The sale of a mountain ranch in Hilo, Hawaii, may create a ripple effect in the state’s residential property market.
An unnamed buyer paid almost $11.3 million in November 2021 to acquire the Hilo Mountain Ranch in Pepeekeo.
Even before the sale, real estate groups such as Hawaii Life have tipped property prices to increase in the next two years.
Hawaii’s top luxury brokerage cited data from the University of Hawaii’s Economic Research Organization (UHERO). Home prices in the state are expected to increase by 8% in 2022 before reaching a plateau in 2023, according to UHERO.
The Connection Between Homes And Ranches
Multimillion-dollar ranch sales in Hawaii State affect residential property prices when redevelopment plans take place.
Hilo Mountain Ranch spans over 13,000 acres, where more than 2,000 acres are reportedly slated for residential development.
As the average price of listings in Pepeekeo costs $1.9 million, prices may increase with the development Hilo Mountain Ranch
While the state builds more houses, much of the housing supply falls into the luxury sector. An annual income of at least $136,500 would be enough just for a “market-rate” house in Maui, according to the Hawai‘i Budget & Policy Center.
Market-rate homes refer to affordable properties that are sold for the highest possible price.
High median property prices in the state not only exist due to the economics of demand and supply.
For example, luxury homes in Honolulu fetch a hefty price when these properties are on spacious grounds. Take Kahala as an example. It’s difficult to find an estate-size property in the so-called Beverly Hills of Honolulu.
If you find one, however, be prepared to spend tens of millions. In 2021, the price for a 1.75-acre estate in Kahala—the largest in the community—is $23 million.
What About Condos With An Ocean View?
Prospective condominium buildings within 2,000 acres of Hilo Mountain Ranch could sustain price appreciation. There’s one key reason: buyers seeking luxury properties with an ocean view.
According to Hawai‘i County data, urban land accounts for approximately 2.5% of land in the state. The other three classifications consist of:
- Agricultural land (approximately 46%)
- Conservation land (approximately 51%)
- Rural land (less than 1%)
A scarce land supply for new homes means that news of potential housing development sparks interest among many investors.
In Oahu, most new development of homes in oceanfront locations entails a time-consuming approval process. Hawaii Life said that such developments may take years because of several public hearings and solicitation of public feedback.
The tedious process for pre-approval may deter some, making already built beachfront homes a more desirable option for luxury property buyers.
While there aren’t many beaches near Hilo Mountain Ranch, homes with an oceanside view could take away the heat from other property markets.
How Much Do Luxury Homes Cost On The Big Island?
The price of a luxury home in Pepeekeo doesn’t cost significantly more than the median price in the area.
For example, you could buy a house for $2.3 million in Onomea Bay Vista. The 4-bedroom, 4.5-bathroom property spans 2.73 acres in a private gated neighborhood.
Residents will enjoy ocean views from the Kahalii Stream, while being near the Botanical Gardens and Onomea Bay.
You should expect to pay more for a luxury property as you move farther from Pepeekeo. In Kamuela, which is an hour’s drive away, a resort-style house with 4 bedrooms and 3.5 bathrooms costs nearly $3.4 million.
Estates in Kamuela such as the 1.15-acre Hokulia Estate may run upwards of $8 million.
Whether you decide to buy a house or estate in Hawaii, you should still consult a long-time broker with a diverse team.
Click here to find out more about Hawaii Life and its roster of more than 350 property agents.