A report just out from the Downtown Development Authority shows that winter may have come early to the Miami condo market. Authored by Integra Realty Resources, the report shows pricing for existing condos in the area fell for the first time in five years. While the average price for a resale fell just 4%, it follows five years of double-digit price growth since recovering from the housing bust of 2008.
Locally, there are several forces that are working to scale back prices. Investor demand is slowing now that rental rates for condos have dropped in recent months, following increased competition from new apartment buildings such as Melody, Soma, and Met3.
Integra’s report shows that this scenario is not likely to change in the near future. There are 5,508 rental units under construction and expected to open within the next two years. There are also 8,483 proposed apartments in the pipeline in downtown Miami.
Additionally, resales are flooding the current market with 3,000 active listings, all while sales volume is off sharply. In the first half of 2015, there were 750 units sold downtown. In the same six month period of 2016, just 550 units sold.
On the global scene, Miami’s perception as an international city is a double-edged sword. With countries like Brazil and Venezuela in the midst of economic and political turmoil, the relative strength of the US dollar has made it difficult for foreign investors to purchase real estate here.
Although sales figures for property owners seem dim, there may be a silver lining for renters and prospective buyers. Integra Realty Resources maintains, “the good news is that affordability may come back in vogue.”
Landlords are resetting rents to offset the increased supply. The gap seems to be closing between asking rents in the downtown area and what tenants are actually paying.
Developers of new projects are also responding to the softening market. According to a report from brokerage ISG, pre-construction sales only showed a slight uptick between this year’s first and second quarter. Construction debt is becoming too expensive, and that means fewer projects will get off the ground, and those that do will be from developers that have plenty of equity.
Finally, the report claims, “The lack of inventory entering the pipeline today will lead to less competition heading into late 2017-2018.”
The luxury market – both across the country and in Miami – seems to be holding its own as developers are offering exclusive amenities which add value and cachet to their projects. At 3900 Alton in Miami Beach, Mast Capital is adding a “Tesla house car” that will take residents to and from the project’s beach club. Louver House will have six electric charging stations for its 12 units. Other developments offering extravagant amenities include Pearl House, Le Jardin, Brickell Flatiron and Fisher Island’s Palazzo del Sol.