Oahu population growth outpacing housing supply (Honolulu: high school, college, utilities)
OahuIncludes Honolulu
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I'm curious - could you be more specific why high-rise condo ownership in Oahu is 'the worst possible investment'? Is it because the constant increases in maintenance fees/HOA? Lack of appreciation?
I'm considering buying a high-rise condo around Kaka'ako/Ala Moana/west Waikiki as a primary residence when I move to Hawaii in the near future, and would like to know what to expect.
Thanks!
JT
Too many reasons to list so I'll try to avoid the more popular ones. Condos are inherently flawed for many reasons. This is NOT specific to Hawaii condos, but to ALL high-rise condos built globally.
Condo owners have an inherent conflict of interest with a healthy well-maintained building. Condo owners want to keep fees as low as legally possible. Low fees are great for resale but what does that mean for the future of the building owners? It almost always means special assessments galore.... they are simply kicking the can down the road. There is a direct correlation to maintenance fees and condo valuations. To put this into perspective, you can own a 2,500 SF penthouse in a 40-story tower with unbelievable views and finishes in an unnamed building in Kakaako for around $1M. But that's because the maintenance fee is $2,500/mo. If the fee was $1,000/mo the condo would be worth over $400K more or 40%. HOA dues are the single greatest impact on the resale value of a condo. While the majority of condo owners want fees low to protect the RESALE value of their investment, low fees almost always means poor maintenance and extending the replacement of equipment well beyond its intended life cycle. Also, condo owners are reluctant to spend large sums of money on repairs/maintenance that does not translate into a more attractive building or improved amenities. They will wait until 100 units are flooded before they replace all the piping in their building at $40K per unit special assessment. Flooding in older buildings is getting so bad that most HOAs are forcing condo owners to insure their own units so that the HOA doesn't get walloped with a huge deductible (which generally runs in the tens of thousands) and increased premiums every time someones' water supply valve busts.
High rise condos are not sustainable. They are designed like hotboxes. Older buildings were designed with glass/windows that did not run flush with the exterior envelope of the building and they have exterior common hallways/entries on one side and living units on the other. There would be windows on one side of the condo unit and windows on the other. Wind could pass through the units providing for a very comfortable living environment without the need for AC. Modern buildings have common hallways in the center and units on both sides and huge glass wall systems... to capitalize on those great views (more on that later). But wind cannot pass through the unit. Windows can be wide open and the wind will simply hit the open window as if it were closed because interior pressure will not allow the wind to penetrate deeply into the unit. They are 100% dependent on mechanical ventilation to be comfortable for occupancy.
High rise condos cannot collect enough rainwater to supply all the residents living in such a tiny footprint. Water is dirt cheap now but that will not be the case in 10-20 years. Homes can capture their own water and filter it very inexpensively today and it will be even more inexpensive to do so in the future. At some point over the next 20 years, it will be cheaper to collect your own rainwater and use that for all the needs of the occupants of a low-rise, mid rise or SFH. High-rises will not be so fortunate. Desalinization technology is getting cheaper but it still requires a tremendous amount of energy today and in the future (and energy is not getting any cheaper). This will add to the cost of city-provided water dramatically once our water table dries up and alternatives for potable water become the norm.
There is not enough surface area on a high-rise condo to generate enough electricity (via photovoltaics) to even cover the common areas. Some people think you can clad the sides of buildings with solar panels but those that allow light to come through are extremely inefficient and the angle of the sun is such that power production will be very, very low. Shading from adjacent high-rises will be a major issue. Also, the expense to install PV modules on a side of a curtain-glass walled high rise structure is astronomical and will completely ruin or at least partially obstruct all the views out of all that glass. Over the next 20 years most SFH and low/mid rise buildings will install PV. Condo owners in high-rise buildings will be paying HECO's exorbitant rates because HECO still needs to maintain and provide distribution infrastructure to the hundreds of thousands that have PV but purchase very little power. The kilowatt-hour rate will be high and the units will be very expensive to keep comfortable with mechanical ventilation (AC). Expect to pay $500/mo just to cool a condo so it is comfortable enough for occupancy in the next 10-15 years. And to add insult to injury, people in SFH and low rise buildings can charge their electric vehicles with their on-site PV production. Condo owners will need to purchase even more HECO-produced kilowatt hours to charge their vehicles. The prospects are depressing to say the least.
