Hawaii is a hot spot for tourism and a dream for many to live in. But with reports of residents increasingly moving to the mainland during recent years, investors may be worried that property values will start to plummet. According to Hawaii News Now, approximately 13,500 residents have moved away from the islands last year, to combat soaring living costs and economic inflation [1]. Furthermore, recent volcanic activity on the Big Island has reached unprecedented levels, causing extensive damage throughout Leilani Estates. The County of Kauai and Oahu’s Hawaii Kai have also seen major flooding as of recent, wreaking havoc in nearby family residential areas. Despite the increased number of locals vacating the islands and the recent rise of natural disasters, Hawaii’s population is expected to consistently grow through 2025 according to the Hawaii State Department of Business, Economic Development and Tourism (DBEDT) [2]. With an estimated average 20 percent population growth, many housing developments are being planned out and put into effect, such as the major urban development seen recently in Kakaako, Oahu [2]. Fears aside and investors reassured, Hawaii is still an ideal location for real estate investment.
After the 2008 housing stock market crash, Hawaii real estate did see a fall in prices. For Honolulu, single family homes saw an approximate $50,000 loss in value from 2008 to 2011 [2]. After 2011, prices continually started to grow again surpassing their original value before the crash. For investors, it is key to note that overall demand for Hawaii homes is high and this makes the market strong. Though real estate is typically seen as an appreciating asset, the housing market can fluctuate greatly making this not always the case. This can also make deciding the right time to sell and buy very frustrating for an investor or home owner.
According to the Honolulu Board of Realtors, the average price for a single-family home gradually increased from $158,600 in 1985 to $675,000 in 2014 [2]. While the average price for a condo has gradually increased from $89,800 in 1985 to $350,000 in 2014 [2]. The DBEDT states that after the 2008 depression residential construction went on the decline, while housing demand increased, causing housing prices to dramatically increase [2]. The demand to live in Hawaii clearly has not diminished and the DBEDT expects that it will continue to steadily increase.
Although investors are worried that the demand for housing may decrease as residents continue to move off island, demand has proven to be very consistent. In fact, the DBEDT expects population growth to increase by 29% for the Big Island, 19% for Kauai, 25% for Maui, and 8% for Honolulu by the year 2025 [2]. The U.S. Census Bureau has confirmed that Hawaii’s population is increasing, citing higher birth rates than death rates and international migration as the two main causes [3].
According to Locations Hawaii and Masterpiece Construction LLC there are numerous future housing projects just for Oahu alone. Projects include, Ho’opilii in West Oahu to add approximately 11,750 new homes and Koa Ridge near Mililani to add 3,500 new homes [4]. There are also at least ten more planned high-rise buildings to be built throughout Kakaako, with an estimated total of 3,880 new condos [4]. These high-rise condos offer numerous luxuries, such home movie theatres and fully stocked gyms, in addition to being located near Ala Moana Beach Park and Ward Village. Kakaako alone has been catching many investors’ eyes due to all the new development coupled by the steady rise of median prices over the past several years [4].
A growing market and new development aside, investors still may be concerned that while demand is being predicted as increasing over the next several years, continued cases of natural disaster could throw a monkey wrench into this positive outlook. On May 3, 2018, a fissure opened in Leilani Estates causing volcanic activity that has wreaked havoc in the Puna District. The lava flow so far has spread 2,223 acres, destroying 27 homes total [5]. Currently, the lava flow has been restricted to Leilani Estates and has not spread further to other parts of the island. It is hoped that the activity will continue to diminish and that no one else will be affected by this crisis.
There have been recent cases of flooding that has caused damage in Hanalei, Wainiha, Haena and Anahola on the island of Kauai [6]. Kauai saw up to 28 inches of rainfall causing road closures and landslides in April 2018 [6]. The east side of Oahu has also recently seen extensive flooding, causing water damage and property lose throughout the area. Fortunately, the recent flooding has seemed to subsist as well.
Despite recent events, Hawaii typically does not experience high occurrences of natural disasters. In fact, the worst natural disaster facing Hawaii are hurricanes [7]. Hawaii, has only been hit directly by a hurricane three times since 1950. The last category 4 hurricane that hit was 15 years ago, Hurricane Iniki. Hurricanes are much more prevalent in the Gulf of Mexico and along the East Coast, so states such as Louisiana, Maryland, and Florida, are at a greater risk than Hawaii [7]. Compare that to other states in the mid-west that experience tornadoes yearly, sometimes on average of 23-27 times per year, and the damage that comes with these occurrences [7]. As for the West Coast, wildfires and earthquakes seem to be the most prevalent and occur quite frequently [7]. Overall, natural disasters are not to be taken lightly, every state has its own risks as Mother Nature is unavoidable. Even with recent events in Hawaii, it is unlikely that demand for new housing will be deterred if affected at all.
Overall, Hawaii is a great investment for Real Estate with consistent and rising demand throughout the years. It seems that people cannot get enough of the comfortable warm climate and the beauty of the mountains and beaches that make Hawaii so unique.
[1] http://www.hawaiinewsnow.com/story/37122464/people-keep-leaving-hawaii-in-droves-for-the-mainland-and-this-year-was-no-exception
[2] http://files.hawaii.gov/dbedt/economic/reports/2015-05-housing-demand.pdf
[3] http://files.hawaii.gov/dbedt/census/popestimate/2016-county-population-hawaii/County_Pop_Fact_2016_Final.pdf
[4] https://www.locationshawaii.com/learn/market-reports/market-insights-report-2018/
[5] https://en.wikipedia.org/wiki/2018_lower_Puna_eruption
[6] https://www.inman.com/2018/04/19/hawaii-real-estate-community-rallies-around-victims-of-disastrous-weekend-flooding/
