By Pacific Island Times News Staff
The pandemic may have lulled real estate activity last year, but the first three quarters of 2021 saw a dynamic resurgence of the industry, with a substantial increase in property sales, according to Cornerstone Valuation Guam's report released today.
"Q2 and Q3 2021 quarter-on-quarter sales increased by 88 and 71 percent respectively compared to the pandemic ridden 2020," said Siska Hutapea, president of Cornerstone. "Yes, the pandemic dampened the activity in 2020, but both quarters reflect sales volumes that are also higher than the same quarters in 2019."
The most notable transaction this year involved the sale of the Bank of Hawaii building on W. Soledad Avenue in Hagåtña, which was purchased by Citadel Pacific Ltd. for $6.75 million.
Citadel, the parent company of IT&E, IP&E and Fujita Properties, announced the purchase of the 62,000-sqft property in September. Citadel said it will continue to lease office space and has plans to further improve the building.
"Smaller commercial buildings are also in demand by owner-occupant buyers. Ready to build land with infrastructures are harder and harder to come by. ," Hutapea said.
The increase in property sales was attributed to anticipated population growth resulting from the relocation of the marines from Okinawa to Guam.
"What does TSLA stock have in common with Guam real estate? Potential," Hutapea said. " Although the Census 2020 stated that Guam's population decreased by 3.5 percent compared to 2010, Guam is on the brink of population growth for the next five to 10 years."
Approximately 5,000 marines and their families are scheduled to arrive on Guam by mid-2020s.
"Local market participants are definitely buying into this idea, with top sales in the first three quarters dominated by local buyers who are acting outside their comfort zone and playing to win," Hutapea said.
"New record prices are paid for various apartment buildings and buyers noted higher rent expectations as the motive to pay the higher prices, in addition to rising construction costs," she added.
Hutapea noted that the Guam Housing and Urban Renewal Authority has increased the rent twice in 2020, resulting in a "price increase in the lower-priced segment and dislocating non-subsidized tenants into oblivion."
Hutapea also noted a continued increase in the median price of residential units, which she said was fueled by low-interest rates, limited additional supply and "the old adage of real estate as a hedge against inflation."
Median price of residential units went up from $295,000 in 2020 to $345,000 in 2021.
"Leonard Kiefer, deputy chief economist at Freddie Mac reported that the U.S. is undersupplied by 1.5 million housing units and the lack of inventory trend is the same in Guam," Hutapea said.
She noted that buyers are competing for a limited number of properties. With most buyers having VA loans, with zero down and housing allowance, the price increase is inevitable, Hutapea said.
As for the expiration of the foreclosure moratorium, Hutapea said market participants are anticipating its impact on supply. The moratorium was part of a Covid-related temporary relief for borrowers.
"I interviewed local lenders who mostly noted that since the payment deferments were lifted, borrowers have been current and no near-term foreclosure waves are on the horizon. Equity also abounds," Hutapea said.