Fifty. Five-oh. That’s how many high-rise condominium properties are now planned or under construction in South Florida. No, that’s not a typo.
With the addition of four new towers announced this week—two in South Beach and two others in downtown Miami—more than 8,600 condo residences have now been proposed for the tri-county South Florida region. That’s the very same three counties—Miami-Dade, Broward and Palm Beach—where nearly 6,000 units left over from the previous binge remain unsold, according to CondoVultures, a Miami consulting and marketing firm.
Just five years after the region’s condo boom began to unravel and projects were stopped in their tracks, one new tower has already been completed and ten others are under construction. At the same time, CV’s Peter Zalewski counts 3,900 units still on developers’ books and some 1,800 more apartments sold in bulk to investors who are intent on re-selling most, if not all, of their units.
The market “hit bottom” in 2010, Zalewski told National Mortgage News in June at the National Association of Real Estate Editors conference in Denver. At that time, there were perhaps 80 condo towers in some phase of construction, either finished or underway, with at least some unsold units.
“It’s been a grind for the last four to five years,” the consultant said, “but we’re now getting back to where we were in 2003-04.”
The market has been buoyed this time around by international investors with cash to burn, which, despite the battle scars of the past five years, is why some developers are raising the bar when it comes to luxury. At one Sunny Isles property, for example, the building has but one unit per floor. And in a Miami building affectionately known as “Porsche Tower,” owners will be able to drive their automobiles onto an elevator with them and be lifted, car and all, to their houses in the sky.
But now there is some concern that the tri-county condo market could be in for another shock at the hands of rapidly deteriorating currencies in Western Europe, which has been a “key source” of overseas investors/buyers. Estimates are that foreign buyers purchase some $3.8 billion worth of real estate in South Florida, according to real estate groups. German, French and Italian nationals are said to account for nearly one in every four sales statewide.
It remains unclear exactly how many of the proposed but yet-to-be-started projects will actually be built, because construction financing is challenging (and expensive) to secure.
To overcome the financing hurdle, some developers are, in effect, asking buyers to back their buildings by requiring them to commit to deposits, paid in phases, of as much as 80% of their preconstruction price, Zalewski reported. During the previous boom, preconstruction buyers were generally asked for deposits of about 20%, and many of them walked rather then close on apartments that were now worth far less than what they originally agreed to pay.
Zalewski also told NMN that some developers have designed their buildings so they could be converted to rentals if sales are too hard to come by. Others, he said, are hoping that the market will clear by the time they reach the delivery stage. “It’s a perfect segue into the next boom,” the consultant said. “They’re hoping they can hit it just right. But if they don’t, they still have those large deposits in the bank.”
