If thousands of expats decide to cash in pensions and leave Cayman by the end of the year – expect a turbulent time in the property market.
That’s the warning for two of the country’s realtors who feel interesting times are ahead as 2017 draws to a close.
A change in the pension law means those who don’t leave Cayman this year, won’t be able to claim lump sums if they do decide to move to pastures new.
Instead their pension contributions will go into a pot and can only be withdrawn when that individual reaches pension age.
Some experts predict a mass exodus as people decide to cash in their pensions and start a new life elsewhere.
But what exactly will that do to the property market?
As those who decide to sell up and move on, will it mean a drop in house prices as more properties go up for sale?
Or can landlords expect to have to drop rent prices as thousands head for the door?
“Inevitably the changes will have an effect, to what extent we aren’t sure at this stage,” said Mike Joseph from Remax.
“It depends on the demographics of those leaving as certain sectors have an oversupply and others an undersupply of product.”
Athena Nicole of Cambridge Real Estate Corporation added: “Some will see it as an opportunity, some as a threat. The large threat is the permanent residency/status issue.
“If people don’t feel they have a future to work towards hence the necessity in securing a mortgage for long-term purposes, the sales market will go down, while the rental properties will be of more demand.”
Mike Joseph says of the rental market: “Initially it might come as a little shock as landlords would face a potential, yet small correction in rates to accommodate.
“Depending how big the ‘shock’, the impact will vary. As with any ecosystem, economy or market, when there is any form of disruption we have to adapt to our new environment. This is of course a constantly changing environment so we should always prepare for the inevitable ‘rainy days’ in advance.”
As far as those looking at buying a house, Ms. Nicole believes the pension payout will have a greater impact on those in the lower income bracket.
She said: “The majority of buyers purchase properties for long-term residential purpose of rental income and the Cayman Islands attracts both local and overseas purchasers alike. I don’t think there will be a large impact for the sales market, but only time will tell.”
Mr. Joseph feels there will be an impact to sale prices, but this is not just because of the changes to the pension law.
And he feels in some cases, sellers may offer incentives such as stamp duty assistance, to make their properties more attractive.
He said: “Logically there will be an impact on sales. Either developers will leave units partially incomplete and empty in the market corrects itself or they will try to rent their units to buy time for market correction.
“But there are many moving parts to the property market and each sector within it, not to mention the external threats and opportunities on and off island. Above all we are all inter-connected regardless of our industry.”
The new laws coming into play in 2018 mean that if people want to cash in, they would have to leave island before the end of the year, in some cases by the end of October.
Despite this threat, many new properties are being constructed, particular along the South Sound corridor.
Ms. Nicole said: “The newer properties in the area increase the value of neighbouring properties. I advise owners with older properties to keep up with the condition of their property both interiors and exteriors, in an effort to secure the current rental income.”
Mr. Joseph added: “Rental prices may come down but only for a period. To mitigate losses, any property owner and/or strata should have a plan in place to maintain and keep their properties up to date and well maintained, not to mention managing their relationships well too.
“If a tenant is happy and comfortable, no matter what the market is doing, they will be more likely to stay put.”
But he did add: “The oversupply of anything will have an effect down the line. This was forecasted some 18 months ago and unless we have a jump in population, there will be a tenant migration of sorts.”