Is Miami the next Monaco?
If Miami real estate is a bubble, it still inflates quickly.
According to a report by Douglas Elliman and Miller Samuel, the average sales price for Miami real estate rose 19 percent in the first quarter compared to the same period last year. The median retail price reached $ 244,000, the highest since the pre-crisis high in 2008.
Sales rose 4 percent, the highest since Elliman began collecting data in 2006. The number of days homes were on the market decreased 9 percent.
The luxury sector – defined in the report as the top 10 percent of the market – was really on fire. The average sales price for luxury single-family homes rose 34 percent to $ 2.7 million compared to the same quarter in the previous year. The number of luxury sales also rose 7 percent.
This six bedroom, seven bath villa in Miami is currently on the market for $ 11.5 million.
Source: Douglas Elliman
Average luxury condominium prices rose 16 percent to $ 1.8 million.
“I can’t believe how much prices are going up,” said Jay Phillip Parker, CEO of Florida Brokerage at Douglas Elliman. “Miami is becoming more and more like Monaco, with a lot of wealth and a highly developed infrastructure and culture to support it.”
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Of course, Miami doesn’t have the gambling, sporting monarchy, or the offshore tax havens that Monaco has. But pockets of Miami are becoming enclaves for the global super-rich. Fisher Island, Star Island, the Venetian Islands, and other posh communities attract a much younger, wealthier, and more private buyer.
“These are closed communities that give people the sense of isolation they are looking for,” said Parker. “Your children can walk safely on the streets. They want that security.”
The latest wave of wealthy buyers is pouring in from both overseas and the northeast, Parker said. Although wealthy Russians and Latin Americans get a lot of attention for Miami mansion sales, core demand is actually being driven by financial managers and hedge funds in the Northeast looking for a lower tax burden and Miami lifestyle, he said.
“People have said for years that the hedge fund people and financiers were moving here, but now it’s really happening,” said Parker.
He said many Wall Street hedge funders and executives calculate that they can buy a luxury condo with the money they save in New York tax “in just a few years”.
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Of course, Miami has a history of booms and busts. One of the red flags in the current market is inventory, which increased 10 percent in the first quarter.
Miami has turned into a huge construction site again, with some developers worrying an oversupply of high-end condominiums will come online over the next year. But because so many buyers pay with cash or have relatively low mortgages and large deposits on new projects, Parker says there is less risk of a bubble bursting.
“Where we worry about bubbles and real contraction is the new build,” he said. “But for these buyers this really is a second or third home. It’s not speculation or an investment strategy.”