Real estate sales, commercial mortgage lending down

Siska Hutapea, president of Cornerstone Valuation

Not surprisingly, the COVID-19 pandemic has caused Guam real estate sales to go down and lending for the commercial real estate sector to plummet as well.

Siska Hutapea, the president of Cornerstone Valuation, says real estate sales volume based on the first 11 months of this year is only at $384 million, down by 12 percent compared to 2019.

“It’s the lowest since 2016, where we had about $560 million. And there’s a couple of factors that caused this. First is the limited supply. Then, of course, there’s the pandemic. And also, because of the high construction costs, there are limited sales of land because people know they can’t find contractors to build on the land that they’re going to buy,” Hutapea said during the Guam Chamber of Commerce economic outlook webinar held last Friday.

Because of the lack of demand, the single-family dwelling median price increased by 9 percent to $325,000 compared to last year.

“Again, this is caused by limited supply,” Hutapea said.

Due to COVID-19, commercial lending also scaled down sharply in 2020. Hutapea said because people are not sure about what to do due to the uncertainties caused by COVID-19, they held off on their investment decisions.

“One really good example is First Hawaiian Bank was lending at $173 million last year. And this year, they’re only at $42.7 million. There were 34 $1 million mortgages last year. But this year, there are only 17 mortgages at $1 million and above. And there’s only like three that is above $2 million,” Hutapea said.

Cornerstone Valuation recently completed its COVID-19 impact study, finalized its November 2020 database, and compared the January to November period of 2019 to the same period this year.

In the condominium sector, the sales volume is down by over one third, down by 36.4 percent. Single-family dwelling is also down by 2.7 percent, land sales are down by 11 percent, and overall transactions decreased by 9.7 percent.

Because of COVID-19’s effect on the economy, Hutapea said there’s going to be some distressed sales, but not as much as during the 2001-2003 period in the aftermath of the Twin Towers terrorist attack. But Hutapea said the market can expect some distressed sales happening between now and the end of 2021.

However, it wasn’t entirely bad news for the real estate industry on Guam.

Hutapea said there were some “notable” sales in 2020, the largest of which ws the sale of about eight acres of land ocean-side in Tumon, the island’s tourism district. The sale price was $35.8 million and the buyer was a Taiwanese company that is planning to build high-density residential units.

As to what the future holds for the real estate industry and the economy in general, Cornerstone Valuation completed a survey last October that asked 57 real estate and economic leaders on Guam what their thoughts are about the future.

According to Hutapea, almost all unanimously said that the Guam tourism industry will take over two years to recover while the Guam economy, in general, is going to take even longer, most likely from two to three years to recover the way it was before COVID-19.

“And when we did the survey in April, that was the beginning of the pandemic. And you know, in October, we’re way into it. And 49 percent stated that the real estate investment in Guam is less attractive. Lastly, we asked the survey respondents that if you’re making a real estate investment decision right now, has it been impacted by COVID-19? Most of them said yes, nearly 80 percent,” Hutapea said.