early 2014. The hospital is the vision of world-renowned cardiologist and philanthropist Dr. Devi Shetty, the Chairman of Health City Cayman Islands’ parent company, Narayana Health In India. Having initially focused on attracting medical tourists from North America the centre is expanding its scope and focusing on those in South and Latin America, as well as other Caribbean nations.
English is the main language in the Cayman Islands although Spanish is also spoken amongst many of the immigrant workers. A dual currency is in operation with the US dollar and Cayman dollar (KYD) pegged. When it comes to buying property on the islands the US dollar is typically the choice of currency with most properties advertised in US dollars, while day to day purchases are carried out using the Cayman Islands dollar. Despite being a tax haven duty is levied on certain imports such as food, meaning that prices are roughly on par with those we see here in the UK. However, fuel prices are more comparable with the US and much cheaper than in Britain.
With a wide array of sporting and cultural activities on offer in Cayman with water sports extremely popular in this part of the world and available in abundance. The warm, calm Caribbean Sea provides water sport enthusiast the opportunity to go diving, windsurfing, kite surfing, snorkelling, swimming with stingrays and fishing to name just a handful. Little Cayman is also a popular location for scuba diving and bird watching, with much of the island unspoilt by the small resident population.
World renowned Seven Mile Beach on the West Coast of Grand Cayman is one of the most popular locations for water sports, along with South Sound. Regularly featuring in the listings of the world’s best beaches Seven Mile Beach is the hub of tourist activity on the island, with hotels, restaurants and bars lining the prime stretch of coastline. Whether you are looking to relax on the beach, enjoy a walk, take part in a water sport or enjoy a meal or drink at one of the Caribbean’s top restaurants, Seven Mile Beach is the premier location.
As a British Overseas Territory a number of sports clubs and leagues can be found on the islands that are familiar to British ex-pats. Cricket is very popular in the Caribbean along with tennis, rugby, football, squash and golf. There are a number of annual events and festivals held across the three islands such as the Batabano Carnival, the Pirates Week Festival and Mardi Gras celebrations. Meanwhile, thanks in part to the Cayman Cook-Off and Taste of Cayman, bringing internationally renowned chefs to the country, the Cayman Islands is fast becoming the culinary capital of the Caribbean.
Moving to the Cayman Islands
The Cayman Islands is often termed a ‘tax haven’ as there is no annual property tax, income tax, capital gains tax, inheritance tax, gift tax or corporation tax, while non-food shopping is predominantly duty free. As there are no such taxes and no restrictions on foreign ownership, the country is a very appealing destination for foreign investors. Buyers of Cayman property can expect to pay around 10% – 12% of the purchase price on accrued costs such as stamp duty (7.5% across all three islands), real estate agent fees (paid by the vendor), mortgage and legal fees. The Cayman Islands legal system is based on a streamlined version of the British process with the exchange to completion period usually lasting between two and four weeks. A CIREBA ‘offer to purchase’ is the most commonly used form of conveyancing, and allows for the transfer of all types of property from vendor to purchaser without expensive legal fees. Once you have determined the property that you would like to purchase your offer will be presented in writing to the owner of the property with the price and any other conditions outlined in the Offer to Purchase document. When the terms of the offer have been agreed the document becomes a legally binding contract between both parties.
Firstly, if you are applying for a mortgage and you hold a work permit most banks will require you to have been on the islands for at least six months before granting a mortgage. You can also obtain a mortgage as a non-resident although a larger deposit is in most cases required, usually in the region of 30%. The mortgage approval process usually takes four to six weeks from the time of application.
If you are buying your home with a mortgage from a bank within the Cayman Islands they will require a valuation of the property by a RICS surveyor. The fee for the valuation is based on the size and value of the property, starting from around US$500.
If chattels (items not forming part of the building’s structure) are included in the price of the property a list of the items and their value will be provided to the purchaser’s attorney so the land transfer document includes the information. The transfer document needs to state the amount paid for the property (excluding the chattels) as stamp duty is only charged on the value of the property and not the chattels value.
When it comes to selling your Cayman Islands property you are only eligible to pay commission to the real estate agent you appoint to handle the sale of the property. Agent fees range from 4% to 10% of the sale price dependent on the value of the property.
The following section will outline each cost associated with buying and owning a property in the Cayman Islands.
Whilst there is no annual property tax in the Cayman Islands all property purchases by overseas buyers are subject to Stamp Duty at a rate of 7.5% (there are exemptions for Caymanian first time buyers). Stamp Duty is based on either the market value of the property or the purchase price minus the chattels’ value, whichever is the highest. Stamp Duty is a one off payment that is payable to the Cayman Islands Government within a 45 day period of the completion date.
If you have purchased land in order to build your home you should pay stamp duty at the time of buying the land, rather than when the property is completed. Once your planning permission is granted your approval is valid for five years.
Stamp Duty on mortgages is charged at 1% for loans below KYD$300,000 (US$365,000) and 1.5% for loans above this threshold.
Real Estate Agent Fees
It is important to note that agent fees are only paid by the vendor. There is no cost for the purchaser. Unlike in Britain, real estate agent fees are set in the Cayman Islands for member companies of the Cayman Islands Real Estate Brokers Association (CIREBA). Commission rates are set on a sliding scale that all agents are expected to adhere to:
• US$95,000 – US$494,999 = 7%
• US$500,000 – US$994,999 = 6%
• US$995,000 – US$9,994,999 = 5%
• US$9,995,000+ = 4%
If appointing a lawyer to handle the legal aspects of the purchase you can negotiate the fee payable for their services, but you should budget between 0.5% and 1.0% of the purchase price.
