With the real estate markets in Hawaii and the U.S. mainland already booming investors are looking to invest in other markets. Guam’s real estate market is especially appealing because experts believe its market is about to boom.
Christopher K. Felix president and principal broker for Century 21 Realty Management Co.; told the Journal that over the past four months he has represented about $4 million in residential real estate transactions.
He said that about four months ago he was contacted by Eric Watanabe principal broker and Realtor for Eric M. Watanabe Realty Inc. based in Hawaii. Watanabe specializes in investments and 1031 exchanges for his clients.
Felix said "It was his [Watanabe’s] feeling that Hawaii was peaking out in its real estate and investment market. He was advising his clients (he has a couple hundred clients who own properties in Hawaii that he is taking care of ) that he felt it was time for them to start marketing their property in Hawaii and looking elsewhere for investing doing a 1031 tax-free exchange and reinvesting the proceeds." Watanabe’s clients responded well to his suggestion.
He said that the California real estate market also peaked. "Investing at the top of the market is not a good investment strategy. Most of the United States Eric believed was in the same situation. I tend to agree with him."
"The latest statistic report and the numbers given out by W. Nicholas Captain president of The Captain Co. prove that the residential market has grown 50% in the last couple years. Condominiums have grown 200% to 300%. The average sales of condominiums and the number of sales have grown. That shows that our market is on a quick increase."
"Over the past few months Mr. Watanabe and myself have basically been locating properties "" mostly condominiums in the $100 000 to $200 000 range that are for sale and hopefully will rent out. The moment I locate that I send it to Eric and he puts the sale together. To date we’ve done about 40 about $4 [million] to $6 million and we have demand for about 50 more. We’ve been talking about how up to 200 units will be needed over the next year. Right now I’m looking for 50 more condominium units to get to Hawaii for the investors there that have sold their properties. In the next six to eight months I could sell another $20 million " Felix said.
W. Nicholas Captain president of The Captain Co. told the Journal "There’s been increased interest from investors in Hawaii the mainland and from throughout Asia."
Anthony R. Godwin principal broker for Today’s Realty has also seen an increased interest from investors in Hawaii and the U.S. mainland in Guam’s residential real estate market. "There has definitely been an increase from that market."
Godwin said "When you rent out condos you want to try and make sure the income that comes in can cover your costs. In our market that’s still possible. In the Hawaiian and U.S. mainland’s markets it depends on what you buy and where you buy."
There has always been an interest in Guam from investors that interest is now heightened he said. "The military is helping that as well because it obviously increases the demand on the market to provide more services housing etc."
According to Felix the problem with 1031 exchange is "You only have three months to locate a property and close it. We can’t sit and wait. We’ve got to find properties right away. The moment they sell the property they have a deadline in which to buy and close another property. We have pretty tight deadlines. Right now we’re scrambling like crazy. In one day alone we did 12 units. We represented almost $1.5 million in sales in one day "" just condominium units. This is just one small part of the market."
Investors from California also contacted Felix. "In the last two months we’ve negotiated and put into escrow over $12 million from one buyer in California "" three different properties including the Airport Apartments and the Polynesian Apartments that this buyer purchased doing 1031 tax free exchanges. I’ve been told by the buyer and by the buyer’s broker that there’s many more to come. There are other buyers in the same boat who have sold their property in Los Angeles and they need to reinvest. I heard that the market has also peaked in San Francisco.
Felix said Guam was presently uniquely positioned. "The world has gotten so small that investors in California are looking at Guam for the first time. I’ve been in real estate for 33 years here on Guam and I’ve never done as much business as I have in the last six months. In the entire 33 years I’ve been here I’ve done more business within the last six months with California and Hawaii investment. It’s a new thing. Our market has always been Asia-driven "" Japan Korea Taiwan Hong Kong. Those investors have come. We’ve never had U.S. investors."
He said investors believe Guam’s boom is just beginning. "We’ve had 14 years of declining prices and the last three or four years have shown an increase "" the economic data showed that the market has turned and is showing an increase so the raw data is correct.
The Asian market in general is picking up Japan is turning. Korea’s market is getting stronger; Taiwan is showing strength and Hong Kong is showing a lot of strength. When Asia stimulates investors start looking that way and so they are looking here."
He said another attraction for investors was the fact that Guam offered "An Asian flavor with a U.S. economy. We deal in the U.S. dollar. We have U.S. banks so investors can invest in Guam and still be investing in the United States but at the same time investing in part of Asia." Investors don’t have to worry about dealing in foreign currency or foreign real estate laws.
"By buying in Guam U.S. investors realized they can stay in the dollar and play in the dollar but still invest in the Asian economy. As Japan grows they’re going to buy Guam and that will stimulate Guam’s growth. The appreciation of real estate values has an Asian flavor to it. It is a unique thing that Guam offers that no other territory or state in the U.S. can offer. We’re the only U.S. territory across the International Dateline so we deal with Japan and Japan time " he said.
The recent coverage Guam received because of the relocation of 8 000 Marines was also a factor that attracted investors. "Guam has just been lime lighted in the national news because of the military. When you double the military population of an island and talk of $10 [billion] to $15 billion in federal funded infrastructure to an island as small as Guam "" that’s world news. If you estimate that 10% to 15% of those troops will be looking for off-base housing "" that gives us a thousand new "˜A-class’ tenants."
Within the last six months rental rates have risen slightly "" about 10% "" but not as much as the values have. "Rental rates have remained fairly stable "" only going up 8% to 10% if at all while values have gone up 20% to 30%. What that tells you is that there is speculation going on. People are banking on the rates going up later and values going up tomorrow. People are buying today."
Captain said that another reason for the interest was the market cycle play associated with Guam real estate. "If you look at what happened over the past 10 years prices on Guam have been beaten up pretty hard. That creates an opportunity for investors to sell in markets that are near the top of the cycle and bring their money into a market that is near the bottom of the cycle and take advantage of the future increases in value that are likely to take place here on Guam."
Felix said that six months ago Multiple Listings Service "" a list of available properties that all the major brokers share with each other "" had 200 condominiums for sale and this month that number dwindled to 68. "I’ve got less than a third of what I had six months ago."
"I think that we’re going to have continued increases in interest among foreign investors and developers. We’re going to go into a period of massive construction activity and dramatic growth in various sectors of the economy. In order to fill the needs for that growth we’re going to see increased interest increased investment and an increased presence from foreign investors " Captain said.
For anyone looking to invest in the real estate market Felix suggests looking at inexpensive condominiums. "Buy cheap to mid-level condominiums in decent areas. If I were a small investor I’d be looking for cheap condominiums. If I were a middle range investor I’d be looking at condominiums priced at $100 000 to $150 000. If I had land I’d be talking to brokers or developers about joint venturing not selling your land. Convert your land into improved property by working with a developer. Go to a real estate broker and tell them you have land that can be developed into housing and you are interested in a joint venture. The broker will find a developer that will build for you and it will cost you nothing. You don’t put any money in except your land. They value the land and at the end you get that in properties." MBJ