Foreign buyers keep Hawaii market buoyant

By Allison Schaefers International Herald Tribune
Thursday, December 6, 2007

While real estate transactions continue to slump on the U.S. mainland, the
strength of Hawaii's international pull has propelled its luxury sales ahead
of last year's tally and increased speculative development in the market.

The recent $11.25 million sale of an estate in Kahala, a prestigious
Honolulu neighborhood, is the latest evidence that the islands's luxury home
market is robust. And it came right on the heels of a $15.9 million
transaction in October that, so far, is Oahu's largest sale of the year.

While Hawaii has long drawn global interest, the international real estate
market here has improved as developers are reinvesting in the state and the
dollar has weakened against foreign currencies, said Donald Eovino,
president and principal broker of Eovino and Associates, a real estate firm here.

"Hawaii is the Monaco of the West Coast for the affluent," Eovino said.
"Hawaii's international real estate market, this year, has the potential to
be bigger than any year before."

The Canadians discovered Hawaiian real estate in the 1960s, the Saudis
arrived in the 1970s and the Japanese came in the middle to late 1980s. Then
left after heavy speculation created a housing bubble that caused the market
to turn. Now, the Japanese and Canadian buyers are back, real estate experts
here say, adding that there was greater demand for Hawaii from Oceania,
Europe, China, South Korea and other parts of Asia.

Although real estate activity overall has slowed by almost 10 percent on
Oahu, transactions involving top-end homes increased 14 percent
year-over-year through the third quarter, said Scott Higashi, vice president
of sales at the Prudential Locations agency here.

In the first 10 months of 2007, 497 properties that were valued at $1
million or more were sold on Oahu, compared with 460 properties in the same
period in 2006, said Harvey Shapiro, research economist for the Honolulu
Board of Realtors.

Such residences also are selling 34 percent faster than they did a year ago,
Higashi said, with luxury homes on the market for an average of just 42
days.

The returning strength of Hawaii as a global real estate brand has been
apparent for some time. Last November, the planned Trump International Hotel
& Tower in Waikiki set a world sales record when it sold $700 million worth
of residential units in eight hours, said Roxanne Loughery, senior vice
president of marketing for S&P Destination Properties. "We see Hawaii as one
of our top international destinations," she said.

Sales of the Waikiki project, which were held simultaneously in Hawaii and
Japan, moved so fast that Ivanka Trump, vice president of development and
acquisitions for her father, Donald, almost missed getting a unit. "About 40
percent of the buyers were from Hawaii and Asia, and the remainder came from
all over the world," she said at the time.

Intrawest Corp. of Vancouver, Canada, set the previous sales record in 2005
- $423 million - when it sold all 318 units in the first phase of its Honua
Kai luxury condominium hotel at Kaanapali Beach in Maui, said Ian Galbraith,
Intrawest's media director.

The weakening of the U.S. dollar is drawing even more foreign interest.
"There's been a noticeable increase in international buyers within the last
60 to 90 days," said Chason Ishii, president of Coldwell Banker Pacific
Properties in Honolulu.

When the dollar exchange rate fell to ¥114 from ¥122 several months ago,
Hawaii saw a wave of Japanese buyers, said Sachi Braden, owner of Sachi
Hawaii, a company here that specializes in selling to the high-end Asian
market. "Right off the top, they are looking at about a 5 percent savings,"
she said.

Similarly, more Canadian buyers are choosing to purchase Hawaiian real
estate and capitalize on the best U.S. exchange rates they have seen in 30
years, Loughery said. "Five years ago, a $1 million property in the U.S.
would have cost a Canadian buyer $1.6 million to purchase. Now it will cost
them just under $1 million," she said. "We've seen a big change in the
exchange rates in the last six to eight weeks, and everyone wants to go
shopping."

Buyers from Alberta and British Columbia played heavily in the mix of
investors who bought property last month when S&P Destination Properties
released the first phase of Koloa Landing, a luxury resort condominium
project on Kauai, Loughery said. "We sold $76 million worth of real estate
in just a few weeks," she said, adding that the planned sales release of the
Residential Suites at the Ritz-Carlton, Kapalua on Maui next year also is
expected to draw international attention.

The strengthening of the euro and more efficient flights have caused
Europeans to eye Hawaii with new interest, said Manu Spaur, broker/owner of
RE/MAX Island Surf Realty on the Big Island of Hawaii, whose multilingual
staff is working to develop the European market.

"With the euro so strong, it makes it much more likely for Europeans to buy
outside of their country," said Spaur, who was born in Germany and has
marketed Hawaii in her homeland as well as in Greece and Turkey. European
investment companies also have bought island real estate, she said.

In the near future, planned tourism and banking charges are also expected to
draw more Hawaii real estate offers from buyers in South Korea and China,
said Marsha Wienert, the state's tourism liaison.

By 2008 or the first quarter of 2009, South Korea is expected to get visa
waiver status, which will make the islands more accessible to its citizens,
Wienert said.

Hawaii officials also are aggressively pursing approved destination status
for China. The designation still would require Chinese visitors to obtain
visas but now they must have a business reason to visit and the change would
allow them to come for pleasure trips, she said. "There's no question that
we'll have more international tourism and a lot more international
investment as a result of these changes," Wienert added.

China and South Korea's robust growth, combined with changes in some banking
restrictions will make it more attractive for investors to diversify by
taking money abroad, said Steve Atherton, managing director in Hong Kong of
Asia-Pacific operations for NAI Global, a commercial real estate business.

"There are other markets that are strong, but Hawaii has an advantage
because it's more attractive than other destinations," Atherton said. "After
you go on a holiday to Cambodia, you aren't thinking about retiring there.
However, it's just the opposite in Hawaii."

But experts have said that the appeal of Hawaii's luxury market goes beyond
perceived value, changes in currency or government monetary or tourism
policies. Improvements in transportation and technology also are factoring
into international real estate buying decisions, Eovino said. "The macro
picture is that technology has made it possible to work from anywhere. Why
not do it from a laptop in Hawaii?" he said.

An example is the $15.9 million sale on Oahu. The buyers - Jason Brand,
president in Tokyo of Merrill Lynch Pacific Rim and his wife, Malindi
Fickle, an actress and producer - are among a number of U.S. expats living
in Asia and buying homes in Hawaii, said Mary Worrall, who represented the
seller in the transaction.

"Hawaii is very appealing to buyers like these because it is seen as a safe
destination with fresh air and water and very little pollution," said
Worrall, president of Mary Worrall Associates Sotheby's International Realty
here.
Demand from such buyers, who prefer turn-key properties, also has spurred a
wave of reinvestment and high-end speculative redevelopment, Eovino said.

A Japanese buyer recently paid $11.25 million, Oahu's second largest
transaction this year, to buy one of Eovino's newly built homes on Kahala
Avenue, a prestigious Honolulu address. The property also drew offers from
Japan and Australia, Eovino said.

And in January, Eovino sold property near Honolulu's Diamond Head for $11.1
million - Oahu's third largest transaction of 2007 - after redeveloping it
into a Balinese-style single-family residence and caretaker's cottage. He
had bought the property in 2004 for $3.5 million.

In the case of the Brand and Fickle purchase, it was the former owner who
had invested. Property records show Susan Tompkins bought the property for
$5.1 million in 2000 and invested about $5.5 million to redevelop the site,
which was once the guesthouse of the American industrialist and shipbuilder
Henry Kaiser.

"She had about $10.6 million in the house and sold it for $15.9 million,"
said Stephany Sofos, a real estate analyst here, "which means that she got a
50 percent return in just a few years. Who wouldn't be happy with that?"