Construction outlook
robust for 2004
With 2003 shaping up to be the fourth consecutive year of growth for the construction industry, economists are predicting a robust 2004, particularly for Oahu.
In their construction outlook for the state, Paul Brewbaker, chief economist of the Bank of Hawaii, and Carl Bonham, associate professor of economics and executive director of the University of Hawaii Economic Research Organization, predict a surge of more than 17 percent statewide on construction spending during 2004.
While most of it will continue to be in the private sector, a rising number of government construction contracts will extend construction spending well beyond 2004.
In the previous four years through year-end 2003, construction jobs in Hawaii grew to 27,000 from 22,000.
But Bonham and Brewbaker predict that continued growth in the industry, combined with fewer young adults entering the building trades, will create pressure on employers who will be competing for fewer workers. They predict more than 5 percent growth in construction jobs during 2004 after nearly 8 percent growth in 2003.
Construction in the neighbor island residential real estate has accounted for much of the upswing in the industry since 1997 due to U.S. mainland investor demand. In the first half of 2003, that trend continued.
The value of residential building permits for the neighbor islands rose to more than twice the value of Oahu permits.
Brewbaker and Bonham predict the trend will continue during 2004. However, throughout the year, the nature of the construction cycle gradually will begin to change with a shift in emphasis back to Oahu, due in large part to the start-up of a number of military-related housing projects.
With neighbor island median home prices now topping $400,000 in some areas, the pace of growth may not be as brisk in those areas. But in urban Honolulu, which got off to a slower start in the real estate recovery cycle, housing prices have far more room for growth.
Barring difficult-to-predict world events like this year's SARS outbreak and other geopolitical events worldwide, Brewbaker and Bonham remain optimistic in their forecast.
But they said rising home prices and increasing affordability issues will mean that the housing market eventually runs out of gas.
