Kauai Condo Crisis
Rising prices are fueling speculation
When the spirits ruled this island centuries ago, the people worshipped Hiaka, the god of the mountain. Today, the gaze of Kauai's residents is raised heavenward by the lofty prices for condominiums.
In an era in the Hawaiian Islands when few things are more precious than a single-family home on Maui, condos on Kauai are also remarkably dear. Once priced at about two-thirds the cost of a home, a Kauai condo in January 2004 cost about 94 percent of a single-family home, according to the Hawaii Information Service, which tracks realty prices on Kauai. The median condo price was $362,000, and headed upward.
"The Kauai market is just booming right now," says Ryan Harada, a vice president of Central Pacific Bank. He wrote a loan for Plantation at Princeville, 68 units, which broke ground in November, and sold its last unit four months in late February. "The other two projects, Villas of Kamalii and Villas on the Prince, sold just as fast. They actually resold some units before the units were finished," he says.
Speculating in resort condos or residential condos is the new realty game on Kauai. Last July, Dana Newquist and Andrea Eltinge of Santa Barbara bought a resort townhouse in a new condo at Villas of Kamalii, in Princeville. The couple paid $430,000 for the second home, but "our plans changed," explains Newquist, from Santa Barbara. Never occupied, the condo immediately went back on the market, where it has been listed for seven months at $570,000, a markup of $140,000.
"The condos have taken off, but so has everything else on this island," reports county tax assessor John Herring. "I see spec buying right now, I see people buying and selling in three months and turning $60,000. This is a seller's market, and the sellers will increase their list price and sit on their listing until they get their price.
"This trend started back in late '96 and early '97 - all types of property started to escalate … In my opinion, we are in the sixth year of an appreciating market. I don't believe the local people living here, including myself, can pay that price."
Between January 2003 and January 2004, the median condo price was up 57 percent, according to figures from the Hawaii Information Service. Specialists in the condo market, such as Realtor Phil Fudge, tell stories of 50 percent and 100 percent appreciation on some units in a year or two. Resort and time-share condos have become so lucrative that only one-third or one-fourth of about 4,000 condos on Kauai are now actually "residential," Fudge says.
"Some condos converted to vacation rentals and time-shares," explains Bill Spitz, an economic development specialist for Kauai County. "That takes them off the residential market, and puts further pressure on residential rentals and prices. Rents have really experienced an uptick in the last year."
Most of the condo projects now under construction are for resort rather than residential use. A busy hotel market on Kauai contributes to pressure for more resort units. Searchers for residential condos find few advertisements. High demand from Mainland buyers, a low inventory and blurring definitions make condo shopping on Kauai an adventure in a new condo-language.
Patty Serdu, who wades among the incoming tide of buyers as the branch manager at First Hawaii Title, takes a break from paperwork for a $960,000 condo to confirm the prices claimed by Realtors. "The minute they come on the market, they're sold," she says. "We get a lot of second homes. We had one sale that occurred on the first day the unit was listed. It's just nuts."
The glee in realty offices is tempered by concern at City Hall. "Condos have higher value to owners as a vacation rental or, I guess, as a timeshare," says Kauai County councilmember JoAnn Yukimura. "They are not in the affordable range for people who live and work on this island. … Many people who grew up here are having a hard time finding houses to live in. They are living with their parents, or they are moving off island. They are paying far more than 30 percent of their income for housing costs. I don't think public officials have foreseen the crisis - but it is here."
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