Sunday, May 1, 2005

"I see it over the breadth of our projects where we've had an increase of three or four-fold from the Asian buyer."
B.J. Kobayashi
President, Kobayashi Group

Isle homes gain
appeal for buyers
from Asia

But the homeseekers face the
same hurdles as locals -- little
selection and high prices

Asian real estate buyers are back in Hawaii's market looking for second homes, but this time they aren't ringing doorbells and making exorbitant offers. Far from the investment bubble of the late 1980s, these buyers are like any other in the state's frenetic housing market -- struggling with limited inventory and high prices.

Real estate agents, home builders and hotels offering a range of single-family homes, condominiums and time-shares are reporting that buyers from Japan, Korea and China are showing an increased interest in Hawaii property. The state's positive tourism outlook combined with the weak U.S. dollar has reignited the interest of Asian buyers, who are anxious to spend, said B.J. Kobayashi, president of developer Kobayashi Group LLC.

"We've had a very strong rebound. I see it over the breadth of our projects where we've had an increase of three or four-fold from the Asian buyer," Kobayashi said. "It's really picked up from about the third quarter of last year. They just weren't making those purchases back in 2001 or 2002."

The difference is that this time around, most Asian real estate buyers are buying for themselves instead of corporate entities and they know what they want and what they are willing to pay for it, he said.

"In the backlash of the late 1980s and bubble economy, they don't want to make that mistake twice," Kobayashi said.

Prudence has created a demand for new properties that require little upkeep, said Patricia Choi, president and principal of Choi International, which specializes in high-end properties.

"They are very cautious with their investments," Choi said, adding that many of her high-end Japanese customers are seeking second homes in gated communities or near golf courses.

But not unlike their local and mainland counterparts, many Japanese buyers are finding it difficult to find a property in a desirable location at the right price, said Chikako Tomita, broker in charge at Sachi Hawaii Pacific Century Properties, a real estate firm that caters to Asian buyers.

"Since last August, we've received a lot of inquiries from Japan for homes in the $400,000 to $500,000 range with a pool and an ocean view," Tomita said. "That's not realistic here -- they are kind of surprised that our market has become so strong."

While home prices are expected to continuing rising, increased valuations aren't likely to halt the growth of the foreign market, at least for the foreseeable future, said Paul Brewbaker, Bank of Hawaii chief economist.

"I've been saying to Realtors that on the day that the last local buyer can afford to buy a house then the value of the dollar will fall and it will become even cheaper for a foreigner to buy into the market," Brewbaker said.

"If the dollar keeps weakening, our home prices will look way too expensive to us, but not necessarily to the foreign buyer."

As the Japanese baby boomers, born between 1946 and 1964, begin to enter middle age and look to retirement, many are gaining wealth by becoming empty-nesters or through inheritance. Improvements in the Japan economy and the increased buying power of the yen have made this an opportune time to spend money they were carefully saving over the years.

"There's even more acute baby-boom buying in Japan, where the population has aged more," Brewbaker said.

Japanese baby boomers, which make up the largest portion of the Japan tourist market to Hawaii, "office ladies" and family travelers all play a role in Hawaii's second-home market, said Masako Nashimoto-Luttrell, president of communications and consulting company Nashimoto & Associates and author of the Japan-targeted "Hawaii Timeshare Book."

"The office ladies can purchase a time-share week for about the price of a car," Nashimoto-Luttrell said.

Their parents, the baby boomers, can make a deeper investment in the market by purchasing a condominium room in a hotel pool, a residential condo or a fee-simple home, she said.

"We see it as a continuing market trend," Kobayashi said, adding that as much as 20 percent of his new affluent high-rise condominium project, Hokua, has been purchased by Asian buyers.

Participation in Hawaii's real estate market by foreigners is nothing new, but in recent times the scope has changed, Brewbaker said.

"I'm not sure that they ever really went away," Brewbaker said. "In the 1990s, they were more prominent on the sell side than on the buy side. Now it looks like we've got another group of foreign investors coming through the entrance."

But a lack of inventory has in some cases made it difficult to deliver the homes, said Nolan Kido, a real estate agent with Oahu Realty.

"My most recent buyer from Japan asked me to find a three-bedroom condo, with two parking stalls and security near Ala Moana -- money no object," Kido said, but added that the order has been tough to fill because only four condos met the owner's criteria and several were in aging properties.

Most Japan buyers Kido works with want new condominium properties that are easy to maintain, he said. They might not care about cost, but they do care about value, he said.

"Second-home buyers are often willing to pay above market value for something that is easy to maintain, but it's kind of a catch-22 because there isn't much inventory," Kido said.

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