Real estate and the Cayman tax advantage

Tax is always an important question when considering the ownership and sale of property. Cayman has many desirable aspects with respect to taxes that make investment in Cayman Islands real estate a wise decision. 

The primary advantage that Cayman has over the rest of the world is that there are no annual property taxes. In the Cayman Islands there are no regional, state or federal taxes related to property as in the U.S., Canada and the U.K. where there are annual fees related to property ownership. As with the property tax system in most other countries, properties are also re-assessed periodically, often resulting in increases in annual property tax. These increases are of course out of the control of the property owner and makes things difficult from a budgeting perspective.

This property re-assessment does not happen in Cayman, so the advantage is that an owner can hold on to a property for an indefinite amount of time without any tax related costs. This is especially so in the case of land, for example even if vegetation becomes overgrown and encroaches on a road front, the government will maintain the road frontage. So, in the case of land, there is absolutely no ongoing cost associated, tax or otherwise.

The only form of tax directly related to property is actually on the transfer of property from one owner to the new owner. The purchaser is liable for this fee, which is currently set at 7.5 percent of the real estate value of the property and does not include furniture or personal effects.

This fee may seem quite sizeable to pay upfront, but spread over the time of ownership it becomes less and less of an impact associated with the purchase. This percentage fee is not unusual as most countries have a transfer fee that the purchaser is liable for and in some countries the fee is as high as in the Cayman Islands.

On the sale of the property an owner also has no tax obligations from Cayman’s perspective. For foreign nationals owning property in Cayman, there may be a tax obligation to one’s home country, but no cost of this nature is owed to the Cayman government as the purchaser pays the stamp duty.

Upon selling a property, there is also no capital gains tax, as there is in many other countries. So any capital gained through the ownership of the property is all for the owners to have, yet another reason owning property in Cayman is so attractive.

Another interesting advantage is the absence of any death/inheritance tax for the transfer or gift of property through love and affection. For this there is a small, less than US$200 cost to transfer the property through love and affection to a close family member, yet another advantage to owning property in the Cayman Islands.

These tax differences between Cayman and other jurisdictions in relation to real estate investment, piggybacked on a strong Cayman market with historical stability due to multiple factors such as location, low crime rate, stable government, excellent infrastructure, professional services, a strong financial industry and tourism industry,  make owning Cayman Islands real estate a wise investment.

In the past few years, Cayman’s real estate market has held its own and increased in value. Even in the economic downturn seen by the rest of the world, while transactions may have slowed, values held for the most part. See figure 1 

FIGURE 1:

 # transactionUS$Volume
2004686$387,855,399
2005678 $ 412,526,163
2006483 $ 214,705,820
2007516 $ 260,486,591
2008579 $ 317,748,393
2009550 $ 291,680,842
2010431 $ 222,381,422
2011467 $ 323,422,258
2012463 $ 318,768,990
2013442 $ 293,433,037

In 2014, coming off of what has appeared to be a very active high season for real estate in Cayman, based on property listings that are tracked by the Cayman Islands Real Estate and Brokers Association, CIREBA, total market transactions for the first half of 2014 increased by 36 percent compared to the first half of 2013, while sales dollar volume to the end of June showed an even larger increase of 69 percent compared to the same period in 2013.

As at the end of June, the total number of pending sales transactions was also up 20 percent and pending sales volume was up 106 percent higher than last year.

The overall market increase was driven significantly by increased sales of condominiums along Seven Mile Beach and also residential homes. Increases in these two market segments are indicators of confidence in Cayman’s economy from both overseas investors and also the local professional residents. See figure 2

FIGURE 2: 

 Sales as recorded by CIREBA – as of June 30, 2014
 
2014
2013
 
 
  transactions   Volume
US$
transactionsVolume
US$
%
vol increase
%
transaction
increase
Total Market 302   $ 181,208,092 179   $ 133,348,95136%69%
Pending 167   $ 165,244,440 139   $ 80,343,965106%20%
Residential Homes 60    $ 53,712,302 39   $ 44,230,26021%54%
SMB Condos 60   $ 51,018,000 29   $ 31,307,41763%107%
Other Condos 91   $ 29,326,426 73$ 29,086,9291%25%
Land – beach/res/ag 75   $ 24,751,222 68   $ 17,950,30038%10%

 

 

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James Bovell

James has been a part of the real estate industry in the Cayman Islands
since 1991. Born in the Caribbean and educated in the UK, he has
achieved great success in listing and selling many of Cayman’s choice
homes, waterfront condominiums
and developments, land parcels and investment opportunities.  James has
received many of RE/MAX International’s awards including The Circle of
Legends, (the highest career achievement within the RE/MAX international
network with fewer than 200 inductees to
date).

James Bovell
Broker/OwnerRE/ MAX Cayman Islands
PO Box 30189 Grand Cayman
KY1-1201 Cayman Islands
T: +1 (345) 945 4000 E: james@bovell.ky W: www.bovell.ky 

RE/MAX

RE/MAX, which stands for 'real estate maximums', was founded in the 1970's by Dave & Gail Liniger in the United States of America. They developed a unique franchise system that allows real estate agents to maximise their potential by having the security of a franchise and at the same time having the individual freedom to run their own business. Today the RE/MAX network comprises over 6,000 offices with around 90,000 associates in 85 countries.

RE/MAX Cayman Islands is such an independently owned and operated office within the real estate network of RE/MAX International and RE/MAX Caribbean/Central America. The office at 7 Mile Shops on West Bay Road unites 21 real estate professionals and 9 administrative staff under one roof. All our associates and administrative staff are highly experienced and constantly expand their knowledge with ongoing training. Within the office, our associates use the synergy potential. Not only synergies within the office are important but we also work closely with RE/MAX offices all over the world as part of our international referral system.

Locally and internationally we are dedicated to maintain a high degree of visibility which will benefit our highly valued customers and clients as well as our Sales Associates. A comprehensive marketing strategy across all media including print and internet ensure our consistent exposure.

We are well established in the Cayman Islands real estate market as a strong office, capable of producing outstanding results. Referrals from satisfied buyers and sellers are a proof of it as well as the many awards the office has received. 

Physical address:
Seven Mile Shops
215B West Bay Road
Grand Cayman

Mailing address:
PO Box 30189
Grand Cayman KY1-1201
Cayman Islands

www.dreamfinders.com