Since first getting my real estate license in 1978 people always ask me “how’s the real estate market?” More often than not my answer is “just great”. Which is proven when you look over Oahu’s real estate sales statistics. Once in a while, I’ll be asked a more specific question like “how’s the Kahala market?” and my truthful answer is slow. So what happened in 2016? If you look at the MLS stats there were approximately 4,000 sales of single family homes Island wide and approximately 5,000 condominiums sold. When you dig deeper and break down the numbers that’s where you’ll find the rest of the story (as Paul Harvey would say).
Island wide there were 3,112 homes that sold for under one million dollars, between $1M to $2M there were 345 sales. $2 to $3M, 103 sales and $3 Million and over there were 53 sales, island wide.
So what about Kahala? In the past 380 days since the beginning of 2016, out of the 53 sales across the island, there were only 7 sales in Kahala that sold for $4 million and up. So what happened to Kahala? Two things: #1 Gensiro Kawamoto and #2, what I’ve dubbed, Condo Mania.
Genshiro Kawamoto, dubbed “The Worst Neighbor on the Block” by Honolulu Magazine (http://www.honolulumagazine.com/Honolulu-Magazine/January-2014/The-Worst-Neighbor-on-the-Block-Genshiro-Kawamoto/) once owned “27 along Kahala Avenue—or 16 percent of all the parcels along the 1.8-mile street”. These properties were often neglected and many fell into disrepair causing a blight to the neighborhood for neighbors and visitors to witness on a daily basis for nearly a decade. Many homes suffered a serious lack of upkeep whereas vegetation spilled onto public spaces causing hazards for pedestrians. In 2014, something no one expected happened and Alexander and Baldwin bought out most of Kawamoto’s holdings, 31 properties, for $98 million. Those same properties had cost Kawamoto nearly $170 million during his acquisitions. The stigma caused by Kawamoto’s actions along this particular Avenue had a lasting impact even 3 years later as still, today, many people don’t realize Kawamoto is no longer present on Kahala Avenue.
The Condo Mania I mentioned is taking place in Honolulu. Kakaako and Park Lane Ala Moana have sold over one billion dollars in condominiums (yes, that’s billion with a B) in the past year and a half.
Buyers have decided to buy condominiums, some priced over $10 million dollars, instead of a single family homes. Historically statistics have shown that a $5 million single family home held for 10 years or longer will out perform a $5 million condo by at least 20%. So why would they buy a condo? These new condos are lock and leave it. Plus they’re brand new and they do not have to manage yard & pool maintenance. Many luxury buyers in Hawaii are non-resident owners. Although the maintenance fees in the new condos can be much higher than paying a pool man, gardener & property care specialist, the buyers prefer the concierge lifestyle.
So how do we bring back the Kahala market?
It may take a few more years to rid the neighborhood of the Kawamoto stigma, but it will happen. Kahala Avenue is still recognized around the world as the premier address to have in Hawaii – the Beverly Hills of Hawaii, if you will. As Rich Turbin, local attorney and Kahala homeowner, said in his Honolulu Magazine article about Kawamoto, “He’s done his damage, and it will probably take five or 10 years for all of his properties to get sold to responsible owners”. Time heals all wounds and Kahala is slowly rebounding as investors see the changes taking place and local Buyers remember just what a special place this neighborhood and Kahala Avenue, in particular, is.
There are only 50 direct oceanfront properties in Kahala, which means only 50 people in the world that will have the prestige of owning one of those properties. Alexander and Baldwin has started on their Kahala Avenue project, bringing new life through a small development on the beachfront side of Kahala Avenue. This six home development will cost A&B around $45 million but will serve as a beacon that the Kawamoto era is finally over. There are also 5 oceanfront homes currently under construction by individual homeowners, again, showing faith in the value and desirability of this historic location.
There will always be wealthy people in the world and if they want the best it is still and always will be Kahala. And while everyone might not be able to own an oceanfront home on Kahala Avenue, there are many Kahala properties within a short stroll to the ocean. As one of the top 1% of Brokers in Hawaii let me help you find just the right home here in the Beverly Hills of Hawaii, Kahala.