Outside the bases , significant development is taking place along Route 3 in Dededo and Yigo due to the construction of the new Marine Corps Base and other facilities at Andersen Air Force Base .
Real Estate
Playing
the real
estate game on Guam
By Frank Whitman
Guam real estate transactions in the third quarter of 2023 totaled $ 116.3 million - nearly 15 percent less than total transactions during the same period the previous year . The drop is likely little surprise to anyone following financial news .
Siska Hutapea , president and founder of Cornerstone Valuation Guam Inc ., included that information in a representation she released recently titled “ Guam Real Estate Update : The Environment , The Game , and How Do You Play It .” According to Hutapea , the Guam real estate market is currently impacted primarily by rising interest rates , rising median prices , rising costs , limited supply and tedious permitting .
As recently as 2021 , a 30-year fixedrate mortgage could be had for as little as 3 percent . By Sept . 28 , the rate had risen to 7.3 percent , making a real estate purchase significantly more expensive .
“ When the interest rate was at 3 percent , with a $ 2,500 monthly payment for principal and interest , you could buy a house at $ 600,000 ,” Hutapea told the Pacific Island Times . “ But now , the interest rate is at 7 percent . With the same payment , you ’ re only going to be able to get a $ 300,000 house .”
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According to Hutapea , the median price of a residence five years ago was about $ 269,450 . It increased to $ 420,000 in 2022 , though it dropped to $ 415,000 as of Sept . 28 , 2023 . “ It ’ s down more because the buyer affordability is curbed because of the interest rate .”
The cost of new construction on Guam has nearly doubled recently . A fast-food outlet currently under construction in central Guam will cost about $ 879 per square foot . “ This used to be like $ 400 for a really quality commercial space ,” Hutapea said .
The labor demands of contractors currently building $ 8 billion to $ 10 billion worth of facilities for the U . S . military in Guam have played a part in an ongoing scarcity of workers . “ The most impact that the military did to us is the unavailability of contractors to build outside the gate ,” she said . “ They absorbed all the construction company capability .”
The limited number of properties for sale in the market — due in part to the impact of the military construction — also pushes prices upward , she noted .
Outside the bases , significant development is taking place along Route 3 in Dededo and Yigo due to the construction of the new Marine Corps Base and other facilities at Andersen Air Force Base .
The government of Guam has started streamlining its process for issuing building permits that can be inconsistent and tedious and often falls to understaffed departments with overlapping responsibilities .
The interpretation of the rules is seldom straightforward , she said . “ It ’ s always ‘ EPA interprets it like this ; the contractor interprets it as this ,’ That ’ s why the idea of having a concierge , someone who understands the whole process at Adelup to help speed up this process , would be a really good idea .”
A task force to reform the permitting process , headed by Lt . Gov . Joshua Tenorio , has issued a request for proposals for a system to automate permitting . The RFP , however , is currently under protest in the government ’ s procurement quagmire .
To benefit from a purchase in today ’ s market , buyers will have to increase the income the property generates and / or reduce expenses , Hutapea said .
One way to generate more income from an existing property is to increase its value by renovating it , she said .
Buyers might also benefit from a tax deferral under Internal Revenue Code Section 1031 . An example of a “ 103 exchange ” would be if a buyer bought a property for $ 1.2 million and then resold it at $ 2.6 million . “ So they technically made $ 1.4 million in capital gains ,” Hutapea said . “ You ’ re supposed to pay 20 percent out of that , which is $ 280,000 . Instead of paying the tax , you could defer the sale and then buy another property , a like-kind property , and then you don ’ t have to pay the tax , it ’ s just deferred .”
Builders might reduce costs by “ value engineering .” – cutting back where
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