real estate: 2007

Friday, December 21, 2007

Property Valuations: Speculation or Fundamental-Driven?

The process of valuation of any asset class (including real estate) is one of the most debatable concepts in finance. Sure, valuation is certainly a subjective assessment of different factors, but it must reflect a true and fair value of an asset and not a figure presented in the sole interest of the builder or seller.

Valuation of property impacts all players in the real estate market viz. developers, buyers and sellers, financiers and investors, lending agencies and project appraisers, regulators and tax collectors. In the developed markets, Real Estate Pricing and Valuation is organized on the basis of intellectual contribution to the appraiser decision making and valuation accuracy, application of non-traditional appraisal techniques such as regression and the minimum-variance grid method, appraising contaminated property, ad valorem tax assessment, and new perspectives on traditional appraisal methods.

Though Indian real estate is not as mature yet, developers are adapting to the process of valuation lately. In the process, valuations have gone up dramatically and they are unsustainable. Real estate valuation practices in India have resulted in overvalued properties in many sub sectors like apartments, bungalows and commercial centers and have fueled the appetite of speculators.

Many investors may find themselves trapped in illiquid sectors where either the value of their investment has eroded in real terms or where returns have remained low when taking into account the opportunity cost of holding such investments. Prices are already going down in many regions and there is still more room for correction. For the longer term, things looks pretty good and people who did record constructions last year are talking about constructing more in the next year. Currently, these targets are difficult to accomplish as execution would be a big problem and this will impact their stock prices.

Though lot of money is available as equity, debt comprises 60-70% and property developers are stretching themselves with too many projects at the same time. Larger companies are still well positioned financially, but valuation remains a critical issue. And as India lacks an organized supervisory body for property valuers, we wish to provide some helpful tips in our upcoming issues in order for small investors to make a wise investment decision when considering a valued property. More on Prevailing Valuation Methods and Practice!

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source: realestatetimes.in

Maui home, condo sales soft but prices up

The median price of a condominium in Maui County rose sharply last month to the highest level since June 2006. Single-family home prices also rose.

The median price of a condo jumped to $647,656 in November, higher than a single-family home, and a nearly 13 percent jump over the same month last year, when the median price was $575,000, according to data from the Realtors Association of Maui.

Sales last month were flat, with 78 units sold, compared to 77 units sold during November 2006.

The median price of a single-family home in Maui County was $624,000 last month, a 4 percent increase over November 2006, when the price was $600,000. The number of sales fell to 79, down from 113 last year.

Year-to-date figures show a different story, however. The median price of a single-family home for the first 11 months of the year was $625,500, a 10 percent drop from the same point last year, when the median price was $697,500.

Sales, on the other hand, are up 8 percent for the first 11 months of the year, with 1,025 homes sold compared to 949 homes sold during the same period in 2006.

Condo sales from January through November were down 5 percent from the same period in 2006, with 1,101 units sold, compared to 1,154 units sold last year.

The median price of a condo through the first 11 months of the year was $550,000, up 6 percent over last year, when the median price was $516,500.

source: bizjournals.com

Maui home prices up last month

Maui home sales remained steady in November, although the median price ticked up to $624,000, 4 percent higher than the same month a year ago and 6.7 percent higher than the $585,000 median in October.

Meanwhile, home prices and sales fell on both Kauai and the Big Island last month.

A total of 79 homes were sold in November, two more than in October but 34 less than a year ago.

Condo sales also remained steady, with only one more sold in November at a median of $647,656 compared to the same time least year, when the median was at $575,000.

But sales were 34 less than in October, when the median was at $552,000. The condo sales volume overall dropped to $76.6 million compared to $97.3 million in October, but was still higher than in November of last year.

Terry Tolman, chief staff executive at the Realtors Association of Maui, summed it up as: "A good time to buy ... and hold."

He said the inventory of condos, homes and land has grown somewhat, and that buyers still have plenty of options due to continued low interest rates. Sellers, however, who resist the realities of a softening market may be left behind. Realistic sellers can beat the competition with careful pricing, better property conditions, and flexible terms, he said.

As of Dec. 3, there were 1,046 homes, 1,325 condos and 492 lots on the market, all three categories offering more inventory than in August.

Year-to-date, the volume of sales for Maui County homes is up, but slightly down for condos and significantly down for land.

