Deciding on a Development
What factors should you consider when shopping for a new home?
Oahu is hot with new home developments – luxury state-of-the-art condos, affordable housing options, even new zip codes. While these new developments are located in a variety of neighborhoods, offer a variety of housing options, and are being built and managed by different companies, all the new developments follow certain trends for their release phases.
Where are new Oahu's developments located?
This is simply the short list of the hot, new developments that are popping up all over Oahu – offering incredible options for all types of buyers to call Hawaii home.
And, as each of these condos or communities is built, there are common phases of release to different groups of people – from the developer to the owner-occupant to the investor. An overarching concept of a new development on Oahu, is that it is built directly by a developer – from the foundation to the roof – and the developer typically sells those homes or condos directly to the general public – all while following State of Hawaii guidelines and regulations. A lot of times, new developments will not be listed on the MLS, which feeds search engines like Zillow or Redfin; that’s why its imperative to know how new developments are released for sale if you want to secure the property for its lowest price as a brand-new home.
What are the phases of new development release on Oahu? Realize every development differs, but the following general information can guide homebuyers as they expect the latest, new development. A trusted real estate agent knowledgeable in new developments can also offer expert advice on the phases of release for a particular condo or home.
To construct a few new homes or an entire community, a number of entities and individuals are involved. The developer is almost always at the forefront of any new condo or residential community on Oahu – managing legal approvals, coordinating construction, marketing, being involved in the final sale and often much more along the way.
Prevalent Oahu developers include Victoria Ward Limited, Gentry Homes, D.R. Horton Hawaii. Avalon Group and Stanford Carr Development, among many others. Sometimes these developers are the landowners and, other times, they serve as the facilitators for the landowners to bring the new development to market.
Either way, Oahu developers are often involved in almost every aspect of the new development before it goes to market. Developers often collaborating with other individuals and private and public entities to bring the new development to fruition, including architects, contractors, real estate agents, marketing firms, the Honolulu Department of Planning and Permitting, utility companies and more.
The developer typically leads the following aspects for the new residential and/or commercial development:
During the developer phase, the idea for a new residential development comes to life. Note that all timelines and processes for each developer differs, however. And, as legal building approvals and financing are secured, marketing and sales to potential homebuyers often occur – and, on Oahu, this usually happens before construction even starts.
When developers decide to list new Oahu homes for sale, they have to follow some general State of Hawaii guidelines, but there is a lot of flexibility for developers to sell the new home in a variety of manners.
One of those state guidelines is the Condominium Owner-Occupant Presale Notice. Hawaii’s Condominium Property Act requires a residential condominium developer to initially designate at least 50% of the units for sale to prospective owner-occupants. Once the developer notifies the public in at least one widespread newspaper about the sale of the new development homes, it must have half of the total units available for sale to owner-occupants only, for at least 30 days. Any violation to this law could leave the developer with a fine of up to $10,000. Therefore, after the developer phase, they next phase is the owner-occupant phase.
Any affordable housing units are also typically sold during the owner-occupant phase, as a stipulation of purchasing affordable housing is typically that the owner needs to reside in the home for a number of years. The Hawaii Community Development Authority (HCDA)’s Reserved Housing program, requiring at least 20 percent of new Ward Village residential units and others in Kakaako, to be set aside for Hawaii residents earning between 80-140% of the area median income (AMI), would be an example of this initial owner-occupant phase. Home sales to satisfy the City and Country of Honolulu’s Department of Planning & Permitting (DPP) Affordable Housing program are also usually done during this phase, if the developer is building under that program.
When do developers tend to sell the new homes to owner-occupants? Some developers sell the properties after they are fully constructed; however, the vast majority of developers sell the Oahu properties in the pre-construction phase, ensuring they will have the interest and funds to construct the – typically – multi-million-dollar high rise or neighborhood. A lot of times developers wait until 70% of units are sold before beginning to build, as that is a normal threshold to secure construction financing.
Sometimes, a home or townhome, like those on the west side of Oahu, are ready to move into within three to six months after purchase, as those homes are constructed fasters. However, someone who buys a new condominium in a high-rise unit, like those in Ward Village, might have to wait three years before they can move in. Therefore, a 1031 exchange or immediate move-in is not usually an option during this phase of the new development’s release.
Let’s take a look at some of the historical selling methods for new Oahu developments. A lottery system was used for homes in the new residential community development, Hoopili, on the west side of Oahu; this lottery system was spread out over many months, allowing phased move in as construction was completed. Other developments do a lottery for all the units all at once, putting people on a waitlist as well. A different method was used for Kalae Ward Village, which released 165 condominiums for sale on a specific date and sold the units on a first-come, first-served basis.
In almost every case for a new development on Oahu, the units sell very quickly – almost immediately. And, they usually have a long waitlist after the initial direct sale or lottery. If a unit doesn’t sell immediately, the developer will typically increase prices during the construction phase. So, to get the lowest price and the most options for a new home development, it usually is recommended to buy when the developer initially releases the home for sale.
The next phase of a new development is the “unrestricted” sales phase. During this time, investors, second home owners, non-owner occupants, an owner-occupant – basically, anyone who is qualified – can purchase a new Oahu development.
This unrestricted sales phase can occur simultaneously during the owner-occupant phase, as the other 50% of the units that are not set aside for owner-occupants can be sold to anybody – unrestricted. However, some developers choose to sell the first 50% to the owner-occupants and then separately do the unrestricted sales. Note that after offering the first 50% of homes for sale to owner-occupants, if some of those set aside units do not sell to owner-occupants, the units can be sold to anybody – like investors – after 30 days of owner-occupant sales, which is based on the date when the advertisement or announcement was published for the public to read.
The unrestricted sales of the new development will go on until all the condominium units or homes are sold. Typically, all new developments units on Oahu are sold before construction is complete.
A new owner now possesses the new development home. Once construction is complete, the new homeowner, or their tenant, can move into the new condo, townhome or residential house. The developer no longer is leading the sales and marketing of the unit, but now the private party has the new development real estate in their possession.
If the private party chooses to resell the new development unit after they bought it, they can, as long as they do not have to meet any requirement for residing in or owning the home for a certain number of years (as is common for Hawaii affordable housing). And, the resale prices for housing on Oahu are usually much higher than when the new development was originally bought from the developer.
To purchase a new development on Oahu, it’s crucial to know the phases of when the developer will release the homes for sale, and how the purchase process will go. Realize that developers have a lot of flexibility in how they market and sell homes, so to secure a new development unit, knowledge and expertise are essential.
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