Jack Tyrrell specializes in Kakaako, Honolulu, Hawaii luxury condo projects.

Morning Edition

Why and where Chinese are buying real estate in Hawaii

Jan 26, 2015, 7:00am HST

Kauai's Princeville Resort may see a boutique hotel as part of a $500 million redevelopment plan by developer Jeff Stone and his partner China-based Reignwood International.

Duane Shimogawa

Reporter- Pacific Business News

Hawaii is the 10th most popular state in the U.S. with Chinese investors, who rank Honolulu, Kailua, Kapolei, Lahaina and Kapalua as their top five destinations to buy real estate, according to a new report by Juwai.com, an international real estate website for Chinese buyers.

Andrew Taylor, co-CEO of Juwai.com, told PBN that Honolulu is far and away the top destination for potential buyers from China.

"Like many Mainlanders in the states, Honolulu is often the place in Hawaii they have heard the most about, [so] it's natural for them to start their search there," he said in an email to PBN. "Much Chinese interest in Hawaiian real estate is prompted by visits as tourists and a love of the local landscape and lifestyle. For example, the Ko Olina Resort [in West Oahu] and the town of Kailua-Kona [on the Big Island] are two tourist destinations that are also very popular with Chinese buyers."

He noted that the most popular location for high-net-worth buyers who are property hunting in Honolulu is Hawaii Loa Ridge.

But there are places in Hawaii that the Chinese are not that interested in as well.

"Since the lava flow made it into the news, interest in Pahoa real estate has dropped off substantially," Taylor said.

China's favorite country is the U.S., with California, Washington State and New York its top three choices.

Taylor said Chinese buyers look for waterfront and water views, luxury suburbs, areas close to good public or private schools and universities, places that are south-facing for natural light, newly built properties not needing substantial renovation, and real estate located near shopping, transportation and other amenities.

Taylor forecasts a 15 percent to 20 percent increase in Chinese buyer transactions in the coming 12 months.

"If China significantly liberalizes capital controls, the flow of money will increase even more," he said. "The Bank of England says China's ownership of overseas assets could increase from around 5 percent to 30 percent of world GDP by 2025, as capital exports are liberalized."

Taylor pointed out that the Bank of England is seeing these buyers extend their interest to new areas as they get more sophisticated and experienced in the local market. That means that in 12 to 24 months, Chinese buyers will likely be active in parts of Hawaii where until now they have expressed no interest.

In a survey by Juwai.com, Chinese buyers' top reasons for investing in Hawaii real estate include lifestyle, buying a place near a good educational institution, investment and immigration.

The average property price Chinese investors inquire about is $1.2 million, while the average total real estate budget buyers report in user surveys is about $3 million.

"Chinese real estate investors are finally starting to play a role in the world that is proportionate to the size of their economy," Taylor said. "As China further loosens capital controls in the next few years, the Bank of England expects the assets Chinese citizens and companies own overseas to increase by 600 percent."

Despite all of the growth in the past half decade, there will likely be even more in the coming years.

"The Chinese are investing at a rapid rate, but they haven't yet accumulated large quantities of oversees assets because they only recently started their global investment," Taylor said. "Although the Chinese are investing overseas at a rapid rate, because they only started in recent years they still don't own as many overseas properties as Americans do as a whole."

Juwai.com facilitated about $4.2 billion in Chinese real estate purchases in 2013.

Hawaii has seen some recent interest by Chinese real estate investors, including President Barack Obama's one-time Hawaii vacation home being sold to a Chinese businessman, 11 lots of a North Shore of Oahu residential subdivision being bought by a Chinese investor, and the 1,103 acres of Princeville Resort in Hanalei on Kauai's North Shore, which was acquired by a partnership between The Resort Group of Honolulu and China-based Reignwood International for $343 million.