By Christopher Murphy
As we pass the end of 2014 and enter 2015, a few facts, thoughts and reflections on Guam’s real estate market are in order.
First, a few facts…
The year 2014 was a year characterized by its stability and remained fairly constant when compared to the previous year.
The major improvement within the market was seen in the condominium sector, which increased approximately 35% in the total number of units sold (to 158) and nearly 38% in total volume of sales (to $30.1 million). The number of single-family sales decreased by 15% (to 224), as did the total volume of sales, which dropped 12% (to $58 million). The sale of multi-family, land and commercial properties all fell slightly in terms of number of properties sold and the total volume of transactions during 2014.
On the rental side of the market, 2014 represented little change from the previous year, with a total of 1,020 condominiums and 670 single-family homes rented respectively. Average rental rates ranged from $1,082 to $2,912.
The average price of property in all sectors increased slightly during the year; however, mortgage interest rates remained favorable, helping to keep property affordable.
The long-awaited military buildup showed glimmers of hope, with the military continuing to fuel the real estate market, both in terms of rental properties and in purchases.
A few thoughts…
Foreign investors still see U.S. real estate as an attractive investment opportunity in light of investment restrictions within their home countries, currency fluctuations and the perceived stability and benefits of owning property in the United States. Guam has seen its share of foreign investment through the years starting with the Japanese in the late 1980s, followed by the Koreans, and most recently, investors from Taiwan. Taiwan investment in Guam should continue into 2015.
Mortgage interest rates should increase slightly in 2015 but still remain favorable for those wanting to purchase property.
The military presence on Guam will continue to increase in 2015 and remain an important component of the real estate market.
Guam will continue to see the development of new housing projects in 2015, providing home ownership opportunities for both owners and investors alike.
A New Year’s resolution…
Based on 2014 results and a positive outlook for 2015, one of your New Year’s resolutions may include getting involved in Guam’s real estate market.
If you’re a first-time buyer, there will be opportunities to transition from the rental market or living at home to that of homeowner. Banks have first-time owner programs; there are government grant programs to assist with down payments and closing costs; interest rates will remain attractive; and there is a good inventory of potential properties.
If you are looking to invest in real estate, here are a few things to consider.
Investment property can provide steady, long-term income or short-term capital gains, but it takes work. To start, carefully assess your financial goals. There are several basic strategies to consider: long-term investment focused on positive cash flow; long-term investment focused on appreciation; short-term investment focused on holding, renovating and re-selling or “flipping” and short-term investment, speculating on the real estate cycle.
None of the above strategies is better than the other, but the success of your strategy will rely heavily on your understanding of the market, its players and how it impacts your specific strategy.
Once you determine your goals, the next area to consider is what type of property best supports your investment strategy. Single-family homes, condominiums, apartments, townhouses or even commercial property all have different issues to consider in terms of income and expense, rates of return, maintenance, marketability, types and availability of financing, to name a few.
Regardless of the type of property you determine appropriate for your investment strategy, you must understand your marketplace and target market for renters or buyers.
A prudent investor will consider both the location and the condition of an investment property. Obtaining a great price on a property in a poor location or in a less-than-desirable neighborhood might result in delays in finding a renter or buyer. Buying a fixer-upper might save you money initially but will require additional costs for renovation. You need to consider the overall cost when selecting a property. Great property in the wrong location will have a negative impact on the success of your investment.
As with all investments, you should buy at a good price, so once again, knowledge of the market in relationship to the real estate cycle is critical. Working with a knowledgeable realtor is advisable, unless you are a seasoned investor with a good understanding of the market.
Finally, all prudent investors in real estate will have a cash reserve to support unforeseen developments, costs or delays involved with your investment.
As we head into a new year, and you make your various resolutions, consider investing in real estate. It’s a financial investment in the future of you and your family.
— Christopher Murphy is the owner of and principal broker for The Real Estate Professionals, Guam, and is the owner and associate broker of The Real Estate Professionals LLC, Hawaii. He may be reached at firstname.lastname@example.org.