I challenge you to find a segment of the Maui Real Estate market that experienced a more drastic reversal of fortune over the last 12 months than vacation rental condos. With tourism shut down starting in April of 2020, demand for vacation rental condos shrank rapidly over the spring and summer. With no rental revenue to offset costs and economic forecasts calling for a slow rebound in tourism, many owners opted to sell. Inventory rose steadily through spring, summer and early fall. On October 15, 2020, the state rescinded the mandatory quarantine rules for incoming travelers. Residents and vacationers who tested negative could avoid the Covid vaccine. This marked the first step in a gradual shift in the market.

For the first couple of months after tourism reopened, visitor numbers were a fraction of what the island experienced pre-Covid. That said, buyer demand ticked upwards and supply slowly ticked downwards as soon as visitors returned. With the start of the new year, a significant shift occurred. Visitor numbers recovered far faster than anticipated. Apparently, many of the visitors were vacation rental condo buyers.

Soaring Sales and Shrinking Inventory

They say a picture is worth a thousand words. These two pictures tell the tale of the Maui Vacation Rental condo market pretty succinctly. Buyers returned to the market in big numbers in early 2021. With a pretty healthy inventory of condos to choose from, the volume of transactions grew quickly. Buyer activity reached its peak in March with 290 condos under contract. Volume started to dip in April. While there was a minor uptick in May, the number of properties under contract continues to fall.

The healthy inventory of condos in January and February quickly gave way to scarcity. A ravenous buyer pool quickly chewed through much of the inventory. Anecdotally, I started to get a lot of e-mails from other Realtors beating the bushes searching for unlisted properties in late March and April. The inventory continued to fall through late Spring and the summer. The contrast between this summer and last summer is pretty stark. While many popular condo complexes had double digit inventory in the summer of 2020, most currently have a handful of active listings at most. The overall condo inventory is less than 25% of last summer.

Shrinking inventory is in turn impacting the volume of properties under contract. There are far less active condos for sale now than there were that went under contract in March back in the peak of the market. It is difficult to compare demand now compared to demand back in the late winter and early spring. Anecdotally, it feels like demand is down some. That said, with such limited supply market dynamics feel similar to the spring when demand and supply were both higher. Plain and simple, it is a strong sellers market.

Strong Demand Plus Declining Inventory Equals Rising Prices

With strong demand and dwindling supply, it’s not surprising to see the trajectory of prices. While median prices on island tend to fluctuate based in part on the composition of condos sold within a given month, there are clear signs of price increases. The median price of the vacation rental condos sold in August of 2020 was $600,000. The median price of vacation rental condos sold in August of 2021 is $747,500.

Other Notable Numbers From the 2021 Maui Vacation Rental Condo Market

• There were 880 vacation rental condos sold on Maui between January 1, 2021 and August 25th, 2021. That is a 221% increase in activity compared to the same period of 2020.
• The average price of condos sold between January 1, 2021 and August 25th is $1,079,000 and the median price is $715,000.
• The lowest priced vacation rental condo to close sold for $110,000. That was a leasehold, oceanfront, one bedroom at Maui Sands.
• The highest priced transaction for the year to date closed for $14,250,000. This was for a 3 bedroom, 3.5 bathroom, direct beachfront unit at Wailea Beach Villas.
• There was a lot of activity in the higher price ranges of the vacation rental condo market. The Wailea Beach Villas sale was one of two transactions that closed over $10,000,000. It was one of nineteen sales over $5,000,000 and one of ninety-two sales over $2,000,000.
• Kihei was the busiest market with 278 closes.
• Kapalua saw the biggest increase in activity of any area of the island compared to the same period of 2020. The 80 closes as of August 25th are a 615% increase in activity over the same period of 2020.
• Kamaole Sands was the busiest individual condo development for sales. There were 33 condos sold for the year as of August 25th. Honua Kai was the next busiest with 31 condos sold.

Market Outlook for Buyers

As mentioned above, scarcity is a challenge for buyers in this market. The summer did not bring any inventory relief. July and August had the fewest new condo listings since April of 2020. It will be interesting to see if we see more inventory in the fall. Mainland markets are seeing a slow increase in inventory. Is our lack of inventory a reflection of different dynamics in play on Maui, or are we just seeing some lag before we catch up to trends on the mainland?

Might we also see a decrease in demand? A report from Redfin in June indicated demand for second and vacation homes started to shrink in the spring. They cited a variety of factors including decreased affordability and tighter underwriting standards. They also indicated that many that intended to buy a second home already made their purchase.

I can see where affordability could start to impact demand on Maui. Price increases over the year are significant. Those looking for strong cap rates are likely to be discouraged. While rents are up some this year thanks to strong demand, they aren’t quite keeping pace with appreciation. Buyers more focused on cap rate rather than personal use of the condos will be less likely to buy in the current market.

Last but not least, the adverse impact of Covid is not over. Cases are up sharply in Hawaii and hospitals are strained. Some tourists are heeding the governor’s calls to delay visits due to the recent surge. Hotels are reporting cancellations over the next two months. Will that dampen demand at all?

