Hutapea

Editor’s note: Siska S. Hutapea is founder and president of Cornerstone Valuation Guam Inc. a real-estate valuation and advisory company she opened in May 2012.

Hutapea is a member of the board of the Guam Chamber of Commerce and most recently completed a term as a member of the board of the Guam Economic Development Authority. She is additionally a board member of the Pacific Islands University and was a founding board member of the Guam Women’s Chamber of Commerce, also serving as its president. She is also a past president of Soroptimist International of the Marianas.

Hutapea holds a 1994 bachelor’s in engineering from Trisakti University and a 1997 master’s in real estate from the University of New South Wales in Australia. She holds several professional memberships and designations. .

 

Q: The Guam real estate market lacks both residential properties for sale and for rent. How is this affecting those market sectors — particularly for those looking to invest in residential property?

 

A: In the past two to three years, there has been a lack of supply in single family residences for sale due to the limited additional supply while demand was steadily increasing. The recent low interest rate climate exacerbated this increase in demand. This has pushed the median prices up 12% in 2021, as compared to 2020. Investors must now be creative and think outside of the box when finding their deals. Older properties, even unattractive properties, are being acquired for renovation.

Lastly, the exorbitant price increases of construction materials are only making this worse. It is definitely a sellers’ market.

 

Q: Do you see the scarcity of residential properties changing in the short term, and if so, why?

 

A:  Unfortunately, not — for the reasons above. Further, we are expecting an increase in population as the military build-up will bring in new civilian and military populations.

 

Q: What is driving residential construction this year so far, which seems high, given the increased cost of construction? Do you see that trend continuing?

 

A:  As the median prices increase, the feasibility of new developments becomes increasingly positive. There were 68 new single-family residence permits issued in the first quarter of 2021 which are annualized at 272, closer to our average in the last three decades. The 272 annualized number is the same number of permits as it was in 2016, but the permit value was up to $81.2 million from $59.7 million, an aggregate of a 36% increase. The scarcity of labor and increase in construction material prices drove the permit value up.  However, the current increase in residential construction projects will not be enough to dampen the price increases.  As demand continues, and as long as interest rates are still low, the trend will continue.

 

Q: Industrial sales increased in 2020, compared to 2019. What sort of properties sold in what was after all a pandemic year and what is your forecast for this year?

 

A: Industrial sales were more affected by the military build-up — military contractors looking for staging yards, temporary workers housing, and warehouses to store materials. These needs were independent of the effects of the pandemic. Demand will still be high in this sector but there is an abundance of M1 zones in the Route 3 vicinity, which should dampen price increases of the land. We may see the return of a Quonset hut, or the modern version of it — prefabricated industrial buildings. These are needed to provide a quick new supply of warehouse space. These spaces should be designed for alternative uses after the buildup is finished.

 

Q: Commercial sales seem healthy, but the numbers are low. Are these major property sales we are seeing, and what is driving those?

 

A: There is a lot of pent-up demand for owner-occupant buildings. In contrast, tourism-related buildings are currently suffering from a loss in rent or occupancy. The high construction cost makes it attractive for owner-occupant buyers to look for existing facilities rather than building.

 

Q: In general, would you say there are real estate investment opportunities in Guam in the short term?

 

A: Always, but make sure to call us first to make the best possible, highly informed decisions.  Be cautiously optimistic.

 

Q: In the Northern Mariana Islands there is talk of changes to Article XII, which strictly governs land ownership in the NMI to individuals of NMI descent. Also, leasing of public lands has been taking a long time, even for well-established and desirable partners — in the hospitality industry. Do these factors dampen investment enthusiasm for the NMI? If there are opportunities, please comment. 

 

A: Yes, but the changes to Article XII have been in process for many years with no end in sight. The NMI did, though, extend the public land lease to a total of 40 years, which is more than Guam has currently at five years. As good stewards of public land, we should make good use of the public land and use the fund to provide affordable housing for the people of Guam. mbj