As of year-end 2018, Kauai real estate sales across all categories remained in line with 2017 evidencing a marginal 1.77% improvement over the prior year. Kauai’s southern coastline, in the neighborhoods of Poipu Beach, Koloa and Omao reflects positive gains and are poised to show substantial gains in 2019.
The 2018 year end data shows a stable marketplace.
- Islandwide residential sales improved by 8%, while on the southshore, sales were exactly even with 2017 at 149 closings.
- Condominium sales across the island were up by nearly 7% at 482 with the southshore coming in at 159 closings up by just under 4%.
- Vacant land showed sales weakness with total sales down by -25% at 169 while sales of vacant land on the southshore came in at 91 up by 4%.
The 2019 game changer is the designation of an Opportunity Zone that blankets the western end of Poipu Beach from the roundabout to Spouting Horn Park and moving in a northerly direction across Kukui‘ula and Omao up to the highway. The map furnished on the US Treasury website is an excellent tool offering a street view of the area. US Treasury (locate layers on top right corner and unclick 2011-2015 LIC Census Tract leave Opportunity Zone Tract and State use zoom to locate state and location of Designated Opportunity Zones within states).
Over the course of 2018, the US Treasury and Internal Revenue Service worked to formalize regulations, and while some regulations still need clarity, buyers here in early 2019 are jumping in. Those who purposefully invest in opportunity zones can take their profits from unrelated investments and move them into an opportunity zone fund here on Kauai, avoiding paying taxes on gains until the end of 2026. We’ve worked with Buyers who are setting up their own funds and those who are joining other larger funds to maximize options. Our clients have listed properties within the oppzone and invested within areas that are included within Kauai’s opportunity zone, namely in Kukui‘ula, Koloa/Poipu and Omao.
According to the US Treasury website, “The Opportunity Zone incentive offers capital gains tax relief to investors for new investment in designated areas. Investment benefits include deferral of tax on prior gains as late as 2026 if the amount of the gain is invested in an Opportunity Fund. The benefits also include tax forgiveness on gains on that investment if the investor holds the investment for at least 10 years. Opportunity Zones retain their designation for 10 years, but under the proposed regulations, investors can hold onto their investments in Qualified Opportunity Funds through 2047 without losing tax benefits.”
Right priced vacant land purchases and underimproved properties are optimal considerations for Kauai opportunity zone purchases, and Kauai’s southshore’s oppzone offers a plethora of choice. When analyzing the investment potential of a property, projecting development costs via the delivery of accurate information is essential. Buyers regularly request that we facilitate with introductions to local architects and builders who are both in tune with pricing and accustomed to performing working on Kauai.
In addition to the US Treasury and your tax advisor, tools to consider when seeking more detail on Kauai Opportunity Zones include