Guam’s real estate market cooling down

Guam’s real estate market cooled significantly during the first quarter of 2008 compared with the recent peak activity in 2007, while the median price of a Guam single family dwelling increased to a new high.

Captain Real Estate Group’s database of all transaction activity reflected sales volume of $98 million during the first quarter of 2008, a drop of 43 percent from the average quarterly activity in 2007, and a decline of over 50 percent from the peak second quarter of 2007, which reflected $202 million in islandwide real estate sales volume.

Nick Captain, president of the Captain Real Estate Group of companies, said the slowdown was expected. “The figures for the fourth quarter of 2007 were surprisingly high at $135 million in sales. We didn’t see that coming. But for a while now, we’ve been telling our clients that the transaction volume and price growth rates experienced between 2004 and 2007 were unsustainable. A period of stabilization or slower growth is healthy and will allow for economic growth to catch up with the recent run-up in real estate prices,” said Captain.

The most recent quarterly real estate sales activity was the lowest in two years.

The sales volume declines impacted all sectors of the market, according to Captain’s database. Single-family residential sales volume of $37 million reflected a decline of 22 percent compared with average 2007 sales volume. The condominium sector reflected sales volume of $13 million, or a decline of 38 percent from average activity in 2007. First quarter sales however, included the $1.2 million sale of a Tumon beachfront condominium. Land sales were down by over 20 percent during the first quarter of 2008, even with the $10 million sale of former federal excess land in Tiyan. The commercial, industrial and apartment sectors were all down considerably, but these sectors tend to reflect increased volatility due to the relatively limited number of transactions and widely fluctuating prices. “To some extent, the slowdown reflects actions by the government as massive fee increases, infrastructure hook-up costs and other expenses leave developers with lower potential profits and less incentive to purchase land and develop”, noted Captain.

The sales volume slowdown did not reverse the upward trend in median pricing for Guam housing. The median price of a single family dwelling during the first quarter of 2008 reflected $206,000, an increase of 5 percent compared with the 2007 median price. However, sales activity in this sector slowed to 156 units, the lowest number of quarterly sales in two years. The increase in median pricing resulted primarily from a continuing shift toward newly constructed houses.

The initial wave of military-expansion related investment has subsided and in Captain’s opinion, the slowdown in market activity is positive news. “On a long-term basis, a temporary slowdown is healthy. Recent buyers need time to digest acquisitions, the widening gap between seller and buyer expectations needs to close, income levels need to increase and the economy needs to grow in order to support recent price increases,” he said. “Our real estate market is substantially driven by foreign investment and capital flows. We expect that the next wave of military-expansion related foreign investment will hit in late 2009 or early 2010, just before major construction activity commences.”

A slowdown means that there is a narrow window of opportunity to enter Guam’s real estate market, which Captain expects to heat up significantly between 2010 and 2014. [B][I](PR)[/I][/B]