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Canary Meet Coal Mine: Miami Condo Sales Are "Cooling Down"

Tyler Durden's picture




 

This time is always, always different. 

One month ago exactly, the WSJ highlighted the booming Miami luxury condo market, noting that a preponderance of wealthy Brazilians fleeing an undesirable political environment has played an outsized role in fueling demand for high-end real estate in the city. 

Similarly, NPR ran a piece in November of last year which cited a laundry list of factors to account for the robust foreign demand Miami has seen for luxury properties. Those factors, according to several people quoted in the article, include: nightclubs, jets, diversity, beautiful weather, great taxes, great restaurants, beaches, and the perception among Russian oligarchs that Miami is “the next Singapore.” Peter Zalewski, who runs cranespotters.com and is an authority on these matters, told NPR the following: “...if we were to sit down in a year from now, we will be well over and above what we did during our last boom and ultimate bust and then ultimate recovery.” 

Average resale prices for Miami condos jumped by 20%+ in 2012 and 2013, a torrid pace that we recently called unsustainable and in fact, we predicted the boom in high priced Miami condos might well suffer the same fate as ultra luxury Manhattan apartments should foreign interest suddenly dry up for whatever reason. As it happens, Miami’s Downtown Development Authority is out with its Annual Residential Market Study Update and wouldn’t you know it, average retail value per square foot not only fell below 20%, but in fact fell to under 16%, the slowest pace in three years.

Also, note the caption under the graph which says, “IRR-Miami predicts further slowdown in appreciation and resale transaction volume as new projects deliver to market in 2015.” 

One of the main culprits for slowing growth is the simple fact that foreign buyers (especially Brazilians) are seeing their buying power crushed by the rapidly appreciating dollar. 

From the Miami DDR report: 

The primary driver for the Downtown Miami Condominium market is foreign investment. At the early stages of this cycle, South American capital was extremely strong versus the dollar and represented significant purchasing power for South American buyers using foreign currency to purchase pre-sale units that were being sold in U.S. Dollars. In addition to the favorable currency exchange rates, South American buyers are typically hedging against their own economies, which experience significant fluctuations due to political turbulence.

 

Due to the recent advance of the U.S. Dollar vs. most South American and European currencies, the advantageous buying power of foreign investors has been diminished significantly since 2011 (with the exception of China). While the Euro has not diminished as much as the South American currencies, its slide vs. the U.S. Dollar has only recently started and is expected to continue to decrease over the next 6-12 months. 


The significant slide in currency exchange from 2011-2015 for Brazil (-38%), Argentina (-52%) and Venezuela (-32%) could have an impact on projects that were heavily weighted to buyers from these markets as buyers will need to produce proportionally greater funds for the remaining 50% of contracted sale price to close on the units that were contracted in 2012-2013 and will be delivered in 2015-2017. 

Visualizing the pain...

And as for demand from anyone other than the wealthy, well..

The slowest pre-sale absorption is occurring in secondary locations in projects at lower price points. While some of these projects appear to be more affordable, they have not gained traction with the foreign investment community. While these projects report very strong interest from the local buyer due to the 50% deposit structure, local buyers are unable or unwilling to contract on a unit under the 50% deposit structure.


Lenders need to exercise caution as projects “reach” for sales hurdles, but do so by abandoning the 50% down model.

It’s not difficult to extrapolate what happens from here. If condo prices stop rising but land and construction costs continue to climb, developers will stop building as their profits get squeezed. Have a look at the following “report card,” which tells us everything we need to know about where this is heading:

We have “early signs of new demand slowing” while “construction pricing is busting budgets beyond feasibility” in a market where “speculation abounds” in land pricing. When framed against a very unfavorable foreign exchange dynamic for the market’s most important buyers, the situation really couldn’t get much more precarious.

* * *

Don’t say we didn’t warn you. 

 

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Wed, 03/04/2015 - 22:34 | 5856336 Carnegie_IB
Carnegie_IB's picture

BTFD

Wed, 03/04/2015 - 23:30 | 5856500 yrad
yrad's picture

This site keeps booting me to the App Store. Tyler, please correct this shit. I'm about to be forced to read Drudge or WND

Thu, 03/05/2015 - 03:51 | 5856829 Gambit
Gambit's picture

Fuck I know, I thought it was just me, or my phone, or the NSA... Glad am not the only one... Tyler plz fix

Thu, 03/05/2015 - 07:18 | 5856945 Headbanger
Headbanger's picture

Fix your browser settings you mooks!

And get something like Ghostery for Firefox to block shit.

Wed, 03/04/2015 - 22:35 | 5856339 wendigo
wendigo's picture

I live in Florida. Will someone with a nuclear arsenal rid us of this foolishness? 

Wed, 03/04/2015 - 22:56 | 5856422 Yes_Questions
Yes_Questions's picture

Unless you're burning off your early twenty something single (or married/committed but no children) years still get the fuck out with whatever you can grab.

