Aloha!Most places in the world that have any kind of coastline boast of a little known island or corner of the country that people refer to as, “the Hawaii of…” China has one in Hainan Island. In South Korea it’s Jeju. Spain has the Canary Islands. That simile has been made time and again because the original Hawaii is really like nothing else in the world. The difference between Hainan and Hawaii is like the difference between Italian food from a chain restaurant headquartered in Omaha and trattoria dining in Florence. Close, but no cigar.

Hawaii is amongst the world’s most popular vacation destinations. Its mix of urban life, rich local culture and history, independent spirit and volcanic beauty have made the last state of the union (1959) a favourite with travellers for years; surfers flock to Maui to tackle “Jaws” — the beach also known as Pe’ahi for its massive waves. The island state is also experiencing something of a pop culture renaissance, featured as it was prominently in Lost, Hawaii Five-O and the Oscar-nominated The Descendants. The state has one of the most ethnically diverse populations in the United States, if not the most diverse, and it is the only state with nearly comprehensive health care for its 1.4 million residents.

Tourism remains Hawaii’s bread and butter economically, and Honolulu is its gateway. But the tourism sector is augmented by defense, research and development and manufacturing, and given its strategic geographic location, a good amount of trade. And like most gateway cities with a heavy tourism component, property investment is common.

There is a distinct pattern of Hong Kong investors purchasing properties in Honolulu’s luxury sector. As in other markets prices dropped off in 2008. Post-peak prices are sitting at around 30 percent across the country, and at around 15-20 percent off peak in Honolulu, so “bargains” can be found. The lack of a direct flight from HKG to HNL hasn’t scared buyers away, but as Patrick O’Neill, CEO of ONEILL Group Hong Kong, points out, “There are direct flights between Beijing and Shanghai … So the Mainland visitor count has almost doubled every year for the last four years.” They’re buying properties too. “There are long historical ties between Hawaii, Hong Kong and China. Sun Yat-Sen went to school here, Stanley Ho has a major property here, Patsy Ho is also developing some properties here. There’s a big connection. And it goes back quite a bit as far as merchants and so forth. So there’s a generational and historical tie between the two [cities].”

Net rental yields in Honolulu are fairly low because of high land values, but a recent 6 percent guarantee leaseback from Trump Waikiki — located in the city’s prime tourist district — was a huge hit. But Honolulu investments stand out for Asian buyers for a host of reasons that reach beyond rental returns. “There’s a use component as well as an investment component. [Some buyers] plan on coming once or twice a year, perhaps bringing children during the summer for summer school and there’s safety associated with investing in the United States, both bodily and financial,” O’Neill theorises.

Like New York and San Francisco, Honolulu is an international city and as O’Neill sees it, international purchasers are currently one of the market’s biggest drivers. “The currency exchange is a huge influence where it applies. The Yen for example … compared to 2007 there’s a 45 percent difference in the Yen to dollar. That’s a tremendous amount,” he states. And regardless of where the markets may be right now, Honolulu is primed for some shifts in the near future. Sales volume is steady, but in prime locations like East Honolulu demand is high and not that much is coming onto the market to keep up with it. Upward pressure on prices down the road is likely and bargains won’t linger forever. “I remember several property cycles and several economic cycles and this is not that bad!” O’Neill comments of the current financial quagmire that has everyone in a tizzy. “I often talk with people and ask, ‘Did you buy real estate in Hong Kong in 2003?’ Think about the people that did … These are just cycles and it’s not the end of the world.”

All investments ultimately come down to what the investor wants or needs from a purchase. When it comes to Honolulu, part of the appeal can be found in something as prosaic as feeling at home. “The majority of the population in Hawaii is of Asian descent. So it feels and lives like an Asian city,” O’Neill begins by way of explaining the increasing lure of Honolulu. “It’s the United States. People want their kids to go to school here. Hawaii has some of the best schools in the country. Barack Obama went to school at Punahou and Sun went to Iolani. They’re Ivy League feeder schools. That’s a major driver. Lastly, is its iconic natural beauty,” he finishes before adding one final remark. “It’s just stunning.” Enough said.