Carla Vianna, Daily Business Review
February 4, 2016
As of January, more than 13,000 newly built condominium units have sold in South Florida since mid-2011, which represents more than three-quarters of the total units built or currently in the pipeline.
The latest figures released by ISG World, a real estate sales and marketing firm that tracks the sales activity of new residential projects east of Interstate 95 in the Miami and Fort Lauderdale areas, point to healthy absorption over the last five years.
But only 302 units were sold since the firm’s last report was released in September, down from 537 sales recorded in the third quarter and 800 units in the second quarter.
Miami luxury condo sales decreased nearly 15 percent in the third quarter from the same period in 2014, according to the Miami Association of Realtors.
But as sales began to lag, the South Florida real estate community is careful to stay away from phrases like “housing bubble” and “market crash.”
Instead, Jim Fried, managing director at Aztec Group Inc., said the more appropriate way to describe the sales slowdown is “a soft landing.” He followed that with, “It’s all going to be OK.”
“It always comes back to fundamentals,” the real estate investment banker said. “Right now, the fundamentals are still strong, even though the Latin American buyer has pulled back. The circumstances are such that’s it’s going to come back for the American buyers.”
Last year’s record-breaking residential deal in Miami-Dade County — the sale of the $60 million Faena House penthouse in Miami Beach — involved a U.S. hedge fund buyer.
If Fried is right and the U.S. buyer will fill the void left by international buyers, then they’ll most likely come from California or Texas. In November, the top five states searching the Miami Association of Realtors website were California, Texas, Georgia, New York and Virginia.
The devaluation of foreign currencies against the U.S. dollar won’t fully chase out deep-pocketed South American buyers, who look at South Florida’s luxury condo market as “safety deposits in the sky,” said Luis Flores, an Arnstein & Lehr partner who chairs the law firm’s Florida commercial real estate practice group. “Those high-net-worth individuals are still out there looking for opportunities to park their capital regardless of the strength of the dollar.”
New condo project announcements are still expected this year, but they will most likely have longer development periods, he said. Developers will take longer to reach the sales threshold needed to secure a construction loan, pushing back groundbreakings.
“We will not see any new developers enter this market in the next year — only existing developers that have a stronghold in the market,” Flores said.
A few construction loans have already flown in this year: $91.2 million for Terra Group’s Eighty Seven Park in Miami Beach’s North Beach neighborhood, $37.8 million for a multifamily project in West Miami and $14.3 million for Sobel Co.’s Galleria Lofts in Fort Lauderdale.
Neil Fairman, founder and president of the Plaza Group, which is co-developing the Marina Palms Yacht Club & Residences, concedes the project has lost the sales momentum it had during the last two years.
“It’s possibly slowed down maybe 30 percent from where it was previously,” he said.
The North Miami Beach project is comprised of 468 residences in two towers accompanied by a 112-slip marina. The first tower is completed and mostly sold, and the second, which will deliver in about a year, is 80 percent sold. Plaza Group is already surveying the market for new property. But Fairman said he’s “not sure whether we will develop during this cycle or the next cycle.”
Fairman, who has firsthand experience with the previous market plunge, said he could “feel the impending doom” of 2007 creeping up behind the Hollywood Beach high-rise his development company completed that year.
“I do not feel that way right now, even if there is a slowdown,” he said.