When is a lot of Condo Construction in South Florida too much?

Motivated by weak condo sales, developers are increasingly turning from condo* development to apartments*, which could eventually lead to a glut of rental offerings, experts say.

One Florida research firm states that about 10,500 apartment units have been completed in South Florida in the last 18 months, and another 18,000 apartments are scheduled to be delivered during the next two years.

A Miami Downtown Development Authority report showed that in 2017, Greater Downtown Miami will see more rental apartments delivered than condominiums for the first time ever.

The slowdown in home and condo sales in South Florida has led to an overall decline of 26 percent in residential construction in 2017 so far, compared with the first half of last year.

That in turn has affected the construction business in the three Southeast counties Miami-Dade, Broward and Palm Beach. Consequently, the region’s biggest general contractors have or are shifting their business toward rental apartments, offices, airport concourses, schools, bridges and more.

If the numbers above don't impress or scare you enough – depending on your position on growth – here's more: 

Fort Lauderdale, definitely having "Growth" written all over it's agenda as anyone who lives or works there will agree, has over 3,200 apartments and condos scheduled for downtown alone in various approval stages.

The latest is a 32-story rental tower near Las Olas with 374 units. The developer is hoping for city approval by the end of the year.

Add that to such luxury condo projects on Las Olas such as the Gale, the Auberge and the Paramount, or the planned millennial-oriented, mixed-use development along A1A, to be completed by fall 2020, and one must ask oneself where the choke-point is, or if Fort Lauderdale is already past it.

I would love to hear feedback from you, especially if you know or live in the Fort Lauderdale area – is this growth schedule healthy, insane, inevitable? What's your take?

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(*for non-US readers: condos or condominiums are owned flats, versus rental apartments. – Photo by istock)

Miami's Luxury Housing Market: Headed for a Correction

Back in early 2006, when the mortgage crisis gained breathtaking speed and just as housing prices peaked before they dropped like a brick, I stared in disbelief at the very same headlines as during the ramp-up: "Now is a great time to buy!"

What?

When, at that time, every dachshound qualified for a mortgage and the end of the joyride was visible on the horizon?

Frustrated, I started compiling my own monthly statistics, including a "buyer-seller-disconnect"-index.

Over the years, that combo of monthly data plus my proprietary database of all things modern for sale between Jupiter and Miami, updated daily, became a bit like the canary in the coal mine.

Fast Forward to late summer 2015: for homes above $1.5mm or so, I started to see increasing marketing time, increasing price cuts and increasing listing withdrawals and expirations. It began ever so slightly to smell like trouble in the upper-priced market.

Well, this week the daily newsletter The Real Deal published the piece below, which imho is right on the money. But just because they are not mentioned, please do not believe Broward and Palm Beach counties will fare much better than Miami-Dade.
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Miami’s luxury home sellers could face price cuts up to 20 percent - 
lofty prices have created a disconnect between buyers and sellers

“Market correction” is the phrase that has hung over the heads of many in Miami’s luxury real estate industry over the past year. The global economy, which has led to weakening demand amid rising prices and supply, has left those in the front lines wondering what’s next for the Magic City’s priciest addresses.

It was also the main point of discussion at a Tuesday morning talk hosted by analyst Anthony Graziano and ONE Sotheby’s International Realty President Daniel de la Vega, who met at Brickell City Centre’s sales gallery to share their second-quarter report on Miami’s luxury market.

Supply has begun to pile up. By Integra’s count, tallying prominent buildings in neighborhoods east of I-95, there were 14,804 condos for sale above $1 million by the end of this year’s second quarter. For single-family homes, 10,221 properties were actively listed in that price bracket.

Even so, luxury prices in most neighborhoods were still on the rise, while some saw values explode, according to the report. The largest jump in prices was for waterfront homes in Aventura, which had their average price per square foot rise year-over-year by nearly half to $503 per square foot.

Other neighborhoods showing resilience: Coconut Grove, where average prices for a waterfront home rose 22 percent to $1,064 per square foot, and Coral Gables, which saw its non-waterfront condos grow in value by 25 percent to $550 per square foot.

The takeaway from Miami’s disconnect between sales, supply and pricing, Graziano said, is that the market is facing a correction.

“The sellers have these lofty price expectations that can’t be met,” de la Vega said. That could lead to steep discounts from asking prices, by as much as 15 to 20 percent, both said.

“We’ll see over the next six to 12 months in the single-family market some retreats in pricing,” Graziano added.

De la Vega cautioned, however, that opportunists waiting for values to drop further than 30 percent would be out of luck. The global financial factors that depressed Miami’s luxury sector, like weak foreign currencies and stock market volatility, have begun to show signs of improvement, Graziano said.

He said the conclusion of this year’s U.S. presidential election — no matter who takes office — will also alleviate some hesitancy among high-net-worth individuals.

The uncertainty now is how a new president will affect issues like taxation and succession concerning real estate for foreign nationals.

As outlined by the most recent Knight Frank Wealth Report, which surveyed private bankers financial advisors, those issues topped the list of concerns for ultra-high-net-worth individuals at the beginning of this year.

Personal real estate is also not an investment they take lightly: the Knight Frank survey showed the ultra-rich typically stow 24 percent of their wealth in first or second homes.

However, many Latin American countries are still facing political and economic strife. Venezuela in particular has been hit harshly, with middle class families waiting in long lines for groceries amidst a food shortage.

“I suspect that it’s going to be lumpy for the remainder of 2016,” Graziano said.
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via The Real Deal, published 16 Aug 16