Sales of apartment buildings in Hawaii top $100M so far this year

Nov 5, 2013, 6:45am HST
Duane Shimogawa  |  Reporter- Pacific Business News

Driven by low inventory, investor confidence and favorable interest rates, sales of apartment buildings in Hawaii posted strong results in the third quarter of this year with more than $34 million in sales, according to a new report.

The report by Apartment Advisors LLC said the total sales volume of multifamily properties for 2013 has now eclipsed the $100 million mark and is expected to continue to climb throughout the fourth quarter.

The median price of apartment buildings jumped to $1.85 million, a $400,000 increase from last quarter, with the average price-per-unit also increasing to an estimated $194,000 for a one-bedroom, one-bathroom apartment unit, the report said.

Small- to mid-sized apartment properties continue to dominate the market and account for more than 87 percent of apartment sales under $3 million, the report said.

The average number of days that properties have stayed on the market spiked to 124 days per transaction but this was due to investors buying properties that had been on the market for longer periods due to the lack of new inventory, the report said.

Jared Ikeda, owner of Apartment Advisors, said in the report that he’s been tracking apartment sales since the early 1990s and that prices per unit for multifamily properties are at the highest they’ve ever been in the past 20 years.

He pointed out that the current level of pricing won’t continue much longer. He noted that as rents for properties increase and interest rates for loans decrease, it creates a larger surplus or cash flow for investors, thus allowing them to pay higher prices.

“If you factor in the low inventory of apartments with no new supply being built, we have a perfect environment for an owner wanting to sell,” Ikeda said. “However, we have already seen signs of this trend changing.”

For example, although interest rates are still comparatively low, they have already risen more than 100-plus basis points since the beginning of last quarter and they will likely continue to rise moving forward, he said.

“Furthermore, apartment rents have also been slowly reaching a tipping point and won’t continue without significant upgrades to properties to justify the increase,” Ikeda said. “For apartment owners who are thinking about selling at the peak, the window of opportunity is closing and coming to an end.”