New Developments Guide
Learn everything you need to know about new construction on Oahu.
Do you want to be the first to live in a brand-new home in Hawaii? Or, do you prefer a time-tested property? Presale and resale are the two ways to purchase a property, and each option comes with a list of pros and cons.
From that new home smell to being able to move in within 30 days, both presale and resale properties have their respective benefits. Should you buy a presale new development property or are resale properties a better option for your situation? A deep analysis of each option can assist a new development Hawaii homebuyer in making an informed decision.
A presale home is a property that is available to purchase prior to being ready to move-in. In Hawaii, a presale property is often purchased before construction even begins on a new development. Sometimes, presales of properties are made during the construction phase, as well. A presale property can be roughly compared to a new car that has to be specially ordered, manufactured and shipped to Hawaii. If all properties are not sold prior to the development being constructed (very rare in Hawaii), then this would be considered a new construction property.
A resale property is a property that has already been owned by another buyer, and then sold again – maybe for the second, third, fourth, fifth or many more times. A resale property may be fully remodeled, but it is not new. A resale property can be compared to a used car – and some are maintained better and are newer or older than others. A resale property may have a very “lived in” look and present opportunities for remodeling.
Pro: Typically, presale properties appreciate highly after putting down the initial deposit.
For presale home purchases in Hawaii, such as a condo in Kakaako, typically buyers must put 20% down of the purchase price to secure the property in the presale phase. This money is held in an escrow account, that acts like a savings account, and Hawaii new development homes usually appreciate greatly over the construction time. In summary, a presale homebuyer puts 20% down and gains 100% of the appreciation of the real estate asset over the construction period (which typically is 3 years for high-rises in Kakaako).
Con: A presale property purchase is considered a higher risk, as the market could change before moving in.
While historical data on residential resales of properties on Oahu indicates great appreciation over the years (466.3% gain in condos and 562% gain in single-family homes from 1985 through 2022), it is true that the market changes from year to year, with changes in interest rates and housing supply and demand – among other global economic factors. The real estate market can, indeed, go up and down, and in a presale property, a purchaser will typically still have to close on the contract or lose the 20% deposit down, despite the market conditions at the time of closing.
If an investor is purchasing a presale property and then hoping to flip it immediately after construction is complete, this has historically worked well financially for many presale buyers. However, if the real estate market is not favorable when construction is complete, the property may need to be held for rental, the homebuyer may need to move in or the presale homebuyer may sell at a loss.
Pro: Presales often offer customizable construction options.
Different developments often offer a range of options to find the perfect fit for your housing needs and wants. From a variety of floor plans, to different housing options (condos to multi-generational homes like those in Koa Ridge), to different appliance packages, to dark or light finishes, to upgraded flooring or countertops, to different ceiling heights – new developments offer a range of options. When purchasing a presale, a buyer has the ability to dictate certain finishes for the home to be done during the initial construction, depending on the property and developer – offering additional appeal.
Con: New development construction completion dates are not 100% certain, and the projected move-in date could be delayed.
Delays in construction in real estate is common, especially in Hawaii. Many factors could delay new development construction, including building permits, construction material costs, labor shortages, inadequate presales, utility connections, severe weather and much more. Purchasing a presale property from a reputable developer – that is known to quickly resolve any possible construction delays to complete the home construction on time – can help to mitigate this presale con.
Pro: New developments – especially in Honolulu high-rise luxury condo building – usually have the best amenities and technology options.
Do you want to swim a pristine infinity pool that is only a week old? Do you want to swing a golf club in an indoor simulator? Perhaps, you want to have guest suites for family members to stay in, or have a movie night in the indoor theater? New developments on Oahu have some of the most incredible amenities. And, when purchasing a presale property, the homeowner will have the first access to these state-of-the-art amenities.
Con: Opportunities to fully view and inspect the property might be limited.
How can you buy a home that isn’t built yet? How can you pay thousands of dollars without even being able to view the completed home? Realize that new developments often are built by developers with years of experience and expertise. And, these developers hire some of the world’s best architects, interior designers, landscapers and contractors – along with a number of other experts to build the property.
However, it is true, a potential homebuyer can not fully see the property. They cannot touch the walls, turn on the water, flush the toilet or look out the windows. Architectural renderings – including 3D virtual reality tours at some properties – act as a substitute instead of seeing the property in person. These renderings, photos, videos, three-dimensional models and testimony from developer personnel help potential homeowner to visualize themselves in the new development and make an informed decision on purchasing a presale property in Hawaii.
