What is the cost to construct a property in the Cayman Islands?
As land developers in the Cayman Islands one of the most common questions purchasers ask is what is the cost to construct a property in the Cayman Islands? a relevant question when purchasing a freehold building plot.
When answering this question, it’s important to note that Oasis can only comment on our own knowledge of the current construction market, market indicators and information collated from credible sources. Oasis cannot comment on other developers. As such our answer to this question, what is the cost to construct a property in the Cayman Islands? doesn’t mean that someone can’t construct a property in the Cayman Islands within their desired budget a lower cost (it just might not be with Oasis).
When investing in Oasis’s Freehold Building Plots in the Cayman Islands, purchasers have several future options:
- You can construct a property in the Cayman Islands on your land with Oasis Land Development Ltd
- You can construct a property in the Cayman Islands on your land with any contractor of your choice, you also have the advantage of using Oasis’s complimentary architectural drawings, (Oasis offers purchasers a choice from six different property designs), you can read more about the six complimentary architectural drawings and property styles which you can view here. Or you can choose a property of your chosen property design to construct.
- You don’t construct on the land, and resell the land in the future, or you can hold onto the land indefinitely as there are no requirements to construct in the Cayman Islands. There is also zero inheritance tax in the Cayman Islands if you wish to pass the land to a family member, just as important there are no property taxes in the Cayman Islands including annual property taxes.
Whichever option you choose, Oasis will assist you each step of the way, if you choose to construct your own property (with Oasis or not), Oasis will be on hand to provide advice, we can offer a rental management service once your property is constructed.
Some of Oasis’ Properties in the Cayman Islands
WHAT IS THE COST TO CONSTRUCT A PROPERTY IN THE CAYMAN ISLANDS?
Prior to the pandemic with a steady flow of construction materials being manufactured and imported to the Cayman Islands, Oasis could confidently estimate purchasers can expect to pay an average starting construction cost in the region of CI$250 per square foot (USD$304 per square foot). In the current climate it’s hard to place an accurate figure on the cost to construct as the industry continues to ride a volatile wave, which is detailed in this construction cost overview.
Oasis always advises purchasers that there are several factors in every case which will affect the cost to construct, whether pre, during or post pandemic:
- The location of the land, for example if the land is located on or near the ocean the cost to construct will be more expensive with the need for increased fill and ground piles. (Even using one of Oasis’s six predesigned property plans the cost to construct on the ocean will increase the cost to build.)
- The size of the property you are looking to develop.
- The finish of the property you are looking to achieve, marble opposed to tiles as an example.
- Any additional features you may wish to include in your property design, such as a grotto (which is common in the Cayman Islands), a swimming pool, a games room etc.
WHY WOULD I JUST NOT PURCHASE SOMETHING ALREADY DEVELOPED?
Great question! On the contrary to rising construction costs, it is worthy to note, as a result of rising construction costs and increased demand, the cost of property in the Cayman Islands has surged and is also at an all-time high and land is being purchased at one of the fastest paces in Cayman’s history – read about the Cayman Islands thriving market in the below links:
The Cayman Islands property market has set sales records in the last 18 months. When comparing the last 12 months (2021) through May to the previous 12-month period ending in May 2020, the luxury market has seen a 356% increase. “Pretty nuts,” Bovell said.
Land across all three of the Cayman Islands has virtually diminished and is now being sold at a premium due to low stock and high demand. During Oasis’s 13 years of business in the Cayman Islands, “we have never witnessed such low stock of land or property, especially on the sister islands Cayman Brac and Little Cayman” (John McLean Jr. Director Oasis Land Development Limited).
According to Property Cayman; on the 13th of July 2020, there were 1,043 active listings in Cayman, the highest total through the end of 2021. That number dropped by 35 percent over the next year! And while the drop in listings has begun to level off, starting in the third quarter in 2021, they decreased to 557 on the 13th of September 2021. That is the absolute lowest number of listings we have seen in the previous year-and-a-half.
Low stock and high demand only result in one thing; higher property prices, by purchasing land first you can achieve the following:
- Secure your desired location. Whether you are looking for something close or on the water, or maybe elevated on the bluff, Oasis have a wide inventory of land catering for most location preferences (although we are seeing our ocean front land sell in a matter of weeks – Jan 2022). All of Oasis’s land comes with outlined planning permission and land sizes start at a minimum size of 10,000.00 square feet, allowing for a property development of 25% of land area, between two and three stories (the 25% build area is the foot print of the property and does not include swimming pools or outdoor entertainment areas). A 10,000 square foot plot could give you a build area of 7,500 square feet over three stories.
