China's financial woes could spell trouble for Hawaii luxury hom - Hawaii News Now - KGMB and KHNL

China's financial woes could spell trouble for Hawaii luxury home sales

Photo Source: Vida project Photo Source: Vida project
File Image File Image
MANOA, OAHU (HawaiiNewsNow) -

A Hawaii business expert says the decision to scrap a luxury condominium in Kakaako because of slow sales could be a sign of things to come.

Eric Mais, a finance professor at the University of Hawaii at Manoa Shidler College of Business, said the economic slide in China and volatility on Wall Street might have the wealthy putting off purchases of vacation homes in Hawaii.

"When wealthy individuals decide to buy second, third, fourth, fifth homes, they look at their overall balance sheet, so to speak, and ask, 'How wealthy do I feel?’” Mais said.

Last week, developers of the Vida project cited lack of demand in pre-sales and rising construction costs for their decision to scrap the project.

Last year, people waited for hours in line to grab a unit in the building. But after that initial surge in sales, interest had waned.

The 39-story Vida tower was to have to 262 units and include a host of amenities, from a children's play area to a dog park to a fitness center. Prices for two-bedroom units started at $998,000, and three-bedroom units started at $1.6 million.

Mais said economic woes in China could spell trouble for Oahu's luxury real estate market.

"The substantial decline of stock markets in the U.S. and China are factoring in on this," Mais said.

But, he said, the pain for luxury home sales might not necessarily be felt in sectors of the economy, including tourism.

"Upper-middle class in China that may be coming to Hawaii as a tourist might not say 'no' because they're not thinking about buying a $2 million condo, they're just going to spend a few thousand on vacation," he said.

Mais also said that rising construction could be a bigger concern for developers.

In a place where affordable construction is already difficult to turn a profit on, developers may be even more hesitant in the face of rising prices of raw materials and labor.

"If the economics don't work out, I don't think you're going to see builders stepping forward to take the risk of buying affordable housing with really small margins," he said.

Copyright 2016 Hawaii News Now. All rights reserved.

Powered by Frankly