Views (which often sell condos) are a scam. Strangely, people will pay 6-figures for a view that will inevitably (with the exception of maybe a handful of ultra-expensive condos on Oahu that line the coast) be partially or entirely blocked by future development of high-rises. Zoning changes can also be the precursor to blocked views of those fronting land that is set aside for preservation. 10 years ago, nobody thought a building would ever exceed the 450' height limit... or allow for development of buildings so close to each other. Times change and they will more than likely reduce the value of these units' resale values.
Special assessments will be larger than anyone could ever imagine. Forget about the inevitable demolishing of the condo you own in the coming decades. How much does it cost to replace windows in a SFH? Or in a low-rise with punch-window systems? It's only a fraction of the cost to replace a curtain wall or window wall system in a high rise. Condo owners (especially older buildings) will inevitably be hit with massive 5 and 6-figure special assessments in the coming years PER UNIT. Yacht Harbor Towers, 1350 Ala Moana and Kahala Towers are examples of buildings that incurred high 5-figure and 6-figure special assessments on replacement of windows, plumbing and spall repair. Spall repair alone can run in the multi-millions on a high rise and there is no value to the owner. No additional amenities, no new shiny floors. It's just repairing expanding/ballooning steel rebar inside of concrete. Rebar that will continue to expand and crack even more (original and patched) concrete over time. Those multi-million spall repairs are extremely expensive bandaids. 15 years later another several million needs to be invested AGAIN. The material expense for spall repair might only be in the tens of thousands but the bill in the millions. How is that? Because these people are making repairs 200, 300 and 400 ft dangling in the air. Accessibility is extremely difficult, work environment highly-dangerous and liability sky-high and selection of contractors that can actually do the work per the HOAs insurance/licensing requirements extremely limited... making the cost of repair and replacement easily 5-10X what it would cost in a low-rise or SFH. Oddly, you never see a headline in the Star Advertiser "Yacht Harbor Tower owners sacked with $100,000 special assessments". That's because nobody wants to talk about it. If everyone knew they would have to pay a $100,000 surprise repair bill within the next 10 years who would buy condos? The entire market would collapse. Special interests keep the public out of the loop. That is how the machine works. Most states require special inspections once a building hits 50 years old and subsequent inspections every 10 years thereafter. That is not the case in Hawaii YET. These inspections are expensive and require a thorough assessment of structural components to ascertain hurricane and earthquake resistance (yes we are in an earthquake zone) and anything else not included in the replacement schedule in the buildings' reserve study. Many buildings are now reaching that age. Once new x-ray equipment (which will be available over the next 10 years) that can determine the remaining structural strength of embedded steel rebar used in buildings, that's when things will get ugly. And I believe it will get real ugly.
The exorbitant maintenance fee only covers a fraction of the true expense of maintaining a high rise building. I know a lot of owners of condos gloat about how they don't have to worry about costs associated with single family home repair because it's covered in the monthly HOA dues but it's clear that reserve studies (which are done to determine the replacement cost and life cycle of all the building's components) do not include everything. Also, they say that a house needs to be rebuilt eventually even with proper maintenance because well... it's a house. But a condo with proper maintenance is supposed to last FOREVER? Obviously it will last longer because of the type of construction but it would be silly to expect the structure to be standing there for several hundred years even with the best maintenance money can buy, especially in such a corrosive (salt) environment. I sit on two condo boards both of which are roughly 40 years old, and the reserve studies for both buildings do not show any reserves for future spall repair, replacement of windows systems (including the glass, aluminum mullions and rubber/silicone sealant system), hand railing, structural and non-structural concrete work (including columns, girders, lanai overhangs, architectural overhangs, eave overhangs, scupper systems, walkways and driveways), structural steel work, water supply piping, storm drainage piping, sewer piping, electrical wiring, entry/exit doors, fire stair exit/entry doors... the list goes on and on. They include virtually all replaceable items that you don't really think ever need replacing like 2" thick marble cladding on certain architectural walls (which still look perfect 40 years later) but nothing to replace metal pipes that inevitably will fall apart over time. It's appalling.
