By Siska S. Hutapea
Hutapea
Our economic pillars — tourism and military-related construction activities — are at two extreme ends. Tourism, primarily due to the strong U.S. dollar, has continued to drag on. Tourism is arguably the one that spins the wheel of our local economy. The construction industry includes annual billion-dollar activities; however, the high profit margins and the labor expenses do not stay in Guam. The majority of construction companies ship their profits to off-island headquarters and the more than 5,500 H-2 workers also remit their money off-island.
Overall, Guam’s real estate sales volume in 2024 went down slightly by 3% from $472.2 million in 2023 to $457.4 million. Recent peaks were in 2021 and 2022 at $600 million. The interest rates and drought in supply caused the decline.
More shocking is the activity in real estate lending. Total real estate mortgages recorded in 2024 were down significantly by 32% compared to 2023. This trend started in 2022, with the rise in interest rates. Real estate lending in 2024 reflects only $338.6 million. Two credit unions took the lead followed by three traditional lenders. The Pentagon Federal Credit Union grabbed the lion’s share with $79.6 million in transaction volume. The winding down of the shock of higher interest rates and the necessity to borrow will likely increase lending activity in 2025. One thing to note too is that the U.S. Small Business Administration Economic Injury Disaster Loan due to Typhoon Mawar still includes a significant amount in 2024 with 118 loans at a total of $20.7 million. The Typhoon Mawar EIDL loan at a 4% interest rate totals $104 million with 674 transactions between 2023 and 2024.
Residential real estate sales volume continues the downward trend from the 2021 peak, down by 4% to $330.7 million in 2024. The decrease was mainly contributed to by the decrease in condominium sales activity that went down by 26% to $85.6 million. The single-family dwelling sector is up by 8% compared to 2023 at $245 million.
The median price of single-family dwellings reached its peak at $427,563 in 2024, up by 7% compared to 2023. As a matter of fact, the median price of single-family dwellings has doubled since 2014 when the median price was $213,625.
Lack of supply of readily developable land is still an issue, increasing the median price of land in Guam to $100,000, up by 8% compared to last year. The military buildup has been ongoing, but it’s not too late to revisit the concept of master planning for the next five to 10 years. Linking the buildup to the development of much-needed infrastructures in Guam will create synergy, expanding developable land and alleviating housing pressure by increasing supply. It’s a win-win for both the military and the people of Guam. This policy can truly bring the spirit of One Guam to life. Remember, our first love affair with the military buildup was centered around infrastructure development, and we continue to benefit from Marine Corps Drive every day. This same synergistic approach can be applied to address other growing needs, such as in education facilities, utilities, healthcare and more.
Another issue worth revisiting is the housing solution for temporary workers, as we are approaching close to 6,000 H-2 workers in Guam. Long time planner Daniel D. Swavely shared that there were 333 permits issued by the Department of Public Health and Social Safety for Temporary Workers Housing Facility — and more than 300 of these permits were issued to facilities that are not barracks. This removes housing units from the local market. Current zoning laws only allow TWHFs in the M1 zone as conditional use. Obtaining a building permit, after submitting a GLUC application, takes approximately eight months — an unacceptable delay given the immediate need for these facilities. I can think of two possible solutions, though controversial, changing the law to permit TWHF as a use in the M1 zone or constructing the TWHF on military land.
The year 2025 will reveal the Trump Effect on global, national, and local economies. The impact on housing includes expected decreases in interest rates, along with potential deregulation and tax cuts, which could free up more funds for housing. Although these two factors may improve affordability, they could also unintentionally lead to price increases, as occurred in 2021.
The top 20 real estate transactions in 2024 see both new and existing investors. The Starts Guam Golf Resort sold in January 2024 for $24 million and reopened as Finest Guam Golf Resort in October 2024 following a nine-month renovation. The golf course is now the first Korean-owned golf course in Guam. Additionally, Macheche Plaza and the Goody’s Sporting Goods building are two prominent commercial buildings that changed hands in 2024; both bought by local buyers. More land in the Route 3 vicinity was also sold in 2024. The list is included as follows.
I’m currently reading a wonderful book by Tish Harrison Warren, Liturgy of the Ordinary: Sacred Practices in Everyday Life. She writes, “Everyone wants a revolution. No one wants to do the dishes. I was, and remain, a Christian who longs for revolution, for things to be made new and whole in beautiful and big ways. But what I am slowly seeing is that you can’t get to the revolution without learning to do the dishes. The kind of spiritual life and disciplines needed to sustain the Christian life are quiet, repetitive, and ordinary. I often want to skip the boring, daily stuff to get to the thrill of an edgy faith. But it’s in the dailiness of the Christian faith — the making the bed, the doing the dishes, the praying for our enemies, the reading the Bible, the quiet, the small — that God’s transformation takes root and grows.”
I see a parallel in real estate investing based on my years of watching Guam’s real estate activities. Successful, reputable real estate investors in Guam have the discipline and resilience to excel in their daily practices. They consistently revisit their systems, seek opportunities despite market conditions, and adapt to shifting parameters. Also, they ensure their bottom line makes sense, maintaining financial safety nets to weather tough times, enabling them to bloom during the good times.
Of course, I can’t emphasize enough the importance of due diligence. I’ve seen too many investors who, eager to be edgy, fall flat in their unmet expectations. It’s in the ordinary, day-to-day practices —the boring, repetitive tasks —that wealth-building happens. – Siska S. Hutapea is founder and president of Cornerstone Valuation Guam Inc., a real-estate valuation and advisory company. She is a member of the board of directors of the Guam Economic Development Authority.
