You may have heard some rumors about the resurgence of South Florida’s condo market over the last two years. This is very true with approximately 400 new condos left unsold as of the first quarter 2014, according to condovultures.com. As many of the 25,000 or so newly built condos of the 2005-2007 boom were delivered and rented out or sold in bulk deals to large cash investors who then rented out their units and have been disposing of them on incremental levels as the market has rebounded steadily, a new wave of pre-construction condos is in the works. In fact, this same source projects another 25,000 condos in South Florida spread out over 183 projects. Of these, four have already been completed and another 46 are currently under construction.
While it’s inevitable that all of the proposed projects will not be built, the appetite by developers to build again in such quantity just a few years removed from South Florida’s condo crisis is incredible. Buyers in large are being required to put down at least 50% deposits, whereas the last boom required typically a 20% deposit from a buyer. This shifts much more of the burden onto the buyer, rather than the developer. It does not appear that the real estate consumer has a long memory either, as that consumer now has a much larger financial risk should a project fail.
A few thoughts to point out relative to this new condo boom that I have noticed are as follows: 1) this boom just like the last one is being fueled primarily by foreign money, 2) In the Miami Central Business District (Brickell and Downtown submarkets) pricing for new projects is in the $500 - $550/square foot neighborhood, as compared to the $300-$350/square foot neighborhood in the last cycle. Many projects are also selling well above $1,000/square foot, which was rare in the past, 3) developers are focusing heavily on providing ultra-luxury large units which was not the case in the last cycle in which developers built lots of smaller, 2-bedroom condos, 4) the last cycle witnessed condos being built in areas with no new real estate or economic activity (read, Edgewater east of Biscayne Blvd.), whereas this time around there has been a lot of new infill retail development in many of these areas since the last cycle, 5) pricing has reached as high as $5,000/square foot for penthouse condos in new projects in mid-Miami Beach. I see this as a huge risk for a buyer who is shelling out millions of dollars for something they haven’t even seen yet and won’t be able to touch for several years. This last point also leads me to write that purchasing a beautiful waterfront residential house on Miami Beach for $1,500/square foot (very achievable) seems like a comparative bargain by comparison; however, the profile of the typical condo buyer (part-time resident) versus single-family home buyer (primary residence) is quite different.
The Achilles heel for South Florida in my opinion and Miami in particular, is the local government’s lack of infrastructure improvements. This lack of planning and engagement leads to traffic that is the worst it has ever been. There is no way this can be rectified or alleviated in the short term, so it is the cost that Miamians will have to bear as the city becomes much more dense. The good news is that our city leaders are also caught up in the same traffic jams and no one can ignore it, so the hope is that this issue is being recognized and will be addressed in order to keep the quality of life in this city high as it continues to evolve and attract new residents.
By: Ben Moss
Estate Agent | ONE Sotheby’s International Realty
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