Then you have to ask yourself what is the life cycle or "useful life" of a mid or high rise building? I see building implosions of all types on the internet/news all the time. I've seen dozens of large/tall concrete buildings being demolished here on Oahu too... some of which are only about 50 years old. I understand that many of these buildings are torn down because they are technologically obsolete, don't meet new code/safety requirements or the building that sits on the land isn't serving the "best use" of the land. They also generally have only one or a few owners or are owned by companies/corporations. But in a condo where there are dozens or hundreds of owners, what happens? Eventually the ENTIRE building has to be torn down, right? Eventually the long term maintenance costs will exceed the cost to finance and erect a new modern structure that serves the needs and requirements of a modern society. There is the argument that some buildings last hundreds of years - just look at many parts of Europe. That's true... but these are usually better-constructed, much smaller/shorter buildings that have cultural or historical significance... and a ton of money is usually injected into preserving these unique buildings through private, municipal, state and federal entities via taxpayers, public/private donations, trusts or otherwise. If the Empire State Building was condo owned, the maintenance fee would be about $2.50/SF or about $2,500/mo for a 1,000 SF two bed unit. Owners of regular buildings (like the type that 98% of people reside in) would never have access to that kind of free-flowing outside money to constantly rehabilitate to be safe and at least moderately technologically viable. In a nutshell, it would be impossible to preserve an acceptable (at that time in the future) standard of living and safety for residents with reasonable and controlled costs in a multi-century old high rise structure.
The economic life of most high rise steel or steel-reinforced concrete buildings is 80-100 years (according to many white papers and studies performed by countless engineers). Wouldn't that suggest that your "investment" would mostly vaporize at some point? Like literally just go poof? And I'm talking almost your ENTIRE investment going poof. When you buy a single family house (the house in this example is a newer home in Honolulu) is usually worth about a third of what you pay... and the land about two-thirds. So a new 1,400 SF $1M house would be valued at about $330K for the structure and $660K for the land. And you can always rebuild a brand new house preserving most of what you originally invested in (the land). Now this is an average for small homes in town on small lots (~5,000 sf)... I'm sure that differs in other parts of Oahu and definitely in other parts of the nation, but the land value to house structure value ratio is definitely much more favorable than a condo; I think that would apply almost everywhere except maybe extremely densely populated and expensive areas like Manhattan and Hong Kong, but even then, I think the land value to building value ratio would still be well under even 20%. Here in Hawaii an average 1,400 sf condo in the urban core goes for about $1M. The same sized house (albeit not in the best condition) in town goes for about the same but you own about 5,000 SF of land. In the condo you would own about 300 SF of land or about 6% of the SFH land. Granted the land under the condo averages about $250 SF (which is about double of what the land under a SFH would go for) so of your $1M investment, only 7.5% of that ($75k) is in land. The rest is arguably in a depreciating asset, which according to my unscientific guess, will eventually be worthless. Maintenance fees mostly prevent that depreciation by injecting money into constant upgrades and repairs. But at what point is the building obsolete whether structurally, technologically or safety-wise? So wouldn't this make investing in older condos (and maybe in condos in general) a poor investment decision for those that want to pass on their properties to their children and future generations?
At the end of the day, I always tell people to either buy SFHs or units in low/mid rise buildings, ten stories max. Anything higher than that is a horrible investment and will be a massive liability in the future. But heck what do I know. Engineers designed and built this country. And they are now advising that what was built will one day need to be demolished. You may want to take their advice.
Would you please list just one dozen of these residential buildings?
Ugh... more reading comprehension skill fails.
Then you have to ask yourself what is the life cycle or "useful life" of a mid or high rise building? I see building implosions of all types on the internet/news all the time. I've seen dozens of large/tall concrete buildings (NOT RESIDENTIAL) being demolished here on Oahu too... some of which are only about 50 years old. I understand that many of these buildings are torn down because they are technologically obsolete, don't meet new code/safety requirements or the building that sits on the land isn't serving the "best use" of the land. They also generally have only one or a few owners or are owned by companies/corporations. But in a condo where there are dozens or hundreds of owners, what happens? Eventually the ENTIRE building has to be torn down, right?
You see how I asked a question at the end? That implies that there is a big question mark as to what happens to a residential condo when it has to be torn down because it hasn't happened in Hawaii YET. The condo concept is historically very new... starting in the late 1960's. So most RESIDENTIAL condos are not ready for demolishing yet but they will be eventually.
