A Sign of What's to Come? Vida gets Zapped!

Aloha Sandy & Norm, cyclically speaking we are heading into a retracting market, there are dozens of projects in pre-sales, and lending is tight. It was really only a matter of when and who would be zapped first! The musical chairs ditty has come to an end and the scrambling is just beginning. 

Aloha Anna B.,

We are the hub of Pacific Rim Real Estate, with domestic investors coming from the US West coast and foreign buyers coming from Canada, Australia, Japan and Korea primarily. The financial downturn did not affect our market as much because of the foreign investment and the conservative lending practices of Hawai'i's largest banks. This created a market ripe for development. With fortunes changing in Asia, we may be seeing less foreign investment along with the saturation of the local market resulting in projects being canceled.

Unfortunately, we are in a housing shortage and with construction costs being driven up by all the luxury developments and other projects, affordable housing becomes much less affordable. It is a bit of a catch 22, because it is these Luxury Developments that help subsidize the affordable housing projects.

The market has been softening and this has been expected for a few months now. It will be interesting to see if any of the Howard Hughes projects will be affected.

Aloha Kathy, there are a number of US cities undergoing urban core revivals spawned by luxury R.E. and commercial development. Because of Hawai'i's unique geo-location and proximity to Asia it would be interesting to see how each city is faring. 

Aloha RnA, You could say the money is moving to San Francisco and people are following the money!

We are affected more by the Yen then by the Yuan when it comes to foreign investment volatility. However, Japans reaction to a weakening Yuan could affect us, especially with a weak Yen.

It could also mean that Vida dropped the ball with it's international marketing.  

Aloha Michael, it's very frustrating because we have a huge demand for affordable and market priced properties that no developer can afford to build. Developers over build the Luxury market drive up construction cost, drive up home prices, and then they address affordable housing after it's no longer feasible to build affordably. The developers milk the market for profits until none can be made and leave the locals scratching their heads at how they can afford to live here.

Aloha Debb, I think if the developers shift away from building exclusively Luxury Condos and use a mix of affordable, market and luxury in a single complex they will avoid the expense of having to cancel their projects. Developers have over saturated the luxury market as they typically do in most development cycles. 

Aloha Michael, the thought process behind the current string of developments is, build the luxury condos, make the profit, and subsidize affordable housing. Unfortunately, there is not enough demand for all of the Luxury Development which is akin to flooding the gas tank, with the most expensive gasoline and having to get out a walk.  We have huge demand for market and affordable housing it's just nobody wants to build for that market. 

Aloha Patricia, being in the center of the pond, so to speak, we feel the ripples for different markets coming from different directions. Fortunately we are global market so when things quite down from one direction, there are usually ripples heading our way from the opposite direction. Hawai'i is probably the best marketed Island community in the world and we depend on that connectivity.

When it comes to development in the islands, the Luxury Market is the most profitable and people are willing to pay a premium for property in Hawai'i. Currently the State recognizes the demand for affordable housing and the lucrative attraction of the Luxury Market to developers and gives incentives to the developers for developing affordable housing projects alongside the Luxury developments. The problem is the cost of construction skyrockets as everyone and their fourth cousins thrice removed want a piece of the Luxury Market. Think 20 well trained dogs drooling over a piece of filet mignon. They all know what the objective is but carving up that filet is going to be very interesting.