If you’re looking for a condo in Miami, you have an abundance of options at your fingertips. Several factors have led to a buyers’ dream in the city’s condo market, including a combination of fewer foreign buyers, more inventory, and falling prices.
Foreign Buying Power Declines
The high-end real estate market in Miami has slowed down significantly in the past several years thanks to shifting economic situations in South American countries.
Miami’s real estate sector, particularly the luxury portion of it, is highly dependent on non-local buyers. Foreign nationals are an especially important buyer demographic. Beginning with Cuban refugees in the late 1950s, Latin Americans have flocked to the Miami metropolitan area for decades.
A shift from low-rise properties to condo development in Miami started in the early 2000s, and Latin Americans began to see Miami real estate as a safe investment, often purchasing condos in cash. Although things slowed during the 2008 real estate market crash, many Latin Americans, as well as buyers from Europe and the U.S., returned as the market recovered.
Currently however, Argentina, Venezuela, and Brazil – where many of the buyers were historically from – are in the midst of economic crises that have seen their currencies devalued, leaving purchasers from these countries with diminished buying power in the U.S.. Furthermore, due to a strong dollar, international buyers who own existing units are now looking to sell, adding to the already skyrocketing condo stock in the city.
Influx of Inventory
Alongside decreased purchases by foreign buyers, the Miami condo market began to explode with new developments. According to the ISG World 2019 Miami report, since the last economic downturn, around 20,000 new units have been constructed or are being planned for the Miami area.
Some communities with many new condo buildings are reporting there are close to two decades’ worth of inventory for condos that cost $5 million or more.
An Integra Realty Resources report showed that condo listings more than doubled for the greater downtown Miami area between December 2013 and December 2018, increasing from 1,591 to 3,663 during that time.
Current numbers show that in the first quarter of 2019, Miami Beach saw 691 condo sales, representing a 24% decrease from the first quarter of 2015 when there were 909 sales. In comparison, sales of single-family homes in the same period declined from 117 to 81.
As the condo market has so many available options, buyers aren’t feeling a time crunch, allowing them to shop around longer, consider their wants and needs more closely, and negotiate for prices below listing value.
Real estate agents in the area have also noted a significant decrease in the number of showings they’re conducting, moving from multiple showings per week to fewer than that per month.
Facing the Challenges
Two strategies are helping the Miami real estate sector deal with some of the challenges the city is facing.
New condo projects are being canceled or put on hold to relieve any additional pressure on the market until the slow pace picks up. The hope is that this will prevent any further increase in new condos being listed competing with those already on the market, which might also give buyers more reason to stall their purchases and buy at lower prices.
Another tactic is to go after domestic buyers who may be interested in taking advantage of Miami’s buyer-friendly market. Sales teams for a number of developers are traveling multiple times a month to various regions of the U.S. to encourage interest in purchasing property in Miami. Previously, sales teams would have been traveling to Latin America and other countries for this purpose.
Attracting wealthy buyers from states like New York and California, which have higher taxes, is also part of the plan to help offset the waning interest from Latin American buyers. However, it could take some time for domestic buyers to fill the void of international buyers, as many are coming to the Miami area to shop around for real estate, but aren’t always quick to purchase.
Positive Trend in One Part of Market
Despite the challenges faced by the Miami condo market, luxury single-family homes in Miami are experiencing an upward trend. Many out-of-state buyers are opting for large homes in the 305, as they feel these properties will offer better value than large homes purchased in the cities and towns in which they currently reside.
For example, in the Miami Beach area, the median price of a single-family home in the first quarter of 2019 was $1.65 million. This is an increase of almost 18% from the first quarter of 2018, which had a $1.4 million median price. Inventory has been decreasing, going from 805 in 2018 to 783 more recently, undoubtedly driving the single-family home price increases.
Even higher-end single-family homes that have been sitting on the market for many years are now being sold, although often the prices for these have been reduced.
By curbing new condo construction, expanding the search for out-of-state buyers, and learning from the positive trends experienced in single-family home sales, Miami is likely poised to see a recovering condo market in future years.