Honolulu attorney Norman Cheng of Starn O'Toole Marcus & Fisher is observing a significant shift in Hawaii's real estate market, driven by two primary factors: the escalating risks associated with sea-level rise and the complexities introduced by tariffs. These elements are causing a ripple effect throughout the market, impacting deal structures, property valuations, and the long-term viability of coastal investments.
Concerns over sea-level rise are particularly acute in Hawaii, where many properties are located in vulnerable coastal zones. This has led to increased scrutiny of coastal properties, with potential buyers and lenders demanding comprehensive assessments of erosion risks and potential property damage. According to a recent study, "Sea level rise risk interactions with coastal property values: a case study of O‘ahu, Hawai‘i" NSF Public Access Repository, sea-level rise is associated with relatively lower property values. Cheng's observations underscore the need for enhanced due diligence, including utilizing tools such as the Hawaii Sea Level Rise Viewer to assess potential risks. The firm also advises clients regarding Hawaii’s Coastal Zone Management Act (HRS chapter 205A) and new regulations designed to address sea-level rise, as detailed on the Starnlaw.com website.
The impact of tariffs on construction materials and other goods further complicates real estate transactions. Increased costs can affect project feasibility, particularly for developers operating on thin margins. This dynamic necessitates careful financial planning and a thorough understanding of global trade policies. These challenges are not only affecting new developments but also impacting existing homeowners and investors who are considering renovations or improvements to their properties.
The confluence of these factors requires real estate professionals in Hawaii to be especially astute in their assessments and deal structuring. Investors and buyers need to factor in not only current market conditions, but also the long-term risks associated with climate change and global economic uncertainties. This new reality demands a sophisticated approach to real estate that incorporates legal, environmental, and financial expertise.
