INCREASE IN ULTRA-LUXURY CONSTRUCTION IS DRAWING ELITE BUYERS TO THE ISLANDS IN DROVES
By Rochelle Mortensen
It’s a seller’s paradise in the Hawaiian luxury housing market these days.
Prices are up and an increase in ultra-luxury construction is attracting more elite buyers to the islands. While ultra-luxury housing markets across the country struggle with low inventory and, in some cases, falling prices, the energized Hawaiian luxury market is expected to continue its momentum in 2019.
LUXURY REAL ESTATE
What’s driving the Hawaii market when other U.S. markets are starting to flag? Experts point to two main factors: location and inventory constraints.
The popularity of a destination tends to shield the value of vacation homes in times of economic uncertainty, says Mark Herbert, co-founder of PowerPlay Destination Properties, a real estate company specializing in vacation homes. “Places like Hawaii, Cancun and Mallorca don’t go through seasonal ups and downs. There are low and high seasons, but people are always going,” Herbert recently told Mansion Global. “People buy a second home and eventually envision living there, so in that sense, it’s recession-proof.”
An intentionally restricted inventory also helps drive prices. While the number of sales in Hawaii overall fell in 2018, prices achieved were remarkable. John Harris, broker and owner of Re/Max Honolulu and incoming president of the Hawaii Association of Realtors, calls the higher price levels the new normal.
“We’ve always had constrained inventory here, all the way back to the World War II era,” Harris recently told Pacific Business News. “We really haven’t ever built enough or quickly enough to keep pace with even population growth, much less a little bit more to account for investment,” he says. “It always puts us in a bit of a bind – given the scarcity of land.”
Higher prices do put sellers at a bit of a disadvantage when it comes to marketing their homes, however. With rising prices, the number of people that can afford to buy shrinks.
“Sellers have to be prepared to approach the marketing of their properties a little differently than they have done in the past,” says Nate Schar, president of Luxury Real Estate for Heritage Auctions. “Many of the buyers in Hawaii are coming from Japan, Hong Kong, South Korea, mainland U.S. and Canada, and even from Europe. The traditional market fails to reach the market efficiently. Partnering with a global presence like Heritage helps – and the excitement generated by an auction can create a competitive market to get properties sold.”
Regenerative development in Honolulu will also help generate activity in the state. The hotbed of activity is centered between downtown and Waikiki at Ala Moana. The heart of the neighborhood is the Ala Moana Center, the world’s largest open-air shopping destination. It’s surrounded by some of the most luxurious hotels and residential high rises on the planet, including Howard Hughes, Park Lane, and the new Mandarin Oriental Honolulu currently under construction.
Promising to attract elite buyers from a global audience, the 37-story Mandarin Oriental Honolulu includes a hotel and 99 luxury residences. Sales begin in spring 2019, and the Mandarin Oriental will attract elite buyers familiar with the brand and the highest expectations of quality and service.
Ian MacLeod, director of sales at Mandarin Oriental Honolulu, notes the new development will be center stage to all of the action in Honolulu, with easy access to the convention center, shopping, entertainment and the beach.
“Location aside, the most compelling feature of the Mandarin Oriental residences will be the bespoke quality of the interiors,” MacLeod says. “The most affluent buyers are willing to pay the price usually fetched by the brand they know. With Mandarin Oriental, they are getting the very best of the best. This will raise the bar for quality of life in Hawaii and is attracting the world’s elite.”
Schar also expects the Mandarin Oriental development to generate a lot of excitement among new buyers coming to Hawaii, and for move-up buyers wanting to simplify life from the usual maintenance of a single-family home. “This type of highly exclusive residence, especially when surrounded by other high-end residences and world-class amenities, will attract global attention,” Schar says. “The appeal of the Mandarin Oriental brand premium alone will capture the attention of elite buyers. Even with an increase in available inventory, the luxury market in Hawaii will remain constrained. It’s taken years to develop this project with the city, and it has involved so many moving parts, like increased public transportation, redevelopment of businesses and infrastructure. The entire project will make the Honolulu market even more appealing.”
Indeed, units in nearby luxury buildings have demonstrated strong sales. In December, a four-bedroom, 4.5-bath penthouse at Park Lane Ala Moana sold for $23.5 million. It is expected that the Mandarin Oriental development will achieve a 30 percent to 80 percent premium over the Park Lane properties.
MacLeod believes the new Mandarin Oriental Honolulu Tower will be the most exclusive residence in the area and will set new price levels. “We will create a new level of high-end living in Hawaii. We are bringing in the best of the best to create the amenities and we fully expect it will be the best, most recognized tower and residential building in Hawaii.”
Development in Honolulu is also expected to bring both temporary and long-term employment to the city. In addition to the construction activity, the new infrastructure, buildings, services and shops will employ significant numbers in the community.
Because homes in Hawaii are often vacation homes rather than primary residences, it’s important to attract buyers while they’re most focused on the purchase of a home. Catching the fleeting attention of a buyer on vacation can be a frustrating way to sell a home. An auction will create competition and set a deadline for bidders to make a decision.
“If you’re considering selling in Hawaii in 2019, think about how you plan to attract the global elite buyers,” Schar says. “If you can spark their interest before they get here, and create a sense of urgency to buy before the opportunity is lost, you’ll get more interested, motivated buyers. An auction sets a deadline for a sale, buyers know they have to make a decision and put their best foot forward if they want to win.”
ROCHELLE MORTENSEN is manager of Heritage Auctions’ Luxury Real Estate (HA.com/LuxuryRealEstate). To learn more about luxury real estate auctions, contact Nate Schar at NateS@HA.com or call 214.409.1457.
This article appears in the Spring/Summer 2019 edition of The Intelligent Collector magazine. Click here to subscribe to the print edition.