FL is where youth and inconsequential retirees go to die.

.

Wed, 03/04/2015 - 23:08 | 5856452 wendigo
wendigo's picture

I get that alot. Believe it or not, I moved to Florida from NY. North Florida is actually a very nice place to live. 

South Florida should be given back to the bugs. I can't think of a single redeeming quality. Come to think of it, it's still ruled by cockroaches, just the two legged variety. 

Wed, 03/04/2015 - 23:14 | 5856470 Yes_Questions
Yes_Questions's picture

Wait

a NY transplant in FL?

;

Wed, 03/04/2015 - 23:20 | 5856479 runswithscissors
runswithscissors's picture

central FLA is a lot better, millions of gallons of clean fresh cool water just boils from the earth...shhh don't tell the oligarchs, they might try to restrict our access using agenda 21...oh wait

 

 

Wed, 03/04/2015 - 22:39 | 5856352 Dearlydeparted
Dearlydeparted's picture

Who'd want to live in today's Miami?

Wed, 03/04/2015 - 22:43 | 5856363 Berspankme
Berspankme's picture

every latin american criminal or government official (same thing)

Wed, 03/04/2015 - 22:45 | 5856375 lost money
lost money's picture

soeone runnig away from a third world dictator who wants to seize all their cash

Wed, 03/04/2015 - 22:50 | 5856404 XqWretch
XqWretch's picture

and they run to the Stasi States of Amurikastan? great choice...

Wed, 03/04/2015 - 22:41 | 5856360 flacorps
flacorps's picture

Do what Ugo Columbo did: buy it when it looks good and dead.

Wed, 03/04/2015 - 22:42 | 5856361 Berspankme
Berspankme's picture

running out of money launderers"

Wed, 03/04/2015 - 22:44 | 5856371 Bossman1967
Bossman1967's picture

Nope not yet closer to 2016 when its election time unfortunatly I am ready now!!!

Wed, 03/04/2015 - 22:45 | 5856374 i_call_you_my_base
i_call_you_my_base's picture

and the perception among Russian oligarchs that Miami is “the next Singapore.”

Absurd.

Wed, 03/04/2015 - 22:50 | 5856397 Dearlydeparted
Dearlydeparted's picture

They must be on crack or are looking for it in the vicinity.Lol!

Wed, 03/04/2015 - 22:50 | 5856398 Yes_Questions
Yes_Questions's picture

if by next Singapore they mean urban third world shit-hole, then yeah. I can see that too.

Wed, 03/04/2015 - 22:52 | 5856409 lost money
lost money's picture

are these the same oligarchs that zero hedgers say are 100 percent correct on Ukraine? and therefore the US is 100 percent wrong?

Wed, 03/04/2015 - 22:47 | 5856386 Dearlydeparted
Dearlydeparted's picture

I wonder who downvoted me? Miami is gone and is a 3rd world hellhole.

Wed, 03/04/2015 - 23:00 | 5856429 Bemused Observer
Bemused Observer's picture

You got one stinkin' downvote! That doesn't even count...you have to get into the double-digits here before you have to be concerned...

Thu, 03/05/2015 - 06:40 | 5856928 Which is worse ...
Which is worse - bankers or terrorists's picture

I got downvoted the other day when I said Tsipras and Vanoufakis are going to have some sick prison s**t done to them before this period of history is complete. I was proud of those downvotes. 

Thu, 03/05/2015 - 13:39 | 5858003 Bemused Observer
Bemused Observer's picture

Every now and then I visit the wrong article...I'll make my little contribution, and BAM! I get hit with a half-dozen downvotes...
Sometimes there'll be a new article days later that basically says what I said, and commenters are high-five-ing it...I think, where the hell were YOU guys a few days ago when the mob was closing in on me yelling "Stone her!"

Thu, 03/05/2015 - 07:06 | 5856934 Ghordius
Ghordius's picture

I am more concerned when I get no downvotes at all. Seriously, what is this childish facebook "likes" thing with votes on ZH? just an expression of sentiment, but you never know from whom

Thu, 03/05/2015 - 04:48 | 5856876 giovanni_f
giovanni_f's picture

A google fact-bot.

Wed, 03/04/2015 - 22:51 | 5856389 Yes_Questions
Yes_Questions's picture

beautiful weather?

sure, i guess..

heat
humidity
hurricanes and hot-headed Cubans ~ no offense you passionate ones you.

Wed, 03/04/2015 - 22:54 | 5856412 Dearlydeparted
Dearlydeparted's picture

Humidity=No way

Hurricanes, Litttle Haiti and hot headed Cubans they can keep. Beautiful weather is not worth it for this gal.

Thu, 03/05/2015 - 04:49 | 5856874 giovanni_f
giovanni_f's picture

 

 

...
whores
hookers
heroin

Wed, 03/04/2015 - 23:09 | 5856456 ricky663
ricky663's picture

$431 sq ft pricing?? F'n A that is overpriced!
Add to that continuing carrