On October 19, 2016, we e-mailed our clients our prediction that Luxury Home Sales in Kahala would be improving due to the diminishing inventory of new Kakaako luxury condominiums. Then on December 7, 2016, the Honolulu Star Advertiser’s Business Section confirmed that “Oahu home, condo sales jump in November.”

The new condominium projects took many of the $3+million buyers out of the real estate market for Kahala. For example, at the end of 2016, 58 buyers between $3,072,000 and $12,800,000 completed their 2 year-long purchase of the Waiea Condominium. These were 58 buyers who may have bought homes in East Honolulu. Beginning in April, closings will occur for the Park Lane Condominium project in the Ala Moana Shopping Center, where another 100+ luxury buyers purchased in the $3+ million price range. Given the lower inventory of true luxury condominiums in Kakaako, sales did accelerate in the last quarter of 2016. Of the 30 sales over $3 million in East Honolulu during 2016, 13 occurred in the last quarter.

Although there are signs of improvement in the Kahala market, it is a good idea to see what is happening in the San Francisco Bay area and nationwide.

Bay Area Luxury Brokers View the Luxury Market with Mixed Signals
A January 11, 2017 blog written by Alain Pinel, one of the marquee names in the San Francisco Bay real estate market, predicts that 2017 will be much like 2016.

“More often than not, the high-end business sets the tone for the real estate industry. It is a barometer of sort. When it’s hot, it serves as a locomotive for the rest of the business.
. . .
The multi-million dollar property market that blesses many of the coastal regions, had a strange year. Mixed results. Prices, driven by the best of the best (top locations, brand-new or newer homes, fashionable style & design, all smart home features …) went through the roof, while, at the same time, unit sales kept on shrinking. Considering what was going on in the world during this tumultuous year, this was no surprise.

We are, today, in year 2 of what feels like a transition. It would not be smart to expect a substantially different picture than the one we saw last year, although we will benefit from a faster start (2016 had the worst-ever annual start). US sales, mostly flat, will be up 3% at best. Same lukewarm prognostic regarding prices (up to 4% increase?).”

National Statistics Predict a Sideways Market in Honolulu
The Institute for Luxury Home Marketing’s February 13, 2017 Luxury Housing Report uses a composite price index sampling 20,561 luxury homes to evaluate the market. With a sideways movement in the national luxury home prices, coupled with an increase in the number of days on the market, their conclusion is that nationally we are in a “Cool Buyer’s Market”. Specifically, the Institute’s prediction is that the prices are going to go sideways in Honolulu and down in San Francisco and Seattle.

The China Market – China has instituted a very strict new monetary policy that reduces the amount of money that can be brought out of the country. According to Maggie Huang (RB-22050) our Vice President of the Greater China Region, there should be little effect on the Honolulu Luxury Market. Basically, the Chinese who can afford luxury homes have already gotten their money out of China or have income outside of China.

The Japanese Market – There is some effect on Japanese Buyers due to the fluctuation in the yen versus the dollar according to Mami Takeda (RB-22153) our Vice President of Japan Sales. When the yen is in the 120+ range to the dollar, there is less incentive to buy. When it is in the 100-110 yen range, the incentive for Buyers is higher. Despite recent fluctuations in the yen, the expectation is that the Japanese will continue to comprise the vast majority of foreign buyers for various reasons, including the desire to own property that would be purchased in US dollars.

2017 Outlook – This year will probably result in more luxury home sales in Kahala than 2016. Although the national and West Coast markets seem to be slowing and turning into Buyers markets, it is likely that Honolulu and Kahala will remain neutral, due to the continuing strong demand from Foreign and West Coast buyers. In 2016, the leading foreign buyers of Oahu property were as follows:
Japanese 562 ~ Canadians 32 ~ China 29 ~ Hong Kong 21 ~ Singapore 11 ~ Korea 11
California and Washington were the top Mainland buyers for Honolulu.