by Jean Hudson, KUAM News Saturday, January 21, 2006 E-mail this article Printable version KUAM Toolbar Web Widgets Get RSS headlines

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Many for-sale homes are being sold and more homes are being developed for purchase. In the last three to five years, Guam has seen a tremendous increase in real estate activity. In 2000 to 2003, total real estate sales reflected about $10 million a month, whereas in 2004 to 2005 the island saw an increase of up to $20 million per month.

Compiling such statistics is The Captain Company, and president Nick Captain says those dollar figures are healthy, with Guam's real estate market looking to continue that trend into the future.

And why are people buying? Captain says it's a combination of factors. "We went through an economic downturn that was a result of a series of negative external forces. Some would argue that the prices that were reflected in 2002-2003 were artificially low and didn't reflect the intrinsic value of Real Estate. So what we're seeing is a return of a more stabilized conditions rather than some booming cycle," he explained.

Guam's overall real estate market is relatively healthy and Captain attributes reasons such as increased interest among foreign investors, business owners, and the local community. He continued, "The most dramatic changes have been occurring in the residential side. We've seen a 60% increase in the median price of the single-family dwelling. In the condominium purchases we've seen 60% increase and a 40% increase in the median price of a single-family dwelling unit over the last couple of years."

Captain says as a result of the rebound in residential market conditions, more and more subdivision development projects are being proposed, and Captain is optimistic that Guam will be prepared for the anticipated influx in military personnel and their family members. "A lot of these projects are going to be targeting military rental or sale side so the recovery in the residential sector is spurring developers to produce new product," Captain said.

One of the most significant products underway and in at least the last 25 years is Paradise Estates in Dededo. The subdivision involves the construction of about 400 homes. Captain says if the market condition continues to improve and with the arrival of up to 7,000 U.S. Marines, Paradise Estates has all the right pieces of the puzzle in place for that project to succeed.

In the meantime, there are other subdivision projects that are underway or are in the planning stages. Said Captain, "You have subdivision going up behind Royal Gardens in Tamuning. You have Town Homes projects going up in Tumon that are either underway or currently being proposed. You have projects in the Nimitz Hill are that are currently being proposed. Mike Ysrael has a huge tract of land that he is considering developing over the next few years and so you're looking at a substantial increase in inventory over the next three to five years.

"I don't see a problem - when you talk about Marines coming over the next five to seven years, that's a long time and that's enough time to produce a product that's necessary to house the increase in the military."

As far as the interest rates that banks offer, Captain says if the rates remain low it will help buyers purchase a home, and not just to live in, perhaps for investment purposes. There's a misconception that when the real estate market is doing really well, interest rates go up. Captain explains the two schools of thought relative to interest rates.

"One school that believes that prices have come too far too fast - they think there's some sort of irrational exuberance reflected in the local residential market and that's because they feel that the economy has not grown to the point that justifies the increase in prices that's occurred. That school of thought would probably argue that the growth in new inventory over the next few years will offset any price increases associated with increased demand, so that school of thought that prices will probably stabilize over the next few years," said Captain. "The other school of thought will tell that Guam is at the precipice of economic explosion; that foreign investment, military activity, the recovery in Japan in the tourist sector will justify continued increases in the residential sector."

And Captain agrees that at this point both schools of thought have pretty strong arguments and can be supported. In Part 2 of our series we'll tackle the local real estate market and detail statistics of properties sold.