On Kauai, the number of home sales went down 27 percent to 24 in November, while condo sales fell a steep 66 percent to just 12.

The median price of a Kauai home was $515,150 last month, 14 percent lower than the same time a year ago. Condo prices, on the other hand, increased 40.4 percent to $772,000 last month compared to $550,000 a year ago.

Sales volume, year-to-date, was down for homes and vacant land, and most dramatically for condos on Kauai.

Sales also fell on the Big Island, 29 percent for homes (to 99), and 26 percent for condos (to 26) in November.

The median home price of a Big Island home was recorded at $363,600, down 3 percent from the same month a year ago. Condos, on the other hand, were recorded at $481,000 in November, up 30.5 percent from the same time a year ago.

Sales volume, year-to-date, was also down across-the-board for homes, condos and vacant lots on the Big Island.

source: starbulletin.com

Hawaii condo prices rising but sales decline

Median prices for condominiums sold on Kaua'i and Maui last month rose above or near previous records, driven by demand for million-dollar vacation property in the broader, more moderate housing market of the Neighbor Islands.

Kaua'i's $772,000 median condo price in November bettered the previous record of $700,000 set in May, and was 40 percent higher than the $550,000 median in the same month last year.

The surge was produced largely by a dearth of sales. Only 12 condos sold last month, compared with 35 a year earlier. Most of the decline occurred in regions with lower median condo prices such as Lihu'e and Koloa. By contrast, the number of sales was unchanged at eight in Hanalei's resort condo market where the median price was $1.77 million, up from $732,000 a year ago.

On Maui, the median price for existing condos sold last month was $647,656 — the second-highest on record after $649,000 in June 2006, and 13 percent higher than $575,000 in November 2006.

Terry Tolman, chief executive of the Realtors Association of Maui, said November's median condo price was influenced by million-dollar resort condos. Of 78 Maui condos sold last month, 23 — nearly a third — sold for more than $1 million. One Kapalua condo sold for $5.1 million.

"There seems to be a whole bunch of high-end condo sales," he said.

Such distributions of luxury residential property sales tend to boost overall median sale prices because the median is a point at which half the sales are for more and half for less.

Because Neighbor Island housing markets typically have relatively few sales each month, the median price is susceptible to significant swings that less likely reflect inherent property values as opposed to larger markets with more balanced distributions of sales such as O'ahu.

On the Big Island, the median condo resale price last month was $481,000, up 30 percent from $368,691 a year earlier. There were 26 sales, down 26 percent from 35 sales, in the same comparable period.

Big Island single-family homes in November sold for a median $363,600, down 3 percent from $375,000 a year earlier. There were 99 sales, a 29 percent decline from 140, in the same period.

Single-family homes on Kaua'i sold last month for a median $515,150, down 14 percent from $600,000 a year earlier. There were 24 sales, down 27 percent from 33, in the same period.

Maui single-family homes sold last month for a median $624,000, up 4 percent from $600,000 a year earlier. Sales were down 30 percent to 79 from 113 in the same period.

source: honoluluadvertiser.com

Kapolei projects will add homes, jobs

KAPOLEI — Three projects planned for west Kapolei over the next two decades will bring more than 6,500 new homes and 7,420 new jobs into O'ahu's Second City.

The projects are among the the final pieces of the Kapolei Master Plan, first discussed in the mid-1950s, to develop a second urban core on the island. They also have been part of the city's 'Ewa Development Plan.

Kapolei Development Co., a successor company to the Estate of James Campbell, will continue on as master planner and major landowner for the region.

The projects, with an estimated economic impact of $66 billion through 2020, were presented at the Makakilo/Kapolei/Honokai Hale Neighborhood Board meeting last night. About a dozen people testified in support of the projects.

RESIDENTS MIXED

Brent Buckley, a Kapolei resident for 12 years, said he's concerned about traffic there. He believes the projects will help the situation because it will bring jobs.

"Transportation is an issue but until we build jobs in the city of Kapolei, people have to get on the road to get to the jobs, which are in Honolulu," the University of Hawai'i-Manoa animal science professor said.

Lolita Takeda, a Kapolei resident for the past 14 years, said she also is impressed by the projects. "Not only are they bringing businesses, they're providing more opportunities in terms of jobs and housing as well as infrastructure and quality of life." Takeda added: "I cannot see Kapolei planned any better."

