Written by ADAM BROWN
Wednesday, May 18, 2011
GUAM – Increasing investment, rising costs of land and materials and an influx of buyers and renters in coming years will raise standards of home construction on Guam, boosting prices and making some older homes obsolete, according to The Real Estate Professionals.
The military buildup "will raise the bar on quality development on Guam which from an overall perspective is good for the island's image," Chris Murphy, Owner and Principal Broker of The Real Estate Professionals brokerage on Guam, told GuamBuildupNews.com. It may also, though, price some local residents to the low ends of the market.
The transfer of at least 8,600 U.S. Marines and their families and support staff from Okinawa to Guam no sooner than 2016 will bring an influx of home buyers and renters with federal housing allowances and higher demands for comfort and amenities than the average that the island currently offers, Mr. Murphy said.
At the same time, a recent surge in construction of high-end properties will further raise the average standards for all housing on the island, even as developers of the costliest dwellings may have trouble finding buyers in coming years, Mr. Murphy said.
The buildup and the accompanying "high expectations" for housing comfort will also affect existing homes on Guam, forcing owners to carry out renovations to meet these new standards or otherwise make their homes difficult to rent or sell, he said.
"As the demand for newer and better homes increases, older homes and neighborhoods will feel the impact of increased competition for the military and contractor dollar," Mr. Murphy said. "Owners of these properties will be forced to spend money on upgrades in order to compete with developers of new subdivisions and housing tracts. Unfortunately, some of the older homes will suffer from functional obsolescence making it impossible to make needed improvements."
Military housing allowances range from $1,918 a month for lower-ranked personnel to $2,700 for higher ranks, while allowances for utilities, maintenance and miscellaneous expenses total about $1,200 a month.
The allowance easily exceeds the current average rental rate for single-family homes on Guam of about $1900 per month and about $1,400 for condominiums. Many of the newcomers will also be able to tap an increasing number of available home purchase loans for military personnel as well, Mr. Murphy said.
The military buildup will add about 35,000 residents to the 180,000 people already living on the island, according to a study by the Guam Housing and Urban Renewal Authority. Between 20 percent and 28 percent of military personnel will likely live off-base, the study concluded.
The home ownership ratio among local residents on Guam, among the lowest in the United States at about 50 percent, will probably remain near the same level as many residents find it tough to compete with some of the newcomers.
"Local residents will be forced to look at older single-family properties in less desirable areas or small condominiums in order to qualify for home loans. This will not be an incentive for local residents to improve on that 50 percent home ownership figure," Mr. Murphy said.
Anticipation of the military buildup and the influx of housing allowances and at least $10 billion in direct investment by the U.S. and Japanese governments may already be driving prices up, according to data from the first three months of this year.
In the first quarter of 2011, the average home price on Guam jumped 18 percent to about $260,000, according to a newsletter by Nick Captain, president of Captain Real Estate Group. That exceeds the U.S. national average of $170,000 by more than 50 percent, Mr. Captain said.
"During the first quarter of 2011, overall quarterly real estate sales volume on Guam exceeded $100 million for only the second time since mid 2008, and quarterly island-wide sales volume reflected 60 percent growth from a year earlier," he said. "Future aggregate sales volume figures are likely to be impacted by foreign investment trends, which have been rebounding primarily due to progress on the military build-up."
GuamBuildupNews.com monitors the marketplace for real estate insights and opportunities related to the military buildup. In the coming weeks, the site will debut a new Guam Real Estate section dedicated to news and information that will help property owners, buyers, renters, investors, developers and realtors make better, timelier decisions.
Image used in this article courtesy Renjith Krishnan / FreeDigitalPhotos.net
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