The Hawaii real estate market is an option that few rental property investors consider when looking for profitable markets to invest in. This is a glaring misstep, as Hawaii offers a wide range of real estate investment opportunities that are not always easy to find on the continental US. In this article, we will focus on one of the best locations in the Hawaii housing market– the Honolulu real estate market. Keep reading as we break down everything you need to know about this market and provide you with an in-depth Honolulu real estate market 2020 forecast.
An Overview of the Honolulu Real Estate Market in 2020
Before you consider Honolulu real estate investing, you must first have a basic idea of how the market will look in 2020. There are several factors that affect the profitability and value of Honolulu investment property and understanding all of them is essential for ensuring a good return on your investment. Here are some of the trends that are likely to shape the Honolulu real estate market in 2020.
1- The Honolulu real estate market will favor buyers
Like many markets across the country, the Honolulu Hawaii real estate market is undergoing a correction. In fact, Honolulu house prices have begun to drop after almost a decade of exponential increase. Consequently, the property buyer has the upper hand in terms of negotiations. A buyer’s market is inherently easier to navigate than a seller’s market since competition tends to be less stiff and investment property financing is more accessible.
Related: Is It a Buyer’s Market or Seller’s Market?: How to Tell the Difference
2- Honolulu’s job sector will remain one of the strongest in the country
The healthy job sector is probably the strongest anchor for the Honolulu real estate market. In fact, the area boasts one of the lowest unemployment rates in the country. The current figure is around 4%, which is significantly lower than the national average. Moreover, the rate is likely to drop even further as the job market is expected to grow by 1.3%. These trends bode well for the Honolulu HI real estate market since they help sustain the demand for investment properties.
3- The local economy will continue its upward trend
Contrarily to common misconception, the economy of Honolulu is fairly diverse and not merely reliant on tourism. As the state capitol, the city is home to several government entities that offer a significant number of administrative jobs. Moreover, the area benefits greatly from the economic impact of military bases. As for the growth of the economy itself, the GDP is expected to grow by 1.2% in 2020.
4- The tourism sector will maintain its steady growth rate
A healthy tourism sector goes hand-in-hand with a strong housing market. In fact, attracting an influx of visitors can go a long way in stimulating the local economy. Tourism achieves this through the creation of numerous businesses and job opportunities. This, in turn, will lead to increased demand for commercial and residential real estate. As for the Honolulu housing market, it will continue to benefit from the upward trend of the local tourism sector. For 2020, the growth rate of visitor arrivals will be around the 2.5% mark. Furthermore, visitor expenditures are expected to grow at a similar rate.
5- New construction will remain low
The low rate of new constructions is one of the main reasons why the Honolulu real estate market is one of the most expensive markets in the country. This trend is not going to change anytime soon as the area will always be restricted by geography. Unless the government allows expansion into some of the island’s natural reserves, Honolulu will remain a very dense and overcrowded housing market.
6- The city will take steps towards enforcing its short-term rental regulations
The Honolulu housing market has restrictive short-term rental regulations. Operating an Airbnb in the city comes with several bureaucratic hurdles and non-owner occupied units are outright illegal. Moreover, the County of Honolulu plans to ramp up its inspection rate in order to ensure adherence to the strict zoning laws. Taking all of this into account, investing in short-term rentals in Honolulu is not recommended.
Related: 5 Cities Where Airbnb Is Illegal in 2019
Should You Invest in Honolulu Real Estate in 2020?
In light of the market trends outlined in our Honolulu real estate market forecast, should you consider investing in Honolulu real estate this year? The answer will vary depending on your financial circumstances. As we mentioned above, real estate in Honolulu is quite expensive. Ideally, only real estate investors who have enough capital and cash equity should invest in such expensive real estate markets. If this applies to you, here’s what you stand to benefit from Honolulu real estate investments:
- The property tax rate is the lowest in the country
- The Honolulu real estate market is landlord-friendly
- The solid economic fundamentals ensure the long-term profitability of rental properties in Honolulu
Now that you have a basic idea of what the Honolulu real estate market offers, let’s go over some city-wide data and explore the neighborhoods that you should focus on when looking for Honolulu real estate for sale.
Related: How Can You Be Making Money in Real Estate in Expensive Cities?
Honolulu Real Estate Market Data
- Median Property Price: $922,488
- Price per Square Foot: $768
- Price-to-Rent Ratio: 31
- Traditional Rental Income: $2,504
- Cap Rate / Cash on Cash Return: 2.4%
Data for the Best Neighborhoods in Honolulu
Even though the median property price for the Honolulu real estate market is quite high, Mashvisor’s data shows that some of the most profitable neighborhoods actually offer more affordable investment properties for sale.
- Median Property Price: $689,966
- Price per Square Foot: $626
- Price-to-Rent Ratio: 23
- Traditional Rental Income: $2,535
- Cap Rate / Cash on Cash Return: 2.8%
- Median Property Price: $1,095,475
- Price per Square Foot: $545
- Price-to-Rent Ratio: 29
- Traditional Rental Income: $3,201
- Cap Rate / Cash on Cash Return: 2.2%
- Median Property Price: $781,817
- Price per Square Foot: $513
- Price-to-Rent Ratio: 28
- Traditional Rental Income: $2,311
- Cap Rate / Cash on Cash Return: 2.1%
Aliamanu-Salt Lake-Foster Village
- Median Property Price: $521,038
- Price per Square Foot: $542
- Price-to-Rent Ratio: 22
- Traditional Rental Income: $1,983
- Cap Rate / Cash on Cash Return: 2.0%
This is the most affordable neighborhood in Honolulu that promises a good return on investment. Start your search in this neighborhood now.
- Median Property Price: $681,098
- Price per Square Foot: $564
- Price-to-Rent Ratio: 28
- Traditional Rental Income: $2,000
- Cap Rate / Cash on Cash Return: 1.8%
Find high cap rate properties for sale in Honolulu that are within your budget (and far below the median property price!) here.
The Bottom Line
Despite the high prices, investing in the Honolulu real estate market can still yield a good return on investment for those who can afford it. After all, Honolulu meets all the requirements for a profitable rental market. To get in on the action right away, use the property finder and start looking for Honolulu houses for sale right now! To learn more about this product, click here.