Q:

How is the price of Hawaiian real estate determined?

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Quick Answer

The price of Hawaiian real estate is determined by the law of supply and demand, size, location and the amount of land belonging to the property. Housing prices in Hawaii were driven primarily by U.S. mainland buyers during the period between the mid-1970s until around 2008, according to a 2011 economic letter from the Federal Reserve Bank of San Francisco.

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The exception to the domination of the U.S. market was during the mid-1980s, when housing prices were driven by Japanese home buyers.

Because of its climate and location, Hawaii has one of the most expensive real estate markets in the nation. In general, two kinds of property ownership exist in Hawaii: leasehold ownership and fee simple ownership. With leasehold ownership, a buyer purchases and owns the property and any improvements on the land but not the land itself. Lease terms for the land generally last for about 55 years, as of 2014, after which the terms must be renegotiated by the land owner, who is not obligated to renew the lease. The upside to purchasing a leasehold property is that it is usually less expensive than a fee simple purchase. In a fee simple purchase, the buyer owns the land and all the property on it.

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