Miami property market normalising after years of record growth
After eight years of record or near record residential sales, the Miami real estate market is normalising with steady growth, according to various prominent local market experts.
The fast sales growth of Miami middle market properties, the continued high percentage of all cash buyers, preconstruction condo inventory in the rapidly-growing Downtown Miami area and South Florida’s overall population and job increases are boosting the market, they told the recent Real State of the Miami Market event.
According to Anthony Graziano, senior managing director of Integra Realty Resources, 2013 and 2014 were extremely strong for the Miami market for fundamental reasons, including pent-up demand.
‘When we look at our numbers today, we are getting back to normal. It’s okay that our market is not growing 15 to 20% every year. In fact, it’s a good thing. I want to grow 5% a year because at some point our wage growth can’t keep up,’ he told the meeting.
The event hears that single family homes priced between $200,000 and $600,000 saw a 5.8% year in year increase in April, with the sector representing 63% of total Miami single family home sales.
Existing condos priced between $150,000 and $300,000 saw a 2.7% rise in sales in April, representing 39.2% of total existing Miami condo home sales in April 2016.
The audience also heard that Miami offers bargain prices compared to other world class cities and the lack of available land are also key factors in today’s market. For example, a 120 square meter condo in Miami-Fort Lauderdale-Miami Beach cost $149,900 on average, according to the National Association of Realtors NAR. Prices for the same condo in London would be $960,840, in Hong Kong $776,280 and in New York $1.6 million.
It was also pointed out that the lack of Miami-Dade County available land means the value of local single family homes will rise and more residents will purchase multifamily units.
Most Miami preconstruction condo developers require a 50% cash deposit on new units, one of the highest in the United States and significantly higher than the 20% required during the last real estate cycle. However, the experts said that the large all-cash deposits are a strong sign home buyers are committed and invested in the Miami market.
The majority of new construction is happening in Downtown Miami, and developers are being cautious not to overbuild. About 85% of condos under construction in Downtown Miami are sold, according to Integra Realty Resources and the Miami Downtown Development Authority. Downtown Miami has about 7,200 units under construction, a 61.2% smaller inventory than the 18,500 units under construction in 2006.
‘The reason downtown Miami is important is because it is what is leading Miami in the marketplace. It’s our urban core. Downtown is the poster child of what is happening in the market,’ said Graziano.
While noting preconstruction sales have normalised compared to the previous record activity, Graziano believes developers are taking a break and doing site plans before announcing future plans. He pointed out that the overall percentage of all-cash buyers is 48.6% and is double the national average. However, in hot submarkets such as Brickell in Downtown Miami, the all-cash percentage is 82%.
The conference also heard that South Florida’s growing population will continue to fuel more home sales. The Miami-Dade, Broward and Palm Beach metro area recently became the eighth most populous region in the US, eclipsing six million residents for the first time, according to new Census Bureau data. South Florida has gained almost 500,000 new residents in the past five years.
Another strong indicator for housing is job growth. The number of employed Miami-Dade County residents increased 2%, growing from 2.13 million residents in 2013 to 2.18 million in 2014. The percentage of Miami-Dade residents earning more than $75,000 a year increased 4.1% in the same time period.
The remainder of the 2016 will see fewer sales than last year and pricing will be hard to predict, according to Graziano, who added that waterfront properties or other unique projects will outperform. The pricing for properties below $1 million will remain strong but inventory expansion should be watched.
The overall average pricing remains strong in South Florida. Sellers should expect to see more competition as buyers become more selective. South Florida’s economic growth and population increases will play key roles in the direction of 2016 residential pricing.
‘Miami is one of the fastest growing cities in the world and I don’t see that slowing down,’ said Alicia Cervera Lamadrid, managing partner of Cervera Real Estate.