Several neighborhood board members made a motion for a vote to support the projects. Others, however, said they want to see more information and asked the developer to come back. The motion died. The developer is not required to gain the support of the board to advance its projects.

While the projects are already designated for development by the state Land Use Commission, they require zoning approvals from the City Council. Kapolei Property Development hopes to obtain zoning approvals by 2009, said David Rae, the company's senior vice president in charge of development.

URBAN CENTER

Combined, the projects will help fulfill the company's goal of a living and working center for West O'ahu. "This is a project with a public purpose — to create an urban center," Rae said.

Steve Kelly, director of development for Kapolei Property Development, said company and city planning officials decided it was best to proceed with the three projects simultaneously to more accurately gauge the effects and benefits.

The three projects are:

Makaiwa Hills, a 4,100-home residential development mauka of Farrington Highway from Honokai Hale and on the hill to the west of Makakilo, Kelly said.

Types of homes on the 1,781 acres will range from 1-acre lots near the top of the development to apartments and townhouses nearer to the freeway.

There also will be one elementary school and one middle school, as well as about 30 acres of commercial space. Sixty percent of the property will be left in open space.

Access into the neighborhood will be primarily through an extension and improvement of Old Farrington Highway just beyond the Palailai interchange near the Hawaiian Adventures Water Park; and a new "Road D" off Farrington Highway east of Kamokila Park. A third outlet would connect Makaiwa with Makakilo, Kelly said.

Kapolei West, consisting of 2,400 townhouse and apartment units on 516 acres between Ko Olina Resort and Downtown Kapolei. No single-family homes are envisioned, Kelly said. The project is considered, at least on its western side, an extension of Ko Olina's townhome development.

There will be another elementary school and an 18-hole golf course. The project also includes the 47-acre Kapolei Commons shopping complex. Projected to open in March 2009, the open-air mall developed by The MacNaughton Group and Kobayashi Group will contain 605,000 square feet of retail space, including one of Hawai'i's first two Target stores and a 31-screen movie theater complex.

There also will be a 12-acre transit center near Kapolei Commons along the extended Kapolei Parkway, which is expected to connect with Ko Olina.

Kapolei Harborside, a 345-acre light industrial and business park. The type of businesses there will be similar to those that have moved into nearby Kapolei Business Park, which is about two-thirds the size of Kapolei Harborside, Kelly said. Also nearby is Campbell Industrial Park, which contains more heavy industrial uses and is about twice the size of Kapolei Harborside.

About 3,800 permanent jobs are expected to be created in the new park. Rae said that this is likely the last major, untapped industrial park site on O'ahu. He said its proximity to Kalaeloa Harbor, directly to the west, will be a selling point for potential tenants.

Kapolei Harborside also will include a 12-acre natural park reserve.

Kelly said that the three projects also will include 800 acres of open space, 12 active parks, three major freeway interchanges and a 12-acre natural park reserve.

$2.2 BILLION PRICE TAG

While the major landowner in the region, Campbell and Kapolei Property Development traditionally have left the bulk of the actual building to state agencies and other development companies such as Castle & Cooke and Schuler Homes.

Rae said to expect similar partnerships with Makaiwa and Kapolei West while Kapolei Harborside will likely be divided up into smaller chunks and sold off.

Kapolei Property Development officials estimated the pricetag for the infrastructure, homes and other buildings at Makaiwa Hills at $2.2 billion, Kapolei West at $1.28 billion and Kapolei Harborside at $590 million.

The 6,500 homes in Makaiwa Hills and Kapolei West combined are just slightly more than the 6,300 homes either built or proposed for Makakilo.

The Villages of Kapolei, which is complete, consists of about 4,800 homes. East Kapolei, which is being developed by the state Department of Hawaiian Home Lands and other state agencies, is expected to add 9,300 homes.

D.R. Horton Schuler Division's Mehana project, just to the west and south of Downtown Kapolei, has just begun construction and is expected to add about 1,150 homes. A senior living community known as Leihano Village, between Villages of Kapolei and Downtown Kapolei, is adding about 400 units and is being developed by Brookfield Homes and Kisco Senior Living.

In preliminary planning stages is Schuler's Ho'opili development, which would bring up to 12,000 homes on 1,600 acres of former sugar cane land between Kapolei and 'Ewa.