- Choose a payment plan which allows you to own a piece of the Cayman Islands and pay over an agreed set period whilst the market settles, with our 0% interest free repayments at the end of your payment plan, you own the property and you pay the same price with to our interest free terms.
- Choose a property which is designed by you and for you, taking advantage of a turn-key service using Oasis or a local project / construction management company
WILL THE COST TO CONSTRUCT A PROPERTY IN THE CAYMAN ISLANDS REVERT TO PRE-PANDEMIC PRICES?
As developers we frequently ask ourselves the same question, will the cost for building materials and construction decrease back to pre-pandemic prices? And, whilst nobody can predict the future there is no reason to believe that at some point the cost to build in the Cayman Island won’t stabilise and some materials will decrease back to pre-pandemic prices. As pandemic life becomes the ‘New Norm’ and we learn to live with COVID-19, supply and demand issues will flatten out and things should resume as normal.
One of the great things about investing with Oasis Land Development Ltd and for people who are considering constructing in the Cayman Islands is the use of Oasis’s 0% interest repayment plan. Clients typically utilise Oasis’s payment plan to purchase their chosen freehold building plot for between 3 years to 5 years. Oasis are advising clients to consider starting the planning process within several years of entering into their payment plan, with an aim to construct at the end of their payment plan term. When purchasers take advantage of Oasis’s payment plan their investment for the land remains the same, if you purchase one of Oasis’s freehold building plots for $80,000.00, at the end of your payment plan, regardless of your chosen payment plan length, your investment value remains at $80,000.00. You pay over the agreed payment terms with an outstanding balance at a 0% interest free rate.
As part of your Agreement of Purchase & Sale, Oasis allows purchasers to start the planning process before you have completed your payment term. Full Planning permission* for your chosen property in the Cayman Islands takes up to 12 to 18 months to receive, Planning permission is valid for 12 months after receipt of build permit and is extendable for up to 2/3 years making it the perfect timing to construct in line with the payment plan being completed. Once you are in receipt of full planning permission you can start to tender the property construction to local contractors *Full planning permission refers to planning permission and receipt of build permit.
The ambiguity in the answer to this question, does lead some clients to ask, what would be the overall cost of my investment if we are not able to quote the cost to construct a property now? Oasis always advise clients, like anything, not just construction but any product or commodity, if you have a set budget in mind, through time and effort you can most likely achieve your desired budget. For example, you budget to construct is CI$400,000, through negotiation and tenders you most likely can source a builder who can meet your requirements (timing will play a key role).
Another consideration which is often overlooked in the Cayman Islands is the Governments incentive to reduce the cost of construction on the sister islands. Currently on Cayman Brac and Little Cayman there is a stamp duty waiver (usually 7.5%) and an import waiver on building materials which is in place until 2025. Read more about the sister island waivers here.
To summarise, can you construct a property in the Cayman Islands, yes but you need to consider that it is more expensive to construct now, than it might be in several years. This isn’t just a Cayman Islands problem, but a worldwide issue, below are some trends which can be found in other countries:
|Country||Estimated Inflation for All
|United Kingdom||24.7% average||December 2021||Here|
|USA||24% average||July 2021||Here|
|Canada||20-40% average||December 2021||Here|
WHAT DOES THE CURRENT CONSTRUCTION INDUSTRY LOOK LIKE IN THE CAYMAN ISLANDS?
The construction industry without a doubt remains strong. Since Oasis was incorporated in 2008 the Cayman Islands construction industry has strengthened year-on-year (with some slow down during the 2008 Global Recession). In December 2021 the Cayman Islands Government released a statement indicating they believed that the financial services and construction industry are the main engines that will push Cayman through the recovery from COVID-19 (source Cayman Compass).
BUT HOW HAS COVID-19 AFFECTED CAYMAN ISLANDS CONSTRUCTION PRICES?
