The property market in Miami is attractive for bargain hunters as prices are still sliding because of the abundance of foreclosures in some areas. Joe Raedle / Getty Images / AFP
Miami Beach used to be famous for celebrity parties and fast cars. Now this stretch of Florida coastline is renowned for empty homes and plummeting property prices.
At the height of the US property crash, rows of new luxury residential towers stood empty. Lenders foreclosed on thousands of properties, while prices dropped 40 percent in 2008 alone.
Today, Miami is starting to rebound, thanks in large part to international buyers. In some areas, investors from the UK and Latin America account for more than half of sales, agents say.
International buyers “kept us afloat during the bad times”, says Oliver Ruiz, a managing broker of Fortune International Realty.
Buyers from abroad are taking advantage of a weak dollar that provides an extra discount on prices. The British pound, worth about $1.40 in March 2009, now fetches US$1.60, a 14 per cent premium.
Miami is also a bargain compared with a few years ago. At the end of last year, the median price of an individually owned flat sold in Miami-Dade County was $99,100 (Dh363,984), compared with $142,500 at the end of 2009, according to statistics from Miami Realtors.
Miami’s coastal strip paid the price for an unprecedented building boom in the first part of the century. From 2003 to last year more than 250 projects were developed along the coast, adding more than 49,000 homes to the market, reports the property consultancy Condo Vultures.
In downtown Miami alone, 22,000 flats were built in a seven-year period.
Most of the projects were finished just as the property market collapsed. Developers and investors who were hoping to quickly sell their properties, were left stuck with them.
“Miami Beach was one of the hardest hit areas in Miami because a lot were second homes,” Mr. Ruiz says.
In 2008, the market collapsed. Hurried sales and foreclosures sent values dropping. That year lenders filed foreclosure notices on 76,000 properties in South Florida, up from 33,000 in 2007, Condo Vultures says. The number jumped to 96,000 homes in 2009.
More than half of sales in the greater Miami area in 2009 were distressed properties, according to some estimates. Many of those sales were by developers, unloading units in new projects to investors buying them at discounted prices.
But the market is changing, agents say. Second-home buyers and investors are starting to return.
“We were the first city to go down and I think we’re the first city back,” says Kevin Tomlinson, the vice president of One Sotheby’s International Realty in Miami Beach. “For as bad as it was, it’s as good as it is.”
The number of individually owned flat sales in Miami increased 43 percent last year, from 6,854 in 2009 to 9,778.That was a 114 percent jump from 2008, when the bottom dropped out of the market.
Prices are still sliding because of the abundance of foreclosures in depressed areas, attracting bargain hunters.
“Today’s South Florida real estate market is strictly a function of price, not emotion,” says Peter Zalewski, a principal with Condo Vultures.
Luxury projects along the coast are starting to see price increases, agents say. In Miami Beach, it is becoming difficult to find attractive homes for sale in the luxury level – properties priced at more than $1 million, agents say.
“We’re just about back to a seller’s market,” Mr. Tomlinson says. “There is no inventory left.”
At the end of 2008 there were 43,095 homes for sale in the Miami area; two months ago the number of listings was down to 23,116, according to Miami Realtors.
Construction has ground to a halt, giving the market a chance to catch up. In 2005, more than 52,000 flats were built in South Florida; last year only 1,900 were completed, Condo Vultures reports.
The volume of foreclosures is also decreasing. Default filings fell 41 percent last year, to 58,000, and only about 30,000 are expected this year, the lowest level since 2007, data from the consultancy show.
Of the 22,000 units built in downtown Miami in the boom years, only 20 percent are available, compared with 36 percent in 2009, Condo Vultures says.
In areas such as South Beach, known for its art deco architecture, nightclubs and settings that inspired Hollywood, owners are refusing to lower prices.
“Developers and lenders are well aware of South Beach’s unique characteristics and future potential, and have therefore been unwilling to reduce the pricing significantly,” Mr. Zalewski says.
Buyers from Venezuela, Brazil and the UK are helping to fuel the rebound, Mr. Ruiz says. And Miami’s reputation for palm trees and sandy beaches has not lost any of its allure, despite the down times, he adds.
“We haven’t been this busy in a long time,” Mr. Ruiz says. “The South Beach aura is back.”
In recent weeks one of the staples of the boom years has returned – “condo sales parties”, offering potential buyers free food and entertainment, Mr. Zalewski says.
“The unknown is whether the droves of attendees really turned out to the condo launch parties to buy or just reminisce about the good old real estate boom days of 2003 to 2006,” he says.