Maui Real Estate Values to Grow Over the Next Decade

Big Beach_Makena_MauiWe all have those moments when we look back and say “I could have done that” or “why didn’t I buy it when”.  Like they say “hindsight is 20/20”.   Well, no one has a crystal ball to tell the future either.  However, by looking at the history, news and trends a pattern starts to appear.  And that pattern begins to look up for Maui Real Estate!  To make sense of this let’s start with the history.

Maui Real Estate is known to be cyclical mirroring trends from both the West Coast and international influences due to its isolated location in the middle of the Pacific.  Around 1987 the Japanese found Maui.  There was a massive amount of new development all over the island and values steadily grew until 1991 with the advent of the Gulf War and the value of the Yen dropping.  In 1995, the market started moving again lasting until the “Internet Bubble” burst in 2000.  This only lasted a short time being quickly replaced by the rush to buy with low interest rates and easy loans nationwide.  This market started to show strain in 2005 and eventually ended in 2007 with the “Great Recession”.  Buyers returned in early 2011 fueled by a strong Canadian dollar and an always faithful West Coast and has been going strong for 5 years now.  One thing to note is that at their top, each of these peaks had values that exceeded the one before.  Even with 5 years of a strong market we are not there yet.

From Maui March 2016 Statistic Report by RAM

Source: Realtor Association of Maui – Maui March 2016 Statistic Report

On average the growth periods for Maui real estate last 5-7 years so we should be nearing a breathing point.  The last two years during the 1st Quarter we have seen a flattening in the market mostly due to weakness in the Canadian Dollar.  However, the real estate market on the West Coast specifically Seattle, San Francisco and Vancouver is red hot.  As the Canadian winter visitors leave the island, those rooms are filled by West Coast visitors and they are Buyers.  Values for property here on Maui are considered a bargain by many mainland buyers.  As these buyers are entering the market, sales volume is increasing and this trend appears to be growing with busy sales months starting in April now, not in January.  Also the Canadian dollar eventually will stabilize so those buyers will be returning at some point in the future too.

Ok, we’ve looked at history and current trends but what about the future?  This isn’t new but the word is China.  Hawaii could be looking at a monumental event as we get “discovered”.  According to the Pacific Business News http://www.bizjournals.com/pacific/ and the Hawaii Tourism Agency #HTA, 500,000 Chinese visitors a year are expected by 2020 putting it “on par with the Canadian market”.  With that number increasing to 1 Million visitors a year within 10 years.  There is a projected shortfall of 10,000 rooms to accommodate this increase so more will have be built soon.  Another piece of the puzzle is initially most first time visitors come in tour groups but “free and independent travelers (from China) in Hawaii increased by 34.7 percent” and that number will grow.

Golfing in Wailea, Maui, Hawaii

So what does this mean for Maui?  Initially there will be an “overflow” from Oahu due to the shortfall of available hotel rooms.  Plus, as these visitors return to Hawaii they usually come as independent travelers and start visiting the “Outer Islands”.  It won’t take long to discover the beauty, beaches, golf and resorts we have here on Maui.  If even 10% come to Maui, that’s 100,000 additional visitors a year, and many are likely to be buyers.  This is just what happened with Japan.  The big difference is now growth restrictions are in place so there won’t be many more resorts or complexes going up to accommodate these new buyers.

As these new buyers enter the market with no new inventory, pressure will be placed on existing real estate.  Initially this pressure will show in the resort areas for vacation homes.  Then as jobs increase in the hospitality, retail and construction sectors overall prices will go up with the demand for new housing.  Expect to see “infill” as remaining open lots are developed and older homes are replaced with newer more efficient and multi-family dwellings.  This has already been happening in Vancouver where values have increased exponentially since the Olympics.  Given all these factors, it means this should lead to values increasing steadily over the next decade.

I don’t have that crystal ball but instead have turned the hindsight mirror around and am looking forward.  This has happened already here before.  There might be a couple bumps along the way but things look “bullish” in the long run for real estate here on Maui.  Fasten your seatbelts and get ready for one heck of a ride.

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