South Florida Condo Market Goes From Sizzling Hot to Just Warm
Real-estate watchers in South Florida are predicting a softening of the region’s once-hot condominium market. There’s already evidence of that happening in Miami-Dade County, where the Miami Downtown Development Authority (MDDA) has been tracking the trend.
The Miami Herald, citing the latest study by the development agency on market conditions, reports that a combination of “skyrocketing construction costs, overheated land prices, and falling foreign currencies” is causing Miami’s condo market to cool down.
Let’s look at those factors one by one.
Skyrocketing Construction Costs
“Construction costs continue to rise at unsustainable levels as the demand for tradesmen and skilled workers in South Florida far outpaces the supply,” the MDDA study said. “The continued rise in construction costs is the biggest factor in determining whether currently selling and proposed projects will move forward within the next six to 12 months.”
Falling Foreign Currencies
Miami has long had international appeal, but with weakening global currencies, enthusiasm among Latin American and European investors just isn’t where it used to be, though the study found that interest among Asian and domestic investors was helping to make up the difference.
“A large number of existing renters,” the study said, “are reporting continued rental increase requests from individual condo owner landlords and are considering alternative rental markets due to pricing.”
And it’s not just renters seeing the cost hikes. The average resale price of the city’s downtown condos still went up by $431 per square foot in 2014, a 16 percent increase over resale prices in 2013. But the two previous years had seen increases of 22 percent and 27 percent, a sign that the boom is now slowing.
Options Dwindling For Condo Renters, Expanding For Condo Buyers
The ripple effect throughout the region is something of a mixed blessing. As the Sun Sentinel put it in an article published this February, “If you want to rent a condo or a townhome, your options in South Florida are disappearing.”
That’s because investors who had rented out those units during the housing crisis are now putting the properties back on the market, hoping to capitalize on rising home prices as the economy rebounds.
The Sun Sentinel concluded that while consumers will have a harder time trying to rent a condo today, they’ll have more options available if they want to buy, especially with another wave of condo construction in the region that’s due to put thousands of more units on the market within the next two years.
In addition, the newspaper reports that restrictions on condo loans, put in place by Fannie Mae in response to the recession, are starting to ease. That should be welcome news to developers backing all the building. In the meantime, however, neighborhoods where the condo market was once described as “sizzling” now appear closer to lukewarm.
At the Law Offices of Larry E. Bray, we’ll be watching this and other trends in both the residential and commercial real estate markets in order to guide our clients accordingly. If you have questions about purchasing or selling real estate, or need legal representation in any other way, contact us to schedule a free consultation.