Waikiki: Stable Values, Wide Variety Appeal to Residents and Investors
BY LISA LEE
Waikiki. It’s a world famous beach, a vacation destination, a retirement oasis. It is also an investor’s paradise, says Shannon Smith (RA), a real estate agent at Prudential Locations, who lives and works in Waikiki.
Waikiki’s real estate market tends to remain stable during the bad times and appreciate in good times, she says.
“Views of Diamond Head or the ocean and proximity to the beach make owning in Waikiki valuable,” says Smith. “From my condo, I can walk to concerts at the (Waikiki) Shell, to great restaurants, or to the beach to watch the sunset. There’s always something going on. I believe it’s the proximity to everything and the potential for income that make it appealing to residents and investors.” Smith owns both the condo she lives in and an investment rental in Waikiki.
The 2012 median sales price of a Waikiki condo is $330,000, which means that half of the 337 units sold this year closed for less than that. This isn’t surprising, as median prices have been climbing slowly since 2009 when they dipped to $315,750 after a 2006 peak of $360,000.
Sales in Waikiki have increased an average of 15 percent per year since the market bottomed in 2009, versus an average of about 5 percent per year for the rest of Metro Honolulu.
“Indicators of market strength, such as days-on-market and sold-price-to-list-price ratio, are at historic levels – the best they’ve been outside of the 2004-2005 period that was the most recent peak in market activity,” says real estate analyst John Jacobson.
Just as it attracts a wide variety of tourists from around the world, Waikiki attracts a diversity of buyers. Smith says her clientele includes first-time homeowners, first-time investors, seasoned investors and those looking to retire. She has also worked with “downsizers” – people moving out of big homes because “they don’t want the hassle of keeping up a large home and a pool or yard. They’re attracted to the ease and convenience of condo living.”
For people looking to invest, rental income is typically higher in the 144 condo buildings of Waikiki than in surrounding areas. Renters make up 62 percent of Waikiki’s residents.
“If your condo appreciates more than other areas and the rents are higher, that adds up to a better value over the long term,” says Smith. “There is a bigger pool of renters here and they are willing to pay more per month because of the location.”
In addition, the renters are just as diverse as the buyers. “You have every rental segment concentrated in one area,” she explains. “Waikiki has the largest concentration of hotels and it provides so many job opportunities, so you have a large mix of tourists, snowbirds and residents looking for places here. If you work in Waikiki, it makes sense to live here to save commute time and gas money, especially if you’re interested in all that Waikiki has to offer.”
“I’ve seen single, young men in the military who choose to live here because of what Waikiki offers. They don’t mind the commute. It’s nothing compared to commutes they experienced on the Mainland.”
CONDO OPTIONS FOR ALL BUDGETS
Waikiki has an array of condo options ranging from $70,000 condo hotel/lodging units to $4 million luxury condos in Trump Tower. The oceanfront condos on Oahu’s Gold Coast can run into the millions, but Smith points out that a less expensive option for beach lovers is the Waikiki Shore, located across the street oceanside of Trump Tower, where walking downstairs to the sand can be as low as $650,000.
Smith points out that condo hotel/lodging units are an option that have provided an immediate, positive cash flow of around $95,000 to $100,000 per year for investors. While they require a 100 percent cash investment, they have had a high ongoing rate of return “compared to CDs that have drawn almost no interest or stocks that need to be monitored constantly,” she says.
Whether you’re looking for a condo hotel or luxury penthouse, a rental or a residence, Waikiki has something for everyone.