Then you have to ask yourself what is the life cycle or "useful life" of a mid or high rise building? I see building implosions of all types on the internet/news all the time. I've seen dozens of large/tall concrete buildings (NOT RESIDENTIAL) being demolished here on Oahu too... some of which are only about 50 years old. I understand that many of these buildings are torn down because they are technologically obsolete, don't meet new code/safety requirements or the building that sits on the land isn't serving the "best use" of the land. They also generally have only one or a few owners or are owned by companies/corporations. But in a condo where there are dozens or hundreds of owners, what happens? Eventually the ENTIRE building has to be torn down, right?
You see how I asked a question at the end? That implies that there is a big question mark as to what happens to a residential condo when it has to be torn down because it hasn't happened in Hawaii YET. The condo concept is historically very new... starting in the late 1960's. So most RESIDENTIAL condos are not ready for demolishing yet but they will be eventually.
1. The discussion was about residential condos on OAHU. You constantly seem to take a small kernel of fact and extrapolate that into some chicken little rant!
2. Large residential building CAN be owned by a few owners or are owned by companies/corporations.
Please provide an example on Oahu that has been demolished.
3. You also seem to have trouble with "history". What are you, 12 years old? While it is true that all mainlanders walked 6 miles to school through the snow, uphill both ways you are going to have a hard time convincing anyone that condos were not invented until AFTER the break up of the Beatles.
Still waiting for that 1978 one bedroom $600 rental comp.
1. The discussion was about residential condos on OAHU. You constantly seem to take a small kernel of fact and extrapolate that into some chicken little rant!
2. Large residential building CAN be owned by a few owners or are owned by companies/corporations.
Please provide an example on Oahu that has been demolished.
3. You also seem to have trouble with "history". What are you, 12 years old? While it is true that all mainlanders walked 6 miles to school through the snow, uphill both ways you are going to have a hard time convincing anyone that condos were not invented until AFTER the break up of the Beatles.
Still waiting for that 1978 one bedroom $600 rental comp.
Someone asked me why I thought condos were a bad investment and I took the time to respond. I'm sorry that the information insulted you.
I'm not going to research individual building demolitions to please your incessant need to prove me wrong. How about you refute all the points I made in my "chicken little rant"? Can you prove that there WEREN'T dozens of buildings that were demolished? Fact is there are HUNDREDS of concrete buildings that have been demolished on Oahu. What do you think was on the land before all these new buildings came up in town? Sugar cane? LOL.
I'm not going to research individual building demolitions to please your incessant need to prove me wrong. How about you refute all the points I made in my "chicken little rant"? Can you prove that there WEREN'T dozens of buildings that were demolished? Fact is there are HUNDREDS of concrete buildings that have been demolished on Oahu. .
You are the one that keeps stating FACTS that YOU cannot support. You keep proving yourself wrong. Can you just name ten out of the hundreds that were high rise residential? In Honolulu.
1. Still waiting for that 1978 one bedroom $600 rent comp.
2. Waiting for those high rise residential demolition comps.
Too many reasons to list so I'll try to avoid the more popular ones. Condos are inherently flawed for many reasons. This is NOT specific to Hawaii condos, but to ALL high-rise condos built globally.
Condo owners have an inherent conflict of interest with a healthy well-maintained building. Condo owners want to keep fees as low as legally possible. Low fees are great for resale but what does that mean for the future of the building owners? It almost always means special assessments galore.... they are simply kicking the can down the road. There is a direct correlation to maintenance fees and condo valuations. To put this into perspective, you can own a 2,500 SF penthouse in a 40-story tower with unbelievable views and finishes in an unnamed building in Kakaako for around $1M. But that's because the maintenance fee is $2,500/mo. If the fee was $1,000/mo the condo would be worth over $400K more or 40%. HOA dues are the single greatest impact on the resale value of a condo. While the majority of condo owners want fees low to protect the RESALE value of their investment, low fees almost always means poor maintenance and extending the replacement of equipment well beyond its intended life cycle. Also, condo owners are reluctant to spend large sums of money on repairs/maintenance that does not translate into a more attractive building or improved amenities. They will wait until 100 units are flooded before they replace all the piping in their building at $40K per unit special assessment. Flooding in older buildings is getting so bad that most HOAs are forcing condo owners to insure their own units so that the HOA doesn't get walloped with a huge deductible (which generally runs in the tens of thousands) and increased premiums every time someones' water supply valve busts.
