MIAMI—With the US dollar gaining strength against foreign markets, Downtown Miami's condo market is shifting. Fewer foreign buyers are doing all cash deals or hefty deposits, but a growing demand among US buyers and capital markets is helping make up the difference. This continues the trend from last quarter's report.
That's according to a new report the Miami Downtown Development Authority (DDA) commissioned. The DDA's Greater Downtown Miami Residential Real Estate Market Update reveals sales prices and rental rates are holding steady following two consecutive years of rapid price appreciation. One key takeaway: supply and demand dynamics are stabilizing.
“There is no doubt that it's a great time to be a domestic buyer in Downtown Miami,” says Anthony M. Graziano, principal of Integra Realty Resources and author of the DDA report. “With less competition from foreign all-cash buyers, we should see domestic buyers increasingly come off the sidelines in lockstep with the strengthening dollar.”
The report finds that sales velocity is slowing as many of the projects launched between 2011 and 2014 sell-out, leaving scarce inventory behind. At the same time, average unit pricing has leveled-off at $430 per square foot following 22% and 16% annual increases in 2014 and 2013, respectively. Average rental rates are also flattening after experiencing 5% and 8% increases in 2013 and 2014, respectively.
According to Graziano's research, the Downtown Miami market is finally reaching equilibrium following two consecutive years of end unit price appreciation and skyrocketing land values, which should lead developers to take pause. Experienced developers in the market are approaching new deals with caution as current land pricing and construction costs are squeezing development margins substantially.
“We are squarely in the middle of the current cycle, which from a market economics standpoint is a good place to be,” says Miami DDA Chairman and City of Miami District 2 Commissioner Marc Sarnoff. “Capital markets remain strong as private equity grows and an abundance of money on the street continues to chase quality projects.”
Brickell City Centre marks the first project this cycle to reduce its required deposit structure from 50% to 35%. Though this reduction has had “minimal effects” on the larger market, the report suggests, the deposit structure will be an important benchmark for gauging future buyer demand going forward.
“Downtown Miami continues to draw international appeal as a global hub for commerce, arts and culture, and innovation,” says Alyce Robertson, executive director of the Miami DDA. “The pieces have been put in place this cycle through public and private investment that will fuel its emergence as a global destination for decades to come.”
According to the Knight Frank 2015 Wealth Report's Global Cities Survey, only two U.S. cities ranked in the top 10 for global investment—New York and Miami. Miami's inclusion reinforces its fast-growing transformation as not only an outpost for doing business in Latin America, but also secures its position as a global destination for ultra-high net worth investment.
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