biz resort market update

BY BOBBY COMMAND

WEST HAWAII TODAY

bcommand@westhawaiitoday.com

Homes in the resort residential market continue robust closing numbers in Hawaii County despite a slight decline in sales during the last two years.

There were 631 closings in 2007, the most in the state, according to Rickey Cassiday, a Honolulu residential real estate consultant and market analyst. That was almost 100 more than Maui County, which until 2005 had the deepest market in the state.

Statewide, Cassiday said the resort residential market seems to be nearing a tipping point. But unlike other earlier market cycles, prices have not fallen back in the face of slowing sales, and are instead rising.

“Within that, there are differences,” Cassiday said. “For sales under $1 million, it’s a buyer’s market; for sales over that – particularly as the prices climbs — it is a seller’s market.”

While closings from five years ago are up more than 20 percent on the Big Island, the 2007 closings represent an 8 percent decline from last year and a 6 percent decrease from two years ago. That’s compared to an 18 percent decrease statewide from 2003 numbers.

Cassiday said the five-year increase on the Big Island is due to a large supply of zoned land, active development and innovative resort properties such as Kukio catering to the very high-end market.

Despite fewer properties being sold during the last five years, that hasn’t depressed prices. The average cost of a resort residential homes on the Big Island has climbed to $1.82 million last year, up from $1.58 million in 2006 and $980,793 in 2003.

According to Cassiday’s numbers, that trend is also reflected statewide, with a steady rise in average price from $773,014 in 2003 to $1.58 million in 2007.

However, Cassiday said the skyrocketing prices on the Big Island and Maui — which has the highest average price at $1.9 million — may tempt investors to look for bargains on Oahu, where average prices hover at $740,300, and Kauai, at $1.05 million.

Gross revenues generated by sales of resort residential product edged closer to the $3 billion mark statewide in the last two years after nearly breaking the barrier in 2005 with $2.84 billion. Both Maui and the Big Island lead in 2007 with almost $1.2 billion worth of gross revenues each.

As is normally the case, condominium sales far outsold single-family units and houselots.

While current trends show softness in the overall market, Cassiday said they are nowhere near as soft as some areas on the mainland, including Miami and Las Vegas.

On the demand side, devaluation of U.S. currency and a strong desire on the part of offshore buyers to own a piece of paradise is enabled by significant wealth creation, as well as wealth transfer, across the country, according to Cassiday.

On the supply side, there is very little developable land — even less and less with the passage of time, particularly with regard to the very highest-quality locations, he added. On top of that, most of the advantageous and desirable parcels have been bought or developed, such that redevelopment is the easiest and surest way to address the high-end market.

“It remains to be seen if events will overtake the integrity of this market, or whether the long-term trends of the baby boomer generational demand, and/or a simple desire to immigrate to Hawaii short or longer term will support the market sufficiently to maintain it around current levels.”

Another factor is what Cassiday describes as a “poisonous” political atmosphere, which could hinder entitlements through high costs.

The other macro-economics trend favoring demand is the devaluation of American currency, relative to other countries. “A weak dollar keeps domestic spenders and tourists at home and foreign spenders — hopefully, on property — and vacationers coming to Hawaii,” he said. “This is especially apparent on Oahu, where Canadians, Russians, Japanese and Chinese are looking into Waikiki and Ko Olina.”