In a down market people, both buyers and sellers, always want to know when the market has “bottomed out”. Buyers, because they can then purchase with expectations of gains instead of losses going forward; sellers, to enable them to anticipate sales – at higher prices.
 
Realistically speaking, in real estate, a bottom can only be identified when both the period leading up to it and the period after it demonstrate higher prices. That means we will be past the bottom before it can really be identified. That is why we in the real estate business usually warn against customers trying to time the exact bottom.
 
It is gone before you know it has happened, and it doesn’t take long for the momentum of a market to change. All of a sudden a seller, who might have accepted a “low ball offer” yesterday, is now thinking he can shortly get a lot closer to his asking price and still get his property sold.
 
Why are we talking about this now? Well because there is finally some good news in the market place which may indicate we are at or near the bottom. Here’s why:
 
The CIREBA statistics are starting to show some positive indicators. Supply is slowing. Prices are leveling off and in some cases rising. There are increasing signs of activity: more showings, increased web traffic, more inquiries and more visitors flying in to look at properties. And prices are now at levels which are attractive to those interested in upgrading their residence or business, or making an offshore investment.
 
Liberal US social and fiscal policies are driving money and people off shore. We have been the beneficiaries of this in previous times and Americans are eager to get equity somewhere safe. But lately due to our own budget imbalance, there has been talk of Direct Taxation here. This possibility has been a huge obstacle for offshore investment for the past six to 12 months. The spectre of direct taxation in Cayman is now off the table.
 
And if we can get a consistent and reasonable residency policy to go with that, we will see a significant influx of foreign money here. This should continue as long as the Cayman Government can keep the budget balanced by keeping a lid on its own expenses.
 
Speaking of influx of money, Cayman now has an additional US$155 million borrowings to add to the bond issue to allow many capital projects to go ahead. Projects like the cruise berthing facility, new cargo port, airport extension, North Sound deep water channel and the private sector East End Medical Centre will provide huge amounts of spin off income to our local economy. This will allow local spending to increase.
 
The East coast of the US may be seriously affected by the BP oil spill in the Gulf. The Gulf Stream will push it northward along the Florida coast and further. This is a serious environmental catastrophe which will cost Florida and the South Eastern beach resorts millions in tourism dollars. The most convenient Caribbean venues like Cayman should benefit from this mess through increased tourism.
 
The key to regenerated long term prosperity in Cayman is the economic health of the US (and US$). Based on the US policies of the last two years that is not going to improve right now. However, there is a groundswell of conservative support which may very well, in time, turn things around up there. In the meantime we will have to depend on our economy and making Cayman attractive to foreign investment.
 
It won’t be until the US is healthy that we will see a return to previous tourism numbers here from the US, but the other factors will improve our real estate economy significantly. It is possible we may look back at the summer of 2010 as the low water mark for this real estate cycle.