High rise condos are not sustainable. They are designed like hotboxes. Older buildings were designed with glass/windows that did not run flush with the exterior envelope of the building and they have exterior common hallways/entries on one side and living units on the other. There would be windows on one side of the condo unit and windows on the other. Wind could pass through the units providing for a very comfortable living environment without the need for AC. Modern buildings have common hallways in the center and units on both sides and huge glass wall systems... to capitalize on those great views (more on that later). But wind cannot pass through the unit. Windows can be wide open and the wind will simply hit the open window as if it were closed because interior pressure will not allow the wind to penetrate deeply into the unit. They are 100% dependent on mechanical ventilation to be comfortable for occupancy.
High rise condos cannot collect enough rainwater to supply all the residents living in such a tiny footprint. Water is dirt cheap now but that will not be the case in 10-20 years. Homes can capture their own water and filter it very inexpensively today and it will be even more inexpensive to do so in the future. At some point over the next 20 years, it will be cheaper to collect your own rainwater and use that for all the needs of the occupants of a low-rise, mid rise or SFH. High-rises will not be so fortunate. Desalinization technology is getting cheaper but it still requires a tremendous amount of energy today and in the future (and energy is not getting any cheaper). This will add to the cost of city-provided water dramatically once our water table dries up and alternatives for potable water become the norm.
There is not enough surface area on a high-rise condo to generate enough electricity (via photovoltaics) to even cover the common areas. Some people think you can clad the sides of buildings with solar panels but those that allow light to come through are extremely inefficient and the angle of the sun is such that power production will be very, very low. Shading from adjacent high-rises will be a major issue. Also, the expense to install PV modules on a side of a curtain-glass walled high rise structure is astronomical and will completely ruin or at least partially obstruct all the views out of all that glass. Over the next 20 years most SFH and low/mid rise buildings will install PV. Condo owners in high-rise buildings will be paying HECO's exorbitant rates because HECO still needs to maintain and provide distribution infrastructure to the hundreds of thousands that have PV but purchase very little power. The kilowatt-hour rate will be high and the units will be very expensive to keep comfortable with mechanical ventilation (AC). Expect to pay $500/mo just to cool a condo so it is comfortable enough for occupancy in the next 10-15 years. And to add insult to injury, people in SFH and low rise buildings can charge their electric vehicles with their on-site PV production. Condo owners will need to purchase even more HECO-produced kilowatt hours to charge their vehicles. The prospects are depressing to say the least.
Views (which often sell condos) are a scam. Strangely, people will pay 6-figures for a view that will inevitably (with the exception of maybe a handful of ultra-expensive condos on Oahu that line the coast) be partially or entirely blocked by future development of high-rises. Zoning changes can also be the precursor to blocked views of those fronting land that is set aside for preservation. 10 years ago, nobody thought a building would ever exceed the 450' height limit... or allow for development of buildings so close to each other. Times change and they will more than likely reduce the value of these units' resale values.
Special assessments will be larger than anyone could ever imagine. Forget about the inevitable demolishing of the condo you own in the coming decades. How much does it cost to replace windows in a SFH? Or in a low-rise with punch-window systems? It's only a fraction of the cost to replace a curtain wall or window wall system in a high rise. Condo owners (especially older buildings) will inevitably be hit with massive 5 and 6-figure special assessments in the coming years PER UNIT. Yacht Harbor Towers, 1350 Ala Moana and Kahala Towers are examples of buildings that incurred high 5-figure and 6-figure special assessments on replacement of windows, plumbing and spall repair. Spall repair alone can run in the multi-millions on a high rise and there is no value to the owner. No additional amenities, no new shiny floors. It's just repairing expanding/ballooning steel rebar inside of concrete. Rebar that will continue to expand and crack even more (original and patched) concrete over time. Those multi-million spall repairs are extremely expensive bandaids. 15 years later another several million needs to be invested AGAIN. The material expense for spall repair might only be in the tens of thousands but the bill in the millions. How is that? Because these people are making repairs 200, 300 and 400 ft dangling in the air. Accessibility is extremely difficult, work environment highly-dangerous and liability sky-high and selection of contractors that can actually do the work per the HOAs insurance/licensing requirements extremely limited... making the cost of repair and replacement easily 5-10X what it would cost in a low-rise or SFH. Oddly, you never see a headline in the Star Advertiser "Yacht Harbor Tower owners sacked with $100,000 special assessments". That's because nobody wants to talk about it. If everyone knew they would have to pay a $100,000 surprise repair bill within the next 10 years who would buy condos? The entire market would collapse. Special interests keep the public out of the loop. That is how the machine works. Most states require special inspections once a building hits 50 years old and subsequent inspections every 10 years thereafter. That is not the case in Hawaii YET. These inspections are expensive and require a thorough assessment of structural components to ascertain hurricane and earthquake resistance (yes we are in an earthquake zone) and anything else not included in the replacement schedule in the buildings' reserve study. Many buildings are now reaching that age. Once new x-ray equipment (which will be available over the next 10 years) that can determine the remaining structural strength of embedded steel rebar used in buildings, that's when things will get ugly. And I believe it will get real ugly.
