Not Enough Buyers And Too Much Product: Why Miami Is In Trouble
Miami’s luxury market, long associated with international homeowners and closed islands, is facing a unique situation amid the pandemic.
Currently, Florida ranks just behind California as the state with the highest number of coronavirus cases in the United States, having topped half a million confirmed cases by Thursday. Despite analysts’ expectations, luxury markets in parts of the state – such as Palm Beach, where inventory is low and demand is high – are seeing increases in transactions and prices. In Miami, sales prices are falling as home buyers interested in city life drop rapidly, real estate agents and experts Inman said.
Indeed, Miami has seen headline-making luxury sales, but a number of signs point to problems in the market, Peter Zalewski, a licensed broker and head of Miami real estate consultancy Condo Vultures, told Inman.
According to a recent report by One Sotheby’s Realty, single-family home sales in Miami-Dade County fell 5 percent between April and June 30, while condominium sales fell 45 percent, although sales prices rose 22 percent for homes in the $ 1 million plus range and 43 percent in the $ 5 million plus range. However, in July sales activity came back to life, and sales of both single-family homes and condominiums rose, according to a new report from Douglas Elliman. One problem, however, is that sales prices are now falling steadily, said Zalewski.
“If you want to get a deal, there aren’t enough buyers and there is way too much product,” said Zalewski. “What do you have to do? If you consider all real estate as a commodity, lower your price.”
Social media influencer Gianluca Vacchi bought a Miami Beach mansion for $ 24.5 million that was listed for $ 27 million, while hedge fund manager Cliff Asness bought a penthouse in the same part of town for $ 22 million A report by professor and real estate economist Ken H. Johnson of Florida Atlantic University found that Miami property prices are more than 20 percent overpriced – the highest overvaluation the city has recorded for more than eight years.
“Prices are not expected to rise as quickly as they used to,” Johnson told the Miami Herald. “They will likely stay the same or see 3 or 4 percent year-over-year growth instead of the 6 or 7 percent we’ve seen in previous years.”
Many of the problems Miami faces are the same as any other major city across the country – the desire to move from dense urban areas to suburban and rural areas with more space. However, there are only Miami considerations that can create the appearance of a hot market that is actually masking problems.
“The reality is that [buyers] Hold the trigger and try to chisel anyone who sells, ”Zalewski said. “Statistics could suggest that sales have increased. What they don’t suggest or reflect is what kind of discount a seller will accept to move real estate. “
Climate change has long threatened the city, which is located at sea level and has been referred to as “ground zero”, and has increased the cost of insuring a property. Foreign buyers, many from South America, made up 63 percent of the city’s real estate market last year. When the virus emerged, many of the overseas sales that would have taken place had been postponed due to travel restrictions in the country.
“We have seen a drastic shift in the market in terms of where buyers are from and why they are coming,” Jay Phillip Parker, executive director of Douglas Elliman’s Florida Brokerage, told Inman. “I think this will affect the speed, value and sustainability of what we see in Miami now.”
But despite the uncertainty, Parker has seen an explosion of customers from other regions in the US looking to buy or rent in Miami and remains very optimistic about the market. The reason for this, he argues, lies in Miami’s lifestyle and desirability as an ocean city that will survive the pandemic.
“I believe what we are doing will work and I believe that we will eventually overcome the coronavirus,” said Parker. “I think we’re going to see real development that will add strength and support to the South Florida market.”
Email Veronika Bondarenko