Market Outlook for Sellers

The market outlook for sellers is pretty clear. There is still good to strong demand and inventory is limited. Prices are up. If you aren’t using your condo or you are just looking to cash out, this is a good time to sell. It is worth noting that while the market is supporting strong appreciation, it is still quite possible to overprice your property. Approximately 53% of the current active listings are on the market for over 30 days. If you want to sell quickly, it still makes sense to look at recent comparable sales when formulating a pricing strategy.

Contact The Maui Real Estate Team

Contact The Maui Real Estate Team if you are interested in buying or selling a vacation rental condo on Maui. For buyers, we would be happy to review current inventory options in your price range and keep our ears open for unlisted properties. For sellers, we would welcome the opportunity to give you a free broker’s price opinion on your condo. We look forward to being of assistance.

The Maui Real Estate market has seen a healthy bump in condo sales during 2017. Sales volume for the first five months of the year are about 10% higher than the same period of 2016. Much of that growth can be attributed to the vacation rental condo market in Kihei and Wailea. After a couple of relatively slow years, this year has seen a resurgence of buyers interested in South Maui. I wanted to take a look at the numbers specific to Wailea and Kihei, the condos that are seen the biggest increase in demand, and provide a few thoughts on what might be driving the increase in activity.

Wailea and Kihei saw a 56% increase in vacation rental condo sales between January 1st and May 22nd, 2017 compared to the same period in 2016. There were 173 units sold this year vs 111 sold last year. That increase in activity occurred across all price ranges. Condos priced $500,000 and under saw the most activity with 78 transactions. There were 65 closes during the same period of 2015. The 20% increase in sales compared to 2016 was actually the lowest percentage increase in activity for any price range. The price range from $501,000 to $1,000,000 saw a larger increase in activity with 63 sales compared to 33 sales. That calculates to a 91% increase in sales activity. While the $1,000,001+ price range experienced the biggest percentage increase in activity compared to last year with 38 units sold compared to 13. That is a whopping 292% increase in sales activity.

Wailea Condo Sales
Which condo complexes saw the biggest gains? In Wailea, the increases were across the board. Every single condo complex in Wailea that allows vacation rentals has seen more sales in the year to date than they did over the same period of time last year. That said, there were a few condos that stood out over the others.

Wailea Elua
Wailea Elua is a low density complex with 25 two story buildings located on 24 beachfront acres. Prices in the complex range from roughly $1,000,000 for one bedroom units up to over $3,500,000 for front row, beachfront two bedrooms. The property is valued by owners for its low density, location and beautiful Elua Beach. To say that the start of 2016 was not busy for Wailea Elua would be an understatement. There were no closes by this point of the year. As of the 22ndd of this month, there have been 6 closes.

Wailea Ekahi
Wailea Ekahi is the biggest beachfront complex in Wailea. There are 296 units spread over 54 buildings on 35 acres. It has studio units through two bedrooms in a variety of floor plans. Prices range from the $600,000s for studios all the way up to just under $2,000,000 for two bedrooms close to the beach. Owners like the location, the green belt that goes through the middle of the property, the beachfront pool area and Keawakapu Beach. Ekahi saw decent market activity in 2016 with 5 sales in just under 5 months. There has been double that amount of activity with 10 sales reported this year as of May 22nd.

Wailea Beach Villas
Wailea Beach Villas is home to the highest priced vacation rentable condos in Wailea. The property has 9 buildings on just over 10 acres. Wailea Beach Villas has larger 2 and 3 bedroom floor plans with some units having as much as 2,900 square feet of living space. Prices range from the low $2,000,000s to over $9,000,000. Owners like the bigger floor plans, amenities, newer construction and central location within Wailea. It is situated right behind the shops of Wailea and next to the Grand Wailea. It only had one sale during the first 5 months of 2016. There have been 4 sales to date this year.

Kihei Condo Sales

Kamaole Sands

When I first started in real estate, I met with a vacation rental manager to discuss popular Kihei vacation rentals. Kamaole Sands was the first condo he mentioned. Kamaole Sands has 440 units spread over 10 buildings on 15 acres. It has one, two and a handful of three bedroom floor plans. Prices range from the mid $300,000s up to the $700,000s. Condos located on the “inner circle” green space and condos closer to the ocean sell at a higher premium. Owners appreciate the large green space running through the center of the complex that features a pool, fountains and tropical landscaping. It is located across the street from Kamaole Beach Park III. It is a big complex and it typically has higher occupancy. Over the last few years, there has been an abundance of inventory and relatively few buyers. In 2016, there were just 5 units sold through the first 5 months of the year. This year, there was a clear market shift. Sales increased over 300%, with 16 closes for the year as of May 22, 2017.

Maui Banyan
If Kamaole Sands was first on the list of condos mentioned when I talked to the vacation rental manager, Maui Banyan was mentioned shortly thereafter. There are 256 units spread over 8 buildings on 8.6 acres. There are one and two bedroom floor plans. The popular two bedrooms have a lock off that allow the units to be rented as a studio and one bedroom. Prices range from the $low $400,000s up to the high $600,000s. View and high quality remodels tend to distinguish the higher priced properties. The lock off option, two nice pools, the location across from Kamaole II Beach Park and proximity to shops and restaurants are typically some of the first things that owners mention about the property. In the first five months of 2016, there were only 3 sales. As of the 22nd of May, there have been 11 sales reported for the year to date. That is an impressive 366% increase in activity.

