Vacation-home sellers in a struggling U.S. market look north of the border for their saving grace
Gillian Shaw
Sun
Canadians are being wooed to buy a slice of holiday heaven in Hawaii as fewer Americans are in the buying mood.
MAUI, Hawaii – Nine out of 10 visitors to an open house hosted recently by real estate agent Randy Antonio were Canadians.
That might be unremarkable except that this open house was in Maui, more than 4,000 kilometres from the closest city in Canada.
Antonio’s experience reflects a growing trend that is seeing vacation home sellers in the subprime-strapped United States skipping straight across the border seeking buyers from Canada.
“The Canadian market is very strong here right now, especially in the resort areas,” said Antonio of Maui Rainbow Homes. “We are getting a big contingency out of the Calgary area and the Vancouver area.
“A lot of people have been coming to the island for many years, and now they think it is the time to buy.”
There is no doubt the economy here has seen better days. Two airlines serving the Hawaiian Islands went belly up within days of each other recently — leaving passengers stranded and sleeping at the airports while they scrambled to find alternative flights.
That followed the closure of the Molokai Ranch, a resort and key employer on Molokai Island. And local economic conditions are being further exacerbated by the countrywide subprime credit debacle that is stirring fears of recession in the United States.
Faced with such constraints among their traditional customers, sellers are looking further afield to market their properties. Canadians are not disappointing them — arriving on the islands in increasing numbers and offering up a potential market that has developers advertising and opening sales offices in Vancouver and Western Canada.
“We have quite a few Canadians who have used us to purchase properties,” said John Papazian, owner of Haiku Properties. “For realtors, the mantra here all during Christmas when it was slow was, ‘Wait until January and the Canadians will come. They’re going to save us.'”
Vernette O’Neill is among the Canadians answering the siren call of the islands. The president and chief executive officer of Toronto-based Computer Security Products has in the past been renting homes for her stays on Maui, but has decided now is the time to buy.
“It is a really good time for Canadians to buy,” said O’Neill, who has opened a U.S. branch of her company in Hawaii. “I’ve met more Canadians here in the last two years than in the last 14 years.
“I think the market has just about bottomed out. It might go a little lower, but not much.”
West Vancouver‘s Tony Holland is in Maui now overseeing the finishing touches on renovations — including a custom swimming pool that overlooks a panoramic view of the island and the Pacific Ocean — to a home on two acres in Kula he bought for $1.27 million, a $425,000 discount from the initial asking price.
Kula is a district on the slopes of Haleakala crater, above the resort areas of Kihei and Wailea and home to extensive vacation holdings purchased by Oprah Winfrey.
“We went and priced out places in Kaanapali, thinking we wouldn’t mind being down by the waterfront. But we found out it would cost $1.3 million to $1.5 million to get a two-bedroom place, and maintenance fees are about $1,000 a month,” said Holland.
“And then, if you rent it out, you are under the control of the condo administration and have to pay them something like a 45-per-cent fee. So what you are actually doing is financing somebody else’s hotel.”
Instead, Holland‘s vacation home is in an agricultural area, where taxes are lower than the average Vancouver home. Zoning and rental restrictions mean he can’t rent it out to vacationers — a limitation apparently ignored by some neighbours in the area — but Holland said he didn’t count on rental income when he bought.
“We wanted to rent it out on a short-term basis, and we were probably going to put an ad on the Internet. But we no longer have that option. It is not a hardship for us, but it is for a lot of people.”
On Maui, vacation rentals are limited by zoning regulations, rules that weren’t strictly enforced until recent years in a change that has curtailed rentals outside of resort areas.
Holland said that while his taxes are $2,500 a year, a friend who owns a one-bedroom apartment in Wailea, an upscale resort area on the beach half an hour away, pays $7,000 a year in taxes because her condo is registered as a rental and is treated for tax purposes as a hotel.
A highway under design will cut the travel time from Kula to Wailea to about 15 minutes. But Kula’s two-acre residential stipulation on property size means there is not a glut of properties for sale compared to other high-condo-populated areas.
Gary Kai is vice-president of Towne Development of Hawaii, a company that is considering opening an office in Vancouver to court buyers.
“Your [B.C.] property values have gone up so tremendously and your economy is so strong, and the strength of the Canadian dollar has really helped,” said Kai, whose company is currently selling a development in Kihei across the street from Kamaole Beaches.
It’s an area where a lot of Canadians bought in the 1970s, and Kai said there is renewed interest now.
“Mostly what we have seen is the buyers take the equity out of their [Canadian] properties to buy here. They live here for six months and then lock up and go,” he said.
The Kihei condos Kai’s company is selling start at about $700,000 for a two-bedroom, 1,233-square-foot (115 square metres), two-level unit with an enclosed garage.
Prices vary depending on the area and rental restrictions on the property. Peter Slate, a broker with Haiku Properties, said while Hawaii isn’t suffering the high foreclosure rates of many other U.S. states, nonetheless buyers are not as plentiful as they once were.
“We don’t have massive foreclosures, but what we do have is massive inventory and that is translating into downward pressure on pricing,” he said. “If someone is prepared to dig through the listings with an agent and can clearly define his goals, it offers a huge opportunity.”
Slate said two-bedroom, one-bathroom condominiums can be found in north Kihei for between $250,000 and $275,000. Farther south, prices go up to the $400,000 to $500,000 range.
Beach-front homes range upward from $1.6 million in Maui, with prices considerably higher in the sought-after Wailea area where beach-front condos have sold as high as $10 million. In Kihei, a three-bedroom, three-bathroom home with a swimming pool is listed at $1.05 million. Across the street from the ocean, two houses on a single lot are looking a little run down and are listed at $950,000.
“Sellers are faced with this three-pronged spear: They are up against a tremendous amount of inventory; they are up against uncertainty in the market; there is a lot of pessimistic news going around; and there is a certain amount of doom and gloom that exists,” said Slate.
“There is anxiety. Houses are sitting on the market longer.”