Canadians Surpass Japanese for Foreign Investment in Hawaii Real Estate

For 2010 and 2011, Canada has taken over for Japan as the #1 foreign country investing in residential real estate in Hawaii.

I had the opportunity to hear Dr. Michael Sklarz of Collateral Analytics speak today at the Hawaii Convention Center about foreign real estate investment. He had some interesting data that he was able to compile with the help of Title Guaranty.

For the state of Hawaii, Canadian investment in real estate has by far surpassed other foreign countries over the past few years. Over the past decade or so, the Japanese have been averaging 250-300 purchases/per year. Canadian investment is nearing 400 purchases/year over the last 2 years. Following a distant third behind Canada and Japan is Hong Kong.

Sklarz also had some good data on where foreigners were buying throughout Oahu, Maui, and the Big Island. Unfortunately, he didn’t have any statistics on Kauai.

On Oahu, the Japanese still have the title of largest foreign investment country. The top areas for foreign investment on Oahu are:

1. Waikiki
2. Makiki
3. Kapolei

On Maui, the Canadians are by far the largest foreign investment country. The top areas for foreign investment on Maui lately have been:

1. Kihei
2. Wailea
3. Kaanapali

On the Big Island, Canadians have also taken the top spot. The top areas for foreign investment on the Big Island have been:

1. Kohala
2. North Kona
3. Puna

While these neighborhoods have been hot lately, here’s a rough breakdown* of the neighborhoods with the highest foreign ownership percentages throughout the state:

1. 10% Wailea, Maui
2. 9.1% Kapalua, Maui
3. 6.5% Waikiki, Oahu
4. 5.8% Makaha, Oahu
5. 4% Puako, Big Island

* These percentages are rough estimates as the slides Sklarz used were bar graphs with only whole numbers shown.

It makes sense why the Japanese are being surpassed when you see some of the graphics that were displayed. The residential market in Japan is still down 60% from 20 years ago! Sklarz anticipates foreign investment to pick up from Hong Kong, Singapore, Australia, and Canada as their residential markets are near all time highs. He went on to compare what we’re seeing with the Canadians, and other foreign investment here, being analogous to the Japanese bubble we experienced here in Hawaii.

Here are 3 reasons driving foreign investment to Hawaii:

1. Depressed prices from the peak of the market
2. Buyers in the countries mentioned above have a ton of equity in their home and want to diversify
3. The exchange rate with the U.S. dollar is the best it’s been in a long time for foreign investment

The difference between now and then is the Japanese back then were willing to pay 25% more than domestic buyers for most properties. Although the Canadians are whipping out their checkbooks, they are not “overpaying” and it is predicted this trend we are seeing will be more sustainable and long lasting.

The Canadians also had a good run on Hawaii real estate in the early ’80s when oil was high. When the price of oil corrected, it took our market with it. Sklarz also didn’t seem to think that would be the case this go around. Although oil is up, Canada’s economy is much more diverse than it was back then.

Our Hawaii Life agents have been experiencing this foreign investment phenomena first hand this year. If you’re looking to invest in Hawaii Real Estate, we have Solid Representation with agents on Oahu, Maui, the Big Island and Kauai to help you out.