Bloomberg Business reports that the pace of Miami’s new condominium sales have fallen dramatically this year:
Downtown Miami’s luxury-condo boom — fueled by buyers from Latin America and Europe willing to pay half the purchase price up front — is becoming a casualty of the year-long climb in the U.S. dollar. Diminished purchasing power and rising prices are holding back the overseas investors that make up the bulk of sales at new towers, cooling a frenzied market. In response, developers are delaying projects, lowering down-payment requirements and turning their focus to Americans.
South Florida had a higher share of international homebuyers than any U.S. market last year, led by purchasers from Venezuela, Argentina and Brazil, according to a survey released in April by the Miami Association of Realtors. Those countries, along with Russia and parts of Europe, have seen their currencies plunge against the dollar amid political and economic unrest.
Does this abrupt slow down indicate that Miami is looking at another major down-turn? I don’t think so, and neither does Carlos Rosso, president of Related Group of Florida’s condo division:
“Everybody is looking at Miami and saying when is something bad going to happen?” Rosso said. “And I say this is a different market. You’re not going to have a bubble burst.”
While developers are currently lowering their down payment requirements, the bulk of the units under construction were sold with the 50%-plus down-payment requirements, minimizing the risk of people walking away from their deposits as happened during the real estate melt-down.
What we are seeing is a much needed stabilization of the market.
Developers have broken ground on more than 7,600 new condo units since 2011, when construction resumed after the last crash, according to a report scheduled for release next week by the Miami Downtown Development Authority. After starting 16 major downtown towers in 2014, builders began work this year on just one. Sales of new condos slowed and prices flattened in the first quarter, the report showed.
More than 3,000 condo units planned for construction are at risk of delay, said Anthony Graziano, senior managing director at Integra Realty Resources Inc., which prepared the report.
The Miami Downtown Development Authority’s report released earlier this year also predicts project delays while existing new-construction inventory is absorbed, but states that this makes for a healthier market:
We will most likely see the first “shelved” condo project of this cycle within the next six months. This is actually a sign of a healthy market as the market is determining the success of each project in the pre-sale phase rather than having a highly leveraged product completed and delivered to market substantially unsold. Significant levels of unsold inventory delivered to market typically force distressed pricing. Shelving the development plans before construction commences is not failure, it is prudent.
Most encouraging, in my opinion, is that lowered deposit requirements coupled with a stronger U.S. economy means an increase in domestic buying – particularly for owner-occupied units. An increase in owner-occupied residences in the Greater Downtown Miami area will help fuel further growth in retail, commercial services, entertainment, and the cultural arts. Maybe even a Miami MLS stadium?