With wealthy buyers from the U.S. mainland helping Hawaii’s luxury real estate market take flight, the return of international visitors is expected to create additional runway for what is already shaping up as an unprecedented market.

“The number of visitors directly correlates to real estate prospects. Despite all the hype of buying unseen, the majority of buyers are going to want to buy what they see,” said Matthew Beall, CEO and principal broker of Hawaii Life, a real estate firm.

While international buyers haven’t come back this year, Beall said buyers from the U.S. mainland have been driving record sales of luxury homes, over $3 million, and ultra-luxury homes, over the $10 million mark. One reason is that there are more mainland visitors than in the past, and another is the increasing acceptance of remote work.

Beall anticipates that the return of international travelers will spark additional demand for Hawaii luxury real estate, albeit not to the same degree as the return of domestic travelers did. “You have increased wealth throughout the world and pent-up demand,” he said. “Those factors will definitely come into play (for the international market) — no question about it.”

The Biden administration’s international air travel policy started Monday. The new policy allows entry for foreign nationals and U.S. citizens who provide proof that they are fully vaccinated and submit a negative COVID-19 test taken within three days of traveling to the United States.

The new international guidelines add a vaccination requirement for international travelers from Japan, Canada, Korea, Taiwan, the Philippines and Tahiti — all already part of the state’s Safe Travels Hawaii program. At the same time, the guidelines create a pathway for international travelers from other nations to bypass Hawaii’s travel quarantine.

Those changes aren’t expected to bring an immediate rush of returning international travelers to Hawaii similar to that underway in some other states. Many countries, like Japan, which supplies most of Hawaii’s international travelers, still have strict COVID-19 reentry requirements.

Beall said during the first three quarters of 2021, there were 634 luxury home transactions (over $3 million each), up nearly 195% from 215 during the same period in 2020. He added that the size of the luxury market grew to nearly $3.7 billion — a gain of nearly 235% from slightly more than $1.1 billion in home sales recorded during the first three quarters of 2020.

Hawaii’s ultra-luxury market — homes over $10 million — tallied 64 transactions in 2021 compared to only 10 in 2020. Beall said the size of Hawaii’s ultra-luxury market in 2021 grew to over $1 billion in the first three quarters of 2021, up from $151 million the previous year. “That’s the most (ultra-luxury sales) we’ve ever had,” he said.

Beall said most of Hawaii’s luxury market growth has occurred on Maui, Kauai, and Hawaii island, and less so on Oahu, which is more dependent on international visitors than the neighbor islands. He said Oahu showed the lowest amount of growth in the luxury segment, amounting to only 28% of the statewide transaction volume and 23% of the statewide dollar volume. In the ultra-luxury segment, Oahu only accounted for 9% of the transactions and less than 9% of the total dollar volume.

In comparison, Maui, which is the state’s most popular island for U.S. mainland visitors, had the overall largest luxury market size in 2021, accounting for 34% of the total dollar volume in the state.

Moe Matsuda, vice president and broker in charge of Sachi Hawaii – Pacific Century Properties LLC, said while neighbor island high-end markets have been really busy, often with buyers from the mainland, “with us being a boutique, and sort of our niche is international clients, we have not been as busy as I would have liked to have been.”

While international visitors are expected to further boost Hawaii’s luxury real estate market, Matsuda said it could take some time to reap the full benefit. “We’ve been hearing early next year, definitely not this year,” she said. Matsuda added that this is especially true for Japan.

“The Japanese buyers can come in, but when they go back they have to still quarantine,” she said. “Most people, they don’t have the ability to take off from work that long so I think that’s been the hindrance. Until they change that over there, I don’t think there will be a lot of people traveling.”

Eugene Tian, Hawaii’s chief economist, said U.S. visitor arrivals to Hawaii since May have been fully recovered compared to the same months in 2019. By comparison, he said, recovery of international arrivals during that period added up to only 6.3% of the 2019 tally.

“It will take a few years for international visitors to recover to the 2019 level. I expect that U.S. visitors will be fully recovered to the pre-pandemic level (2019) in 2022, but international visitors will be still falling behind,” Tian said.

Lagging international arrivals are part of the reason that the state’s current projection for visitor arrivals in 2021 is 6.8 million and 8.8 million in 2022. That’s still far short of 2019 when Hawaii ended the year with a record 10.4 million visitors.

Still, Tian said by year’s end Hawaii could begin to see some improvement as a result of the new federal guidance for international travelers.

“According to the most recent airline schedule, we will see more international visitors coming to Hawaii starting in December, mainly from Canada,” he said. Further, more flights are being scheduled in January 2022 from Japan, Australia, and Korea.

Hawaiian Airlines spokesman Alex Da Silva said in an email statement that the new international entry rules help give travelers confidence.

“We are seeing strong interest for travel to Hawaii from places like Australia since we announced the resumption of our Sydney- Honolulu flights beginning in December,” he said.” We expect to see similar pent-up demand in other international markets as restrictions are further relaxed.”

Prior to the pandemic, Hawaiian carried more international visitors to the state than any other airline, Da Silva said, adding, “We look forward to maintaining that leading position, keeping more tourism dollars in Hawaii and helping drive our state’s economic recovery.”

A walk down Kalakaua Avenue, where T-Galleria by DFS and other businesses cater to the international visitor market, makes obvious the importance of international visitors to Hawaii’s tourism industry.

Honolulu Star-Advertiser calculations using data from the state Department of Business Economic Development &Tourism also point to the importance of international travelers for Hawaii real estate.

During the first two quarters of 2019, foreign buyers made up nearly 3% of all Hawaii real estate transactions, while mainland buyers accounted for 16.9% and local buyers comprised 77.5%.

In the first two quarters of 2020, local buyers dominated the Hawaii market, accounting for 79.8% of all Hawaii real estate transaction. In comparison, mainland buyers purchased 17.9% of the homes and foreign buyers 1.8%.

However, during the first two quarters of this year, mainland buyers comprised nearly 24.4% of the transactions, while the percentage of transactions bought by local buyers dropped to 74% and foreign buyers made up just 1.6%. Regarding that dip in sales, Matsuda said, “We are hoping once (international tourism) restarts it will … get busier and take off again with the international buyers.”