Another Bubble Has Burst: The Miami Luxury Condo Market Is A “Ticking Timebomb”
Last year we warned that the luxury condo market in Miami was cooling down, and we also noted that one of the mail culprits was the fact that foreign buyers (especially Brazilians) were seeing their buying power crushed by the appreciating dollar.
Today, the bubble has officially burst and the Miami luxury condo market is a complete trainwreck. There are 3,397 condominiums available in the downtown Miami area, and at current prices it is estimated that it would take 29 months to sell those. A strong US Dollar has continued to force South American investors to unload recently built condos, adding inventory to an area where 8,000 units are under construction and nine towers have already been completed since 2013.
Purchases from January through April fell 25 percent from the same period in 2015, and average prices have fallen 6 percent on a per-square-foot basis according to Bloomberg.
And prices will continue to slide…
“The problem is that investors are no longer buying, and now they’re going to be looking to sell. And what buyers are going to replace those other than vulture buyers looking for deals.” said Jack McCabe, a housing consultant based in Deerfield Beach, Florida.
During this latest construction boom, projects required cash deposits of as much as 60 percent, and contract cancellation had stiff penalties. Due to this, some investors have been able to cover costs as they wait to sell by renting the condo’s out, but that isn’t a viable option for everyone either, as apartment vacancies have been on the rise as well.
“The ticking time bomb is based on rental rates. When some of the foreign investors sitting on the sidelines have to dig into their pockets and subsidize renters, that’s the fuse that will lead to a correction.” said Peter Zalewski, owner of real estate development tracker CraneSpotters.
Or said another way, will accelerate the current correction.
Full report here…