Local investors still lead the way in purchasing Oahu real estate
BY LISA SCONTRAS
The median sale price of an Oahu home is down, from its peak of $645,000 in 2007 to $595,000 in 2011. During that same timeframe, the U.S. dollar also has lost 35 percent of its value against the Japanese yen effectively increasing the yen’s value here in Hawaii. And during the same period, the Canadian dollar also has increased in value achieving par with the U.S. dollar and resulting in a 10-percent-plus increase in Canadian buying power here.
What does this all mean for the Hawaii real estate market?
The drop in median price coupled with the monetary exchange rate of the yen and the Canadian dollar means the number of investors from Japan and Canada buying real estate on Oahu is up significantly.
In fact, when the research division at Prudential Locations analyzed data from 2005 when sales were the highest and compared it to 2011, they found the number of buyers from Japan increased 59 percent and the number of buyers from Canada increased 150 percent.
“Canadian buyers purchased three times as many condos in 2011,” says Scott Higashi, executive vice president at Prudential Locations. “The reason is that the combination of relatively stable prices and better exchange rates is a formula that creates a positive buying environment for these buyers. Their buying power is significantly increased.”
Despite the monetary advantage some foreign buyers are enjoying, the Prudential Locations study of where Oahu real estate investors are coming from revealed 75 percent are local.
For the remaining 25 percent of out-of-state investors, the makeup has changed.
In 2005, the U.S. mainland made up 94.5 percent of Oahu’s out-ofstate buyers with 63 percent from California. In 2011, the percentage of U.S. mainland buyers investing here has dropped to 63 percent, with only 28 percent from California.
The change in exchange rates, particularly in Japan and Canada, correlate with the increase in the number of investors from those countries. Historically, it is not uncommon for exchange rates to have a positive effect on real estate sales.
Thirty years ago, when the yen was 239 to the dollar it was expensive for Japanese investors to buy in Hawaii. But by 1988, at 128 yen to the dollar, the value of the yen in U.S. dollars had doubled, kicking off a boom in Hawaii real estate sales.
“We are not saying that our recent study indicates an upcoming boom, just that there is a positive effect on our investor market,” says Higashi.
Since 2005, Japanese buyers have increased from 4 percent of the investor market to 22 percent today. And “other foreign investors” also have increased significantly, from 2 percent in 2005 to 14 percent today.
Given the severity of the mortgage crisis in California, the distribution of mainland investors has shifted as well. The percentage of non-owner-occupant buyers from southern California has fallen from 35 percent to 12 percent, and from 27 percent to 16 percent for northern California investors.
“The biggest pot of buyers come from on-island. (The) next big group is from the West Coast, including California, and after that is Japan,” Higashi says. “And this is the reason Prudential Locations is very interested in tracking this data. Knowing where the buyers are coming from benefits our clients who are selling property as it allows us to focus our marketing efforts on the most appropriate demographic.
“It’s as simple as fishing where you know the fish are.”