When are financing your property with a mortgage your lender can employ an attorney to represent the bank to complete the purchase.
As stated earlier there is no monthly or annual property tax, council or capital gains tax levied in the Cayman Islands. The largest home ownership costs relate to the general maintenance of the property. It is advised that property owners, who do not intend on residing in the property permanently, or plan to use their home as a short or long term property, hire a property manager to handle any maintenance and repairs. Such services vary in price depending on the amount of service required and the size of the property. In most cases a monthly fee is paid to the manager of the property.
For properties in strata developments, for example, condominiums located along Seven Mile Beach, a monthly strata fee (including insurance) is paid that covers maintenance costs and the general upkeep of the exterior of the buildings and any associated amenities such as swimming pools, tennis courts and landscaping.
Any Other Associated Costs
The majority of canal fronting condominium developments and family homes have private docking facilities. For home owners of inland property boats can be moored at marinas such as Barcadere, located adjacent to the Cayman Islands Yacht Club in George Town, where mooring fees are based on the linear foot of the vessel.
Short term mooring costs start at US$0.73 per foot per day based on a seasonal six month term, rising to US$1.83 per foot for single day moorings.
Long term rates range from US$18.30 per foot per month for one year with discounts available on additional years up to 4 year terms.
Property market overview
After a difficult period following the onset of the global economic recession, the property market in the Cayman Islands has been improving since the start of 2013. For three small islands Cayman has a surprisingly diverse range of real estate to meet the needs of buyers from all over the world. The property market in the Cayman Islands is characterised by two distinct types of buyers; the resident and the non-resident/second home buyer. At present growth is centred along Seven Mile Beach, with particularly strong demand for condominiums. For family homes Cayman Kai, on the north coast of Grand Cayman, has proved to be the most popular market this year. The demand that has been seen throughout this year is likely to sustain itself as both investor and consumer confidence continues to improve.
In 2012 property values fell by 14.5% in the Cayman Islands before a resurgent performance last year saw the average house price increase by 13.5%, according to a recent market survey. Due to its relatively small housing stock the Cayman property market can be susceptible to large shifts in house price performance, in part due to the number of large-scale acquisitions made by developers. In 2011 28% of all property transfers were as a result of Dart Group making significant purchases on the island. Therefore, this did to some extent distort the scale of the large price fall seen in 2012.
Sales figures compiled by the Cayman Islands Real Estate Brokers Association (CIREBA) highlight the strength of the Cayman Islands market as 446 transactions have taken place in the first nine months of this year, a near 35% rise on the same period in 2013. On a value basis sales have totalled US$283,549,405 this year at an average value of US$635,000. As the North American property market has started to recover over the last couple of years, along with the economy, buyers have returned to the overseas investment market be it in the form of a lifestyle or investment decision.
Prices in the Cayman Islands vary considerably on the location and quality of the housing stock. The most affordable housing can be found inland with two bedroom condominiums starting at US$240,000 while three bedrooms will generally cost from US$420,000. This year has seen a spike in interest for canal-front properties from buyers, and two bed condominiums cost from US$305,000 upwards while three bedroom units, more limited in terms of supply, begin at US$365,000. In the most desirable locations along Seven Mile Beach three bedroom condominiums command asking prices above US$500,000.
Traditionally the most popular units for overseas investors are two and three bedroom properties located along or close to Seven Mile Beach. Due to the location buyers are able to secure themselves an excellent holiday home with the benefit of holiday rental demand and the potential for capital growth as the area remains the most desirable location for holiday makers.
Figure 4: Starting, average and top house prices by property type
For larger inland family homes three and four bedroom properties start from around US$730,000 but can command up to and over US$1 million in the most sought after locations. Locals are more likely to purchase family homes away from the tourist hot spots of George Town and Seven Mile Beach where as overseas buyers look for homes with, or close to, water frontage with a mind to the lifestyle and investment benefits available. Family homes in the Seven Mile corridor typically cost a minimum of US$1 million and in excess of US$1.8 million in the most desirable canal networks close to Seven Mile Beach, such as Crystal Harbour, Canal Point, Vista Del Mar and the Yacht Club. At the very top end of the market large family homes on the beach front and water front can cost anywhere in excess of US$2 million and can reach up to and beyond US$10 million.
Though the wider property market in the Cayman Islands suffered in the years following the economic recession the upper echelons of the market remained relatively robust during the downturn, helped by sustained demand particularly from non-resident buyers. This in turn led to a number of new developments that have continued to pop up, predominantly centred round the capital George Town, Seven Mile Beach and South Sound. High profile residential developments include the US$700 million Camana Bay project, providing office and retail space along with 63 high-end apartments, completed around two years ago. The second phase of the project will deliver a far larger residential focus though the details concerning the number of units are yet to be confirmed. Meanwhile, Fraser Wellon’s luxury development WaterColours has sold exceptionally well and is nearing completion. Elsewhere Casa Luna, a community of Mediterranean style villas on a private cove, was recently released and Davenport Development has recently launched its next phase of VELA in South Sound.
The high season in the Cayman Islands rental market runs from November through to April, the most popular months of the year for tourists, and coincides with holidays such as Thanksgiving, Christmas, New Year and Easter. Such times of the year command significant premiums for those looking to rent out their home while the rest of the year rental values range from US$250 to US$500 per night per bedroom, depending on the specific characteristics and location of the property. As is the case in the sales market properties in the Seven Mile corridor and Cayman Kai command the highest rents throughout the year.