The Great Migration
One question often being posed is, "Are foreigners and out of state buyers purchasing real estate on Oahu?" This is a totally fair and legitimate question to ask.
According to Title Guaranty's January - September 2020 Buyer Statistic report, the top three foreign buyers on Oahu come from Japan (100, $102.3 M) , Canada (44, $50.9 M), and Korea (9, $6.3 M). The Japanese has consistently invested in Hawaii real estate. Matter of fact, in 2019, I helped a client purchase a luxury condo unit in Kaka'ako. Per the listing agent, the unit was the second home to her Japanese seller.
Although Kaka'ako and Ward Village are the prized gems for luxury condos, the next wave of development appears to be on Kapiolani and Keaumoku. Korean and Chinese developers have planted their flags in these neighborhoods. As we work our way through our COVID-economy, it will be interesting to see how these developments play out.
Affordability is extremely important too. It is a term often criticized since people sarcastically ask, "How is $800,000 affordable?" What consumers need to understand is housing prices will not get cheaper. Oahu has roughly 10% buildable land. This is not only a scarcity issue, but construction costs are higher.
Why are construction costs higher? It is because we live on an island. A person who works in the construction industry once mentioned how the windows for a condo was easily marked up 100%. These costs gets passed down to the buyer.
If land and construction costs are sky high, it forces developers to build high end homes. That is where the frustration comes from because many local people feel they are being priced out of the market.
Referring back to Title Guaranty's report, the top three U.S. buyers were California, Washington, and Texas. During the pandemic, all three of these states were hit very hard by COVID-19. With employers allowing its employees to work from home, are out of state buyers hunkered down in Hawaii? When you think about it, Hawaii is a relatively safe place during the pandemic. Thankfully, Hawaii did not experience what some states went through.
Coming second to Hawaii, California buyers ranked second in buying homes on the Leeward, Central, Honolulu, East Honolulu, and Windward regions of Oahu. Who are these buyers? I will not be surprised if some of these people are from Big Tech.
So what is next?
In our low interest rate environment, people will be enticed to buy. Since we have low inventory, desirable homes will be sold at a premium. If you are interested in buying, it might be beneficial to do it sooner than later. If you are currently a homeowner, double check your current mortgage rate because you might be a candidate to refinance.