The State of Hawai‘i is grappling with its #1 industry. How does Hawaii create a framework for sustainable tourism? It is widely acknowledged that the islands are popular, and in some cases, they have become too popular. Over the last decade considerable growth in the number of flights and carriers into the state rendered impressive occupancy figures for the traditional lodging sector. As demand surged, the value driven consumer, equipped with a screen and keyboard, shopped for alternate accommodations. The net-effect was the securitization of what once was shelter and a shortage of permanent housing options across the state. In many cases, without verifying zoning ordinances, property owners opted to vacation rent their properties versus long term rent. The net effect is less permanent housing across the state.
Kauai County just released its Kauai Tourism Strategic Plan entitled Refocusing Tourism to Find Balance. Mayor Carvalho writes, “While this (tourism) has created a valuable economic sector for Kaua‘i, tourism’s success is straining the patience of residents and the island’s environment and infrastructure. It is our kuleana, our responsibility, to continue to create a viable economy for our people while maintain all that makes Kaua‘i unique and special.” The intent is to achieve balance for the well-being of the island, its residents and visitors. As long as Hawai‘i has a housing crisis, I anticipate that counties across the state will move to enforce zoning laws and restrict properties that are not vacation rental zoned from pursuing this use.
On Kaua‘i, we see the supply of rentals and homes declining. With interest rates rising and 30 year conforming mortgages at +4.500%, buyers exhibit some angst. A recent search reflects just 5 homes for sale on Kaua‘i with an asking price of $500,000 or less, 70 listings from $501,000 to $750,000 and 41 listings from $751,000 to $999,000. Reasonable alternatives to buying a home include building; yet with negative unemployment and a statewide boom in construction, architects and contractors can have long lead times. Meanwhile, long term rentals advertise at prices that reflect inflationary tendencies.
With no curbing of demand for housing in sight, I anticipate a strong conclusion to 2018. As of month-end September 2018, Kauai produced 987 closed transactions translating into sales volume of $883,000,000. Additionally, sales are up over 2017 by 7.52% with volume up by a staggering 33.25%.