The exorbitant maintenance fee only covers a fraction of the true expense of maintaining a high rise building. I know a lot of owners of condos gloat about how they don't have to worry about costs associated with single family home repair because it's covered in the monthly HOA dues but it's clear that reserve studies (which are done to determine the replacement cost and life cycle of all the building's components) do not include everything. Also, they say that a house needs to be rebuilt eventually even with proper maintenance because well... it's a house. But a condo with proper maintenance is supposed to last FOREVER? Obviously it will last longer because of the type of construction but it would be silly to expect the structure to be standing there for several hundred years even with the best maintenance money can buy, especially in such a corrosive (salt) environment. I sit on two condo boards both of which are roughly 40 years old, and the reserve studies for both buildings do not show any reserves for future spall repair, replacement of windows systems (including the glass, aluminum mullions and rubber/silicone sealant system), hand railing, structural and non-structural concrete work (including columns, girders, lanai overhangs, architectural overhangs, eave overhangs, scupper systems, walkways and driveways), structural steel work, water supply piping, storm drainage piping, sewer piping, electrical wiring, entry/exit doors, fire stair exit/entry doors... the list goes on and on. They include virtually all replaceable items that you don't really think ever need replacing like 2" thick marble cladding on certain architectural walls (which still look perfect 40 years later) but nothing to replace metal pipes that inevitably will fall apart over time. It's appalling.
Then you have to ask yourself what is the life cycle or "useful life" of a mid or high rise building? I see building implosions of all types on the internet/news all the time. I've seen dozens of large/tall concrete buildings being demolished here on Oahu too... some of which are only about 50 years old. I understand that many of these buildings are torn down because they are technologically obsolete, don't meet new code/safety requirements or the building that sits on the land isn't serving the "best use" of the land. They also generally have only one or a few owners or are owned by companies/corporations. But in a condo where there are dozens or hundreds of owners, what happens? Eventually the ENTIRE building has to be torn down, right? Eventually the long term maintenance costs will exceed the cost to finance and erect a new modern structure that serves the needs and requirements of a modern society. There is the argument that some buildings last hundreds of years - just look at many parts of Europe. That's true... but these are usually better-constructed, much smaller/shorter buildings that have cultural or historical significance... and a ton of money is usually injected into preserving these unique buildings through private, municipal, state and federal entities via taxpayers, public/private donations, trusts or otherwise. If the Empire State Building was condo owned, the maintenance fee would be about $2.50/SF or about $2,500/mo for a 1,000 SF two bed unit. Owners of regular buildings (like the type that 98% of people reside in) would never have access to that kind of free-flowing outside money to constantly rehabilitate to be safe and at least moderately technologically viable. In a nutshell, it would be impossible to preserve an acceptable (at that time in the future) standard of living and safety for residents with reasonable and controlled costs in a multi-century old high rise structure.
