Amid already hot housing market, foreign investment in Hawaii properties soars

Hawaii has among the highest costs of living in the nation.
Hawaii has among the highest costs of living in the nation.(Hawaii News Now)
Published: Dec. 26, 2018 at 5:50 AM HST
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HONOLULU (HawaiiNewsNow) - Decades after the collapse of the Japanese investment bubble, foreign investment in Hawaii is making a big comeback.

A Hawaii News Now analysis of real estate records shows that foreign investors purchased about $1 billion in residential properties in both 2016 and 2017.

And for the first nine months of this year, they’ve acquired about $841 million worth of properties.

That’s up sharply from the $500 million to $600 million a year seen from 2008 to 2015.

Experts said the offshore boom is helping to fuel Hawaii’s economic growth, but critics warn it’s taking much-needed housing from working class buyers.

“It’s good news for the construction workers, architects and attorneys and so on. But it’s certainly adding to our local resident housing shortage," said Mike Sklarz, CEO of Collateral Analytics.

Critics also complain that foreign and mainland buyers are fueling the influx in monster homes and illegal vacation rentals here.

“It’s terrible for the residential neighborhoods. It’s turning our residential neighborhoods into tourist destinations," said Chuck Prentiss, a longtime Kailua resident.

Eric Gill, treasurer for Unite HERE Local 5, said the offshore boom is pricing out many of his hotel union’s membership. The illegal vacation rentals, he added, are taking away hotel jobs.

“What it does is create a well-heeled and wealthy group who are buying a piece of paradise and we have to compete with them," said Gill.

Sklarz said the increase in foreign buyers is a spillover of strong global economies and booming real estate markets in places like Silicon Valley.

But he say the current boom is more understated than the late 1980s and early 1990s bubble, when Japanese investors poured more than $18 billion into Hawaii economy.

Back then, Japanese investors purchased dozens of hotels, local businesses as well as large land parcels. Most purchases today are second homes.

Sklarz added that foreign investors make up just 5 percent of Hawaii’s real estate market while local buyers represent 70 to 75 percent. Mainland investors account for the rest.

“They’re buying these highly visible trophy properties and as a result ... there’s a tendency to generalize that they’re buying properties all over the island and dominating the market. But again, it is very isolated," he said.

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