Pro: Maintenance costs, including Homeowners Association (HOA) fees, are potentially much lower in pre-sale properties.
A presale home is brand new, and an inspection before move-in is done to fix any possible construction defects. Therefore, presale homebuyers don’t typically have to deal with peeling paint, cracks in caulk, leaky faucets, separating floors or broken appliances – as is common in resale properties when these items have aged. Move in to a new property and enjoy it for years without having to do any maintenance. It’s also important to ask in a presale what is under warranty, as some appliances as well as other items in the home are under a warranty, depending on the developer.
If you are opting to purchase a presale condo, like those in Kakaako, these typically have HOA fees to cover items like shared maintenance of amenities, outdoor window cleaning and more. When first purchasing a property, these HOA fees are lower, as the building also does not have any many expenses. However, as the building ages, HOA fees tend to rise, as well.
Con: Presale properties’ surrounding community features are uncertain.
Like the renderings of the home itself, the condominium or surrounding community features may also have renderings. Is there plans for a new elementary school, park or boat launch to be built nearby? How about plans for a gym or grocery store? What about neighborhood landscaping, sidewalks, bike paths and Honolulu Rail stops? There might be plans for all these community features; however, only time will tell if all these elements are actually built and maintained to benefit community members.
Pro: A potential homebuyer can see the resale property and its neighborhood fully and in-person before purchasing.
Unlike presale properties, a resale property and its neighborhood are tangible. You can touch the faucet and turn on the water. You can see the paint color, the countertops and the lighting. You can feel the air in the space and see how big each room is and how high the ceilings are. In the neighborhood, you know what is available at that moment; there might already be established recreation, restaurant and retail facilities as well as transportation and schooling options.
Con: Resale properties often have a number of offers – sometimes leading to bidding wars and high competition.
In a presale property, the price is often fixed. There are a number of one-bedroom apartments for sale in the new development, for example, with that floor plan, and they have that price. If you decide to purchase the presale property at the onset of sales, there is more supply, and – with an experienced Hawaii real estate agent and the right timing – you are more likely to secure the deal on a particular presale property.
For a resale property, the price isn’t fixed, but it’s negotiable. This might mean that you can negotiate a lower purchase price, which would be a pro. However, in Hawaii’s limited real estate market with demand often outpacing supply, this often means paying the asking price or more and also competing against multiple other buyers to secure the desired property.
Pro: Homebuyers can move into a resale property usually within 30 to 60 days of acceptance of an offer. Resale properties often have a quicker closing than presale properties.
With a resale property, you can negotiate how long the escrow process takes and when the property will close. In Hawaii, it is typical to have a 45-day closing and then you can move in. This quick timeline is unlike a presale property, which typically is anywhere from multiple months to multiple years – with possible construction delays – before moving in.
Con: After moving in to a resale property, renovations or customization – as well as other hidden costs or unexpected expenses – could occur.
While a resale property does go through an inspection period, it is not typical for a Hawaii seller to do any repairs (especially major repairs) prior to closing. The inspection may list a number of repairs that the new homeowner needs to make. And, since the property has been lived in before, unforeseen repairs might be uncovered over time. Also, after moving in, a resale property may need to be customized to your tastes – unlike a presale property that can be specifically selected and customized during construction and prior to move in.
Painting the walls, updating lighting fixtures, remodeling kitchens and bathrooms, exterior wood replacement and painting, a new roof, new landscaping, new floors: All of these home repairs and upgrades are common when someone purchases a new resale home in Hawaii. Note that some resales have been fully remodeled prior to purchase; however, even resale homes that are remodeled need to be carefully inspected; realize the home still isn’t brand new, and something like the water heater might not have been replaced during the remodel.
Both purchasing a presale or a resale property in Hawaii can be a viable option – depending on the buyers’ goals, budget and lifestyle. Ultimately, buying a new development in the presale phase or buying a new development in the resale phase as the second owner – or purchasing a property that is many years old – is the right choice depending on the homebuyers’ situation.
Speaking with an experienced real estate professional, especially someone who knows the ins and outs of Hawaii’s new developments, can help to clarify the buyer’s unique situation and to articulate whether the pros outweigh the cons for either a presale or a resale property.
Learn everything you need to know about new construction on Oahu.
What factors should you consider when shopping for a new home?
Is there a different with financing a pre-sale home purchase?
Your home is built and ready. Learn the final steps to move-in.