Hopefully amidst all the financial woes and gloomy predictions, we will all find time to give thanks for all the blessings we have received over this past Christmas Season. With regard to real estate trends we saw a very strong month of September (up 18 per cent in volume over last year) and then a very weak October (down 16 per cent compared to last year).

In fact both the August and the September figures were also up and there is no doubt the stamp duty discount and CIREBA purchaser rebate were major reasons for that increase in transactions as both expired at the end of September.
 
The depth of the October slowdown was largely due to all sales, which were close to completing, being pushed forward into September to beat the deadline. So the quietness of the market in October was likely as artificial as the activity in September.
 
The number of sales for both homes and condos was pretty static this year over last, but the average price for homes was significantly down while not nearly as much for condos (see actual figures provided in our market report). As homes are traditionally purchased more by local residents, this would indicate the purchasers have been getting very good buys in the housing market. It also indicates local sellers are aware of and being flexible in consideration of local market conditions.
 
On the condo front, just recently we are seeing sellers breaking ranks and dropping prices to ensure sales success. And there are purchasers out there waiting for just such occurrences. We recently had three bidders for a Heritage Club beachfront two bedroom which had been reduced to US$639,000. However, many of the sellers have not figured this out yet, which is why the average price for condos has not fallen as much. This winter should be very interesting in the condo sector.
 
On the supply side, that really hasn’t increased. In fact, supply has dropped 3-4 per cent over last year. So the better question is how much demand will there be? In our travels we are still seeing discretionary spending in evidence, and we believe that will translate into a decent tourist season for us in Cayman. And if prices continue to come down a bit more on average, we think we will continue to see purchases made and deals had. But besides this natural attraction to warm weather in the winter and good deals at most any time, we are not expecting any real comeback of business volume or prices during the coming year. In fact, we have serious concerns about the value of the US dollar going forward, especially if any more of President Obama’s expensive programmes become a reality.
 
As people continue to pull out of CDs due to low rates and dollar fears and move into real estate and stocks/futures, pressure for banks to provide better returns will increase and as a result you may see a loosening up of lending policies. The reduction of real estate values will assist there. Especially here with our small market, opportunities to purchase quality properties, with financing at reasonable rates, will become even more available and be very tempting. But these opportunities may be short term. We don’t see interest rates going up until/unless the aforementioned Obama policies begin to take effect. At that point inflation and rising interest rates are a certainty.
 
Locally, we have the funds loaned to government now available and we expect government to start the Port Cruise Ship project as soon as it can.
 
Spin-off income from this and the other planned projects will provide income, which will support our local economy. But sadly, we fear that the sudden availability of funds might dampen Premier Bush’s professed enthusiasm for cutting expenditures. The civil service is by far the biggest red number and since the government does hold the purse strings, there is no truth to the argument that they cannot control the size of the civil service. If the budget is cut, then the department itself will have to cut costs. So it all comes down to politics and priorities.
 
Premier Bush’s government has been making noises with regard to residency and immigration policy which could have significant positive effects on our economy. Mr Bush is convinced we need to take the long view with regard to foreign investment and residency and in some cases will need to choose the ‘greater good’ over ‘local political correctness’ – another issue where politics and priorities come into play.
 
Lastly, the spate of violent crime we experienced a few months ago has got to be properly and firmly tackled. This is yet another politics and priorities issue, but it should be even more obviously critical than the others. The world economy notwithstanding, there are decisions to be made and actions to be taken that will go far in determining the long-term future of the Cayman Islands. We are counting on Premier Bush and this government to ensure that their politics and priorities end up in the right places.