The construction industry in the Cayman Islands remains robust, the only downside is the upward trend of increasing material costs. Issues within the industry haven’t arisen due to demand for purchasing property, but the ability to build property fast enough to sell, restricted through the constraints of supply and demand for building materials, resulting in an increasing cost to construct in the Cayman Islands. As the Cayman Islands relies heavily on importing building materials, from countries such as the USA, Canada, Europe, Jamaica and in some cases China, COVID-19’s impact was immediate — it was as if the tap was turned off and supplies to the Cayman Islands simply stopped. Developers had no means of acquiring building materials, and stock on the islands diminished in a matter of days. Although, we have started to see a steady flow of materials entering the Cayman Islands, the cost of materials still continues to increase as well as the cost of shipping. Two years down the line, the world is still dealing with the mutation of COVID-19 variants, changes in quarantine restrictions and even the re-introduction of lockdowns in some parts of the world, all of which continues to disrupt supply and demand chains. According to Daniel Murphy, retail manager at A. L. Thompson’s, there has been record-breaking price increases throughout COVID for raw materials. At one point last year (2021), lumber had gone up 300% on some products. That has since come down but the market in raw materials remains volatile, such fluctuations make offering a fixed price construction contract difficult.
Furthermore, according to Mr. Bovell in the Cayman Islands;
Since the pandemic began in early March 2020, everything has changed when you look at what it costs to build a home or any type of development. Construction costs have gone through the roof and the knock-on effect surrounding construction such as shipping costs, and product availability and accessibility are impacting new housing development across the globe.
From lumber paint and concrete to everything in between, the costs of almost every item that goes into building a home or new development are soaring. In some cases, the price increases have topped 100% since the pandemic began and the cost to build an average home in the US has increased by at least 50% in the last two years.
Keep in mind that this 50% increase is for the cost of building a house but the actual labour and land prices although they have increased have not increased by 50% in the last 2 years. “We are seeing wage increases in the construction industry up to 20%,” said David Johnston, President of the Cayman Contractors Association. “That is in addition to the shortage of labourers currently on island.”
The demand surge from the building boom has lifted concrete prices sharply, up 104%, placing it second to lumber in terms of price increases
Lumber prices have almost doubled since Fall 2020 and gained momentum at the beginning of the year and then catapulted by May. Lumber futures—a type of contract that allows people to buy or sell commodities for a certain price on a fixed date—hovered around $700 per thousand board-feet in late January. By May 2021, it doubled to roughly $1,400.
“We are seeing costs skyrocket with respect to lumber products,” added David Johnston, President of the Cayman Contractors Association. “Sheets of plywood used to be priced at $34 and we are seeing those over $100 now. This shortage is due, in part, to the very active residential market particularly in the SE US.”
The demand for steel worldwide is at unprecedented levels. The World Steel Association forecast dated April 15, 2021, indicated that steel demand will grow by 5.8% in 2021 and in 2022 that steel demand will see further growth of 2.7%. In addition, the lead time for steel has gone from an average of 20 days just 8 months ago to an average of 120 days currently.
Drywall has increased 26% in the last two years and builders are also paying more for plumbing, due to a shortage of PVC pipes, which are commonly installed rather than metal. The severe 2021 winter storm that temporarily took power down in Texas, where most PVC is manufactured, reduced US supplies. Record high copper prices, meanwhile, are adding to the cost of electrical wiring and air conditioning systems.
Appliances and furniture
Prices for appliances are also surging, with major manufacturer Whirlpool Corp. phasing in price increases between 5% and 12% this quarter due to strong demand and higher metal costs. “Material costs are still increasing and will likely keep doing so until the third quarter,” Chief Financial Officer Jim Peters said in April.
Coupled with increasing prices across the board, wait times to receive materials has gotten much longer. Many products that traditionally took 1 to 8 weeks in late 2020 are now taking 6 to 30 weeks.
“We are seeing supply chain challenges on just about everything from steel to electronic components to everything in between as the world slowly starts to reopen,” added David Johnston, President of the Cayman Contractors Association. “If one component for materials such as windows, doors and stud work is missing it obviously effects the final product.”
Containers and shipping costs
Coupled with increases on overall construction materials, shipping costs continue to increase adding to the rising cost of all materials. There continues to be a shortage of shipping containers due to the high demands of every product that comes to the US from other countries.
“The cost of fuel is also up, which is adding to overall costs,” added David Johnston, President of the Cayman Contractors Association. “Trucking costs in the US, which we cannot control, are through the roof.” Source here
The advice from Oasis is to wait to start your construction until the market settles and prices decrease. For more information about construction in the Cayman Islands or Oasis Freehold Building Plots please complete the below form;