The environmental effects of global warming can be felt around the world. Yet the additional important after-effects of this phenomenon tend to slip under the radar. One of these is a major change in the real estate investment world. As more and more lands that once were fertile become barren, and once safe territories become hazardous due to the risk of natural disasters, the search for lands with higher potential gains momentum.
While in regions close to the equator, these changes are manifested in climate instability, in areas close to the poles we mainly witness a rise in temperatures. This, of course, has a destructive effect on icebergs. Nevertheless, it also means that regions that were once too cold to be widely used for residential and commercial needs, are blooming. One of these regions is Alaska.
Is it a good idea to invest in Alaska’s real estate market? What are the benefits, and what are the risks? According to Ofir Bar, a veteran real estate investor experienced in global markets, there are multiple considerations needed to be kept in mind before deciding to enter this market.
The Last Frontier?
Alaska’s housing market is strong in many areas of the state. Investors have the choice to buy or sell properties in both urban and rural areas. However, there is a vast shortage of housing supply. This has multiple reasons. In Anchorage, for example, this has been caused by a long recession that started about three years before the pandemic erupted (and, needless to say, the pandemic didn’t help here). Only 200 new single-family houses were built during this time period. Aside from the fact that sellers see an influx in interest in properties, those who wish to buy are likely to confront fierce competition.
Potentially, there are vast territories good for real estate investments in Alaska, for both commercial and residential needs. However, a very small percentage of these are currently held by conventional private ownerships. It seems there are some obstacles that deter investors from placing their bets on Alaskan lands. Most of these are owned by the state, the federal government, and indigenous groups – and all of these have no interest in selling territories.
Any land that is auctioned off by the state in annual, sealed-bid land auctions is available first only to residents of Alaska. Non-residents interested in buying the leftovers are offered by the DNR (Alaska Department of Natural Resources) to buy lands at a fixed price. Moreover, some parcels aren’t permitted for commercial use by Alaskan legislation or aren’t appropriate for commercial use.
Many of the available lands for sale in Alaska are remote and are on harsh terrain – made of rocks or covered with swamps. In addition, a large portion of these are far away from the nearest civilization – some of them don’t even have road access.
While Alaska’s tourism is continuously growing, tourists still tend to visit only developed areas of the state. Many of them mobilize using planes or cruises, and very few are highway travelers. Moreover, many tourists come to Alaska with a fixed plan for their visit. This might make investing in commercial real estate for tourism purposes even less worthwhile.
The Alaskan climate is also an obstacle. On the one hand, the local weather tends to be predictable and dependent. On the other hand, the low temperatures and short time periods of daylight still cause many to abstain from visiting – let alone immigrating to – Alaska. Therefore it’s less attractive to investors.
“Better opportunities are yet to come”
It seems the challenges set by the real estate market in Alaska are real obstacles for new investors. However, if one wishes to invest in this market anyway, they ought to take some actions in order to maximize potential:
- Conduct proper environmental tests.
- Line up the services needed to clear the asset of any debris or vegetation that one looks to get rid of.
- Examine zoning laws and request changes if needed.
- Take into consideration aspects such as livability, access to utilities & amenities, commercial practicality, and distance from civilization.
In 2016, the Trump administration began transferring millions of acres of federally owned land in Alaska to state and private ownership, yet the transfer hasn’t yet been fully enacted. For this reason, among the rest, the Alaskan real estate market is nowadays raising worldwide curiosity. However, Ofir Bar believes that rushing toward it right now might not be a great idea for most investors. “For now, investing in this market should be done after careful planning. Investors ought to consider waiting a bit more before taking this step, because I believe better opportunities are yet to come.”