Maui Vista
Maui Vista offers one of the lower entry points into the South Kihei vacation rental condo market. The complex has 280 units spread over three buildings on 8.82 acres. Each building has its own pool and set of tennis courts. There are both one and two bedroom floor plans. Prices range from the high $200,000s for fixer units up to the mid to upper $400,000s for two bedrooms. Maui Vista offers good amenities and close proximity to shops and restaurants. It is a block from Charley Young Beach Park. Maui Vista has seen a little more activity over the last couple of years compared to places like Maui Banyan and Kamaole Sands. It had 7 sales through the first five months of 2016. That said, it was another place that experienced a healthy jump in activity. As of May 22nd, there have been 16 sales reported this year.

Why the surge this year?
While the overall Maui real estate market experienced fairly strong years in 2015 and 2016, the vacation rental condo markets in Wailea and Kihei were not seeing the same strong levels of activity. Inventories were high and sales volumes were low. A significant factor in the slower sales over the last couple of years was a lack of demand from Canada. The period between 2007 and 2013 was an era of stronger Canadian Currency. With the Looney at or near par with the U.S. dollar, Canadians were flocking to South Maui. They remained pretty consistent buyers through the recession. The slip in oil prices in 2014 pushed down the Canadian dollar and a significant pool of buyers shrank considerably.

While that explains why sales have been lower the previous couple of years, I don’t think that speaks to why we are seeing the increase this year. The Canadian dollar is still well below par with the U.S. dollar. We have seen some Canadian buyers start to come back, but it isn’t enough to juice the market to the extent that we have with this year’s sales increases. I did my best to look at the geographic composition of buyers this year in some of the Kihei and Wailea complexes over the last five years. I say that I did my best in that more recent sales within the last month may not show the geographic origin of the buyer yet. With some of the older sales, the condos may have already resold preventing me from seeing where the previous owner resided full time. In Kamaole Sands, just 1 out of the 16 buyers this year is Canadian. By comparison, in 2013, 3 out of 10 were Canadian and 2 out of 4 units sold in 2012 were Canadian buyers. Maui Vista had a few more Canadian buyers this year with 3 out of the 16 sold. That is still well below the 4 out of 7 and 4 out of 10 Canadian buyers we saw at Maui Vista in 2012 and 2013 respectively. The one place where we did see a little more Canadian activity this year was among the higher priced Wailea condos. At Wailea Elua 2 out of 6 buyers were Canadian, and 1 out of 4 buyers were Canadian at both Polo Beach and Wailea Beach Villas.

If the Canadians played only a small part in the resurgence, what were the other factors at play that drove the sales increase? I can’t say definitively, but I would suggest there were a few factors at play. The strength of our feeder markets play a part. Real estate markets in the Western United States remain strong. Buyers coming from strong real estate markets may be empowered both psychologically and financially to purchase a second home on Maui. The stock market continues to achieve near record highs. Strong stock returns may enable buyers to make a discretionary second home purchase. The last factor is pure speculation on my part, but I wonder if the growing strength of the Airbnb brand might also play a role. With Airbnb doing more and more advertising, maybe just maybe that is planting the bug in some people’s ear to consider a vacation rental condo purchase. The last factor that enabled the upsurge is more tangible. We had supply to sell. Home sales volumes are down this year on island, but not due to a lack of demand. There just isn’t enough inventory for buyers particularly in the price ranges below $1,000,000. There was plenty of inventory in the condo market after the previous two to three slow years. In Kihei, there are also some pretty good values. Places like Kamaole Sands are still selling for prices a fair amount below the last market peak.

While the market has absorbed some of the inventory during the first five months of the year, there is still a good selection of condos available to sustain healthy activity in the South Maui condo market. I would suspect that we will continue to see stronger sales this year unless something in the overall economic picture cuts back demand. Contact the Maui Real Estate Team if you are considering a vacation rental condo purchase on Maui. We would welcome the chance to talk to you about some of the options on the market that might fit your needs. You can also search MauiRealEstate.com for the full inventory of Kihei Condos for Sale and Wailea Condos for Sale.

The Maui Real Estate Team has a great listing at the Kamaole Sands Condominiums in South Kihei. This one bedroom, two bath listing in building 9 was completely renovated in 2008. The owners added one of the few central air conditioning systems in the complex, tiled all of the floors, redid the cabinets, added granite counters and recessed lighting. They also installed new appliances and fixtures. The lanai boasts peek a boo ocean views. This condo is a popular vacation rental. It is rented through the onsite program managed by Castle Resorts and augmented through VRBO. This condo is in a fantastic location right across the street from Kamaole Beach Park III.

This Kamaole Sands Condo is offered for $449,900. This condo sold in 2013. Contact The Maui Real Estate Team for assistance with other Kamaole Sands Condos.