The strong recovery of the market in South Florida continues to get attention. In this comprehensive report written by Fernando Levy Hara market situation shows from the last crisis .
In my last article for Real Estate Report in June 2012 I noted that the deep recession that had shaken since 2008 the real estate market in South Florida seemed to be beginning to disappear .
The property prices have stopped falling and had begun to recover slowly ; rental prices had begun to rise and the number of vacant units to decline.
The stock of 42,000 completed units remaining unsold in 2008 had been absorbed gradually , and there were only 4,500 vacant units . He ended the article saying, " this is the time to re-enter this market , those who enter in the next 24 months will be buying in the beginning of the new virtuous cycle of real estate boom and may have excellent yields within 4-5 years when prices recover . "
Luckily , I was not wrong . Many thought it was too optimistic back in 2009 when I had to swear to my investors would make an excellent business investing in property in "distress " in South Florida.
In 2010 I had to defend my thesis in the Program in Real Estate Development from which I graduated from Harvard University, and some of the jurors, ( the most recognized professors and real estate advisors USA) told me , "Your numbers sound too optimistic, recovery will not reach the region until 2020. "
But I insisted that before 2013 , we would see construction cranes filling the skyline again Miami ... and luckily I was right. I found one of those teachers last month at Harvard, where now I teach classes , and just saw me he said, " I remembered a lot of you ... if you followed in business your theory , you should have made a lot of money these years , it is not right? " . It was a great pleasure to hear .
The recovery of the condo market in this area of the country is , even for an optimist like me, without a doubt amazing .
Of the 42,000 condo units ( beyond what we call horizontal property ) if there are only 650 sold .
Empty units are at a historically low record : 1.4 % of all units are not rented or occupied by their current owners , compared with 4.5% on average across the country .
Only in the area of the urban core of Miami ( Brickell -Downtown- Edgewater- Midtown, from the center of the city to the Bridge Street NE 33) there is a demand for 6542 new units each year due to the new trend of young professionals to live near the downtown area of the city avoiding commute an hour drive to work. This demand is not satisfied now : for 7 years, no new projects were started in the area, and currently there is less supply than demand .
For this reason, the rents rose rapidly : an extraordinary 10.6% in 2012 ( in a country with less than 2 % inflation ); estimated to rise 6% this year and 3.5% each the next four years . As we studied in economics , by rising rents, rising prices of the properties below , so that " the value of goods is directly proportional to the income they generate ."
The National Board of Realtors, one of the largest professional institutions in the country, has appointed Miami with " Number 1 in the market rate of recovery in 2012."
Because recovery was stronger than in other cities?
• On the one hand , Miami is one of the metropolitan areas of higher population growth. While cities like Detroit and other industrial cities in the Midwest are shrinking rapidly (up to 2 % annually over the past 13 years ), Miami has grown between 2% and 1.2% per year since the beginning of the millennium.
• Still paradise for foreigners like me, looking for a place with quality of life , good weather, and professional development opportunities not found elsewhere.
• In addition , the vast majority of these immigrants are young, between 25 and 45, who are in the middle stage of formation and growth of their families. South Florida was no longer 15 years ago the city of withdrawal of American retirees. The population is growing and with them, the need for more and better housing units.
• The demographic composition also contributes : currently 23.5 % of the units are occupied by one person , 27.5 % and 18.7 % for two for three . This creates greater demand for residential units at the beginning of the decade.
• In return for the past 7 years, only 200 new condominium units were built in the area, waiting for the surplus left by the crisis absorbed .
• Finally , we can not fail to mention the powerful effect of the thousands of foreigners who arrived after the crisis to invest their savings in this market , perceived as solid and stable, and where anyone can do business even if not resident , not pay higher taxes, and free to take your money the day you sell your property. The State of Florida is one of the U.S. states in which fewer taxes are paid because, unlike others such as New York or California, there is no provincial income tax . For the same investment in California is paid up to 53 % tax , here will pay 20 %.
Investors came this time around. Until the previous boom, most of the capital came from Latin America. In 2012 , for the first time , the group of biggest foreign buyers came from ... France. The French, eager to escape the onerous 75 % rate of income tax that President Hollande proposed as part of his campaign promise , put aside their traditional aversion to invest abroad , and bought 20 % of the units for sale in the area ... more than Canadians, Venezuelans, Brazilians and Argentines, traditional buyers of properties in this city.
Finally we should add that Miami is in train to become one of the most important cities in the country. Currently already one of the ten metropolitan areas with higher GDP : it is important to note that the GDP of South Florida, an area of 9 million and 90 kilometers long, is higher than any country in Latin America except Brazil and Mexico .
My prediction ?
The condo market in South Florida has given all the conditions to experience sustained development cycle for the next three or four years.
Think of Buenos Aires in 2003 to understand : after a severe crisis in that year the first developments began to appear , driven by the costs and low sales prices . Those who bought at the time to $ 1,100 per square meter thought they were paying expensive but resold three years later for $ 2500. Smart developers then bought huge lots to build 30-story towers at prices that now there is a small batch gets to make a 7-storey building .
Currently this same thing happening in Miami :
In January 2012 we purchased land on water, located in Edgewater , the new top area of Miami, an issue of $ 260 per m2. salable . Last month, the last two lots on the water with an incidence of 850 ! Sold ! The cycle is always the same : at the beginning of the recovery phase increases the price of land , then the construction costs , and this translates to sales prices of new units first and used later.
I do not think that prices increase 100 % as in the Buenos Aires market, because that would be a very exaggerated rise to mature as the South Florida market, but conservative think the price of condominiums increased by 20 % and 30% , following the sharp rise in rental prices .
As the investor can finance 50 % or 60 % of the investment with a bank loan , this allows you to " leverage " their investment , achieving yields of between 40 and 60 % the day you re sell the property, unimaginable gain until very shortly .