The economic life of most high rise steel or steel-reinforced concrete buildings is 80-100 years (according to many white papers and studies performed by countless engineers). Wouldn't that suggest that your "investment" would mostly vaporize at some point? Like literally just go poof? And I'm talking almost your ENTIRE investment going poof. When you buy a single family house (the house in this example is a newer home in Honolulu) is usually worth about a third of what you pay... and the land about two-thirds. So a new 1,400 SF $1M house would be valued at about $330K for the structure and $660K for the land. And you can always rebuild a brand new house preserving most of what you originally invested in (the land). Now this is an average for small homes in town on small lots (~5,000 sf)... I'm sure that differs in other parts of Oahu and definitely in other parts of the nation, but the land value to house structure value ratio is definitely much more favorable than a condo; I think that would apply almost everywhere except maybe extremely densely populated and expensive areas like Manhattan and Hong Kong, but even then, I think the land value to building value ratio would still be well under even 20%. Here in Hawaii an average 1,400 sf condo in the urban core goes for about $1M. The same sized house (albeit not in the best condition) in town goes for about the same but you own about 5,000 SF of land. In the condo you would own about 300 SF of land or about 6% of the SFH land. Granted the land under the condo averages about $250 SF (which is about double of what the land under a SFH would go for) so of your $1M investment, only 7.5% of that ($75k) is in land. The rest is arguably in a depreciating asset, which according to my unscientific guess, will eventually be worthless. Maintenance fees mostly prevent that depreciation by injecting money into constant upgrades and repairs. But at what point is the building obsolete whether structurally, technologically or safety-wise? So wouldn't this make investing in older condos (and maybe in condos in general) a poor investment decision for those that want to pass on their properties to their children and future generations?
At the end of the day, I always tell people to either buy SFHs or units in low/mid rise buildings, ten stories max. Anything higher than that is a horrible investment and will be a massive liability in the future. But heck what do I know. Engineers designed and built this country. And they are now advising that what was built will one day need to be demolished. You may want to take their advice.
All HOGWASH! As long as rent supports an investment its ok. Meaning 1% of cost of condo per month is ideal. Hard to do in HI though. ex.$200,000 condo rents for $2,000 a month. Presently almost impossible so investors HOPING for appriciation while having big neg. cash flows a month.
You are the one that keeps stating FACTS that YOU cannot support. You keep proving yourself wrong. Can you just name ten out of the hundreds that were high rise residential? In Honolulu.
1. Still waiting for that 1978 one bedroom $600 rent comp.
2. Waiting for those high rise residential demolition comps.
The problem is you don't know the difference between apartments and condos. A condo is where all units are sold individually to separate owners and an HOA governs its operation and maintenance. An apartment is owned by one or several entities; apartment buildings do not have HOAs to govern them. I specifically stated that residential CONDOS have not been demolished here YET simply because it's impossible to do so. You cannot have 100% of the owners say, "yes let's demolish our crappy condo and build a new one. I have $500K sitting in my checking account now to pay for it!" You will always have owners that cannot afford to do so or have no interest in being forced out of their home to live for 2 years somewhere else then move back... therefore even if a condo structure is deemed economically or technologically unviable, it will continue to exist until government officials condemn it for various reasons due to safety concerns. An apartment building will be demolished decades before a condo will be demolished simply because condos are structured very different from apartments. First Hawaiian Tower, Kaiser Hospital and most recently Kapiolani Medical Center are examples of large structures that have been demolished. Many others have also been demolished.
Maybe you're one of those technically challenged people that don't understand that steel rebar in steel-reinforced concrete actually corrodes and that every year this steel gets a tad bit weaker. Those condos (pretty much all of them in town) where the foundation sits below the water table, are corroding quite rapidly from a construction material longevity standpoint. Once a major structural component in a high rise is compromised, it must be demolished. I can keep jacking up/leveling my house for hundreds of years where the condo needs to pulverized into dust. It's becoming a problem in certain parts of the world incl the US; in an environment as highly-corrosive as Hawaii, this problem will rear its ugly head sooner than you would think. The day a condo project is deemed unsafe for occupancy will be an ugly day for condo owners in new or old buildings alike. The reality will finally sink in with the public and prices will plummet to the floor. But in the immediate future owners will be dealing with exorbitant electric rates to sustain their highly-inefficient units, ever-increasing fees, and some owners will be dealing with insanely costly special assessments while those that don't experience them will say "that won't happen to us, our building is special". There is nothing non-factual about my statements. It isn't a matter of if... but when. Maybe in your magical fairytale land steel reinforced buildings last forever. It must be nice in that land; it's truly a special place.
Again, I'm sorry I hit a cord with you on my chicken little rant.
Sigh, please show an example of a high rise residential property (doesn't have to be a condo since condo is NOT a type of building but a form of ownership) being demolished because it was unlivable due to age in Honolulu.
1. Still waiting for that 1978 one bedroom $600 rent comp.
2. Waiting for those high rise residential demolition comps.
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