Cash paying Latin American property investors invade Florida real estate market
Cash rich Latin Americans, spearheaded by Venezuelans and Brazilians, have led a charge into Miami real estate, helping to spur a recovery in the state’s housing market.
Enticed by what they view as cheap real estate prices and paying in cash, Latin American buyers have snapped up condominiums, apartments and houses as investments or second homes. They are cashing in on recent heady economic growth their region, which also weathered the global downturn fairly well.
The wave of property buying has re-energized Miami real estate developers who are rolling out new projects even as Florida remains among the states hardest hit by the housing collapse. It has also transformed Miami into a top real estate destination for international buyers.
‘Latin America has really helped to breathe new life into our market,’ said Jorge Perez, the chairman and chief executive of Related Group, a leading South Florida developer.
The influx is being led by Venezuelans, who like many Latin Americans, have historically turned to Miami real estate as a safe haven against political and economic volatility at home.
According to the Miami Association of Realtors, Venezuelans were the top foreign buyers in 2011 and accounted for 15% of all sales to international buyers, followed closely by Brazilians and Argentines.
Last year, sales of houses and condos in the Miami area rose a record 46% compared with 2010, the association said. Condo prices finally began to rebound in the second half of last year, and December also saw an appreciation in single family homes for the first time since the recession.
Wealthy Venezuelans, faced with dwindling investment opportunities at home and worried about what they describe as a crackdown on the country's domestic housing market by leftist President Hugo Chavez, have become sought after clients for real estate developers and brokers.
‘They pull out their cheque books right away,’ said Harvey Hernandez, a Venezuelan born managing director of the Neward Group, which is developing BrickellHouse, one of the first condo towers scheduled to be built since the real estate crash.
At BrickellHouse, more than half of the tower's 374 units have been sold, with Venezuelans representing around 40% of the buyers. Venezuelans have also helped reinvigorate real estate markets in Miami suburbs like Doral and Weston, home to large Venezuelan expat communities.
‘It's the Chavez effect,’ said Cleto Puzzi, a Venezuelan who sold an apartment he owned in Spain and bought two in Doral that he now rents. ‘You can't invest in Venezuela these days,’ he added.
Last year, Chavez introduced legislation that makes it more difficult for landlords to evict delinquent renters, spooking property owners and chilling interest in one of the few investment options in Venezuela.
Other South Americans are turning to Miami real estate as property prices across Latin America have soared. A recent report by Miami based RelatedISG, a real estate sales group, said prices of downtown Miami apartments and condos are cheaper than those at newly built properties in several South American cities including Rio de Janeiro, Sao Paulo, Buenos Aires and Bogota.
Prices in downtown Miami average more than $400 a square foot, the report said. That compares with $1,000 a square foot for properties in Rio de Janeiro, $900 in Sao Paulo and $550 in Buenos Aires.
The interest from Latin Americans has led real estate developers, many of whom were stung during the US housing crash, to adopt new financing and sales models. Before the crash, Miami condo and real estate developers and property buyers relied heavily on bank financing. But as the market unravelled, developers watched as clients walked away from their deposits and banks, worried about falling housing prices, shut off lending.
With Latin Americans and other non US buyers now representing a majority of real estate sales in Miami, developers have unveiled a more cash focused financing option familiar to foreign buyers. The pay as you go model means buyers pay at certain stages of construction. It is used widely in Latin America and requires buyers to pay as much 80% of the property's final price before construction is completed.