Hawaii has long been a popular destination for tourists and second home buyers due to its tropical climate, natural beauty and relaxed lifestyle. In recent years, Hawaii’s housing market has seen tremendous growth, presenting attractive investment opportunities, especially in real estate. With median home prices over $900,000 statewide and limited housing supply, demand far outpaces inventory. Hawaii home values also appreciated substantially faster than most U.S. markets amid the pandemic. Investors stand to gain rental income and significant equity growth from Hawaiian real estate.
Hawaii home values greatly outpace mainland markets
According to the study cited in Document 3, typical Hawaiian home values are more than four times higher than midwestern markets like Ohio and Oklahoma. Phoenix saw median home equity rise 28.7% from 2020-2021 as one of the country’s hottest markets. Yet Hawaii still bested Phoenix to claim the highest home equity nationwide last year. With high barriers to new construction, limited inventory seems likely to persist in Hawaii for years ahead. Investors can capitalize on Hawaii’s extreme supply-demand imbalance through rental income and massive home value appreciation over time.
Hawaii presents unique risks requiring research
While Hawaii real estate offers tantalizing upside, prudent investors should carefully assess hazards specific to the islands. Hawaii faces threats from volcanic eruptions, tropical storms, typhoons and tsunamis. Coastal properties also risk sea level rise and erosion issues. Understanding an investment property’s elevation, building codes and prior natural disaster history is critical. Investigating local market conditions on each island is also key, since markets can vary significantly. For example, 2021 saw record price growth on Oahu but slowing appreciation on Maui.
Alternative Hawaiian investments provide diversification
Beyond direct real estate plays, Hawaiian investments allow mainlanders to diversify portfolios geographically. The islands’ tourism, agriculture and renewable energy sectors all offer prospects. Hawaiian Airlines stock rewards investors supporting the tourism rebound, with revenue already near 2019 levels. Contrastingly, utility Hawaiian Electric may struggle with disrupted oil supply chains. Startups leveraging Hawaii’s natural assets also merit examination, like renewable fuel producer Aemetis. While lacking stock investments’ liquidity, Hawaiian LLCs, crowdfunding and syndications open private growth opportunities.
With extreme home value growth, limited housing supply and unique attributes, Hawaii offers lucrative if higher risk real estate plays. Prudent investors can target specific islands and research local conditions, natural disaster threats and construction quality to mitigate hazards. Alternative Hawaiian investments in tourism, agriculture and energy also provide geographic diversification.