The more land that is available for purchase, the cheaper it is. It’s simple economics, according to Michael Griggs of Clark Realty Corporation on the Big Island.
“The reason Big Isle real estate prices, in general, are less than Kauai is supply,” Griggs told The Garden Island. “Kauai has finite supply and good demand; our east side has lots of supply with limited demand.”
Kauai real estate is expensive because most of the land is preserved and only 5 percent of the land is commercially developed. Jimmy Johnson, a real estate broker at RE/MAX Kauai, said that 570 single family residences were sold in 2016 and the median sales price was $628,000.
“Each island has its own market. Like the market in Lihue is going to be different from the market in Princeville,” Johnson said. “All real estate is local and it always comes back to supply and demand. Some of the nuances here is that Kauai attracts people with a little bit more money, which actually drives the prices up.”
On the Big Island, property is significantly cheaper.
“For homes listed under a million in North Kona, the average sales price was $462,821, most likely a three-bedroom, two-bathroom home built in the ‘80s,” said Gretchen Osgood, broker and owner of Hawaiian Isle Real Estate. “But without that cap, the price goes up to $882,916 because we have so much luxury out at the Four Seasons.”
There were 2,091 residential listings sold on the Big Island as of November of this year, which is a 13.76 percent increase in sales from November of last year. The median sales price for those residential homes were $335,000, according to West Hawaii Association of Realtors.
Big Island’s vog is also a deterrent for potential buyers, Osgood added.
While vog can be an issue, it is not the main reason for cheap property, said Marrianne Bacon, Realtor at Hawaiian Dream Properties on the Big Island.
“It’s all opinion, but a lot of people buy their second homes here, and we do have a large local segment here for family homes,” Bacon said. “The vog doesn’t come into that, but for second home buying, I believe it does.”
Active lava zones are another factor affecting real estate prices on the Big Island.
“The whole east side is basically in lava zone one, so on average, that’ll take down the price here,” Bacon said. “That’s the reason why prices are so much lower here, because of the east side — because they are in the lava one or two zones and it’s hard to get insurance or mortgages for those homes.”
Of course, real estate is all about location.
“It depends on which side of the island you’re on,” said Osgood. “We’re not as expensive in Kona as you are in Kauai, but real estate is always about supply and demand. We have a lot of land and the land is cheaper than all of the other islands. However, some of that is changing.”
The per square foot entitlement program on the Big Island — how many roads have to be built and how many schools are needed, how much affordable housing has to be built — has become too large, said Osgood.
Development has also been truncated by a water aquifer issue, she explained.
Plus, the price of developing the land before construction can even start is costly.
“The developers need over $400 a square foot to be able to start building and make money. Everyone thinks that developers always make money, which is not true,” Osgood said.
“They have to put in $11,000 to $12,000 in the ground to put in sewer, water, roads and parking and everything else before you even get started on the building. And also buying the land! It’s actually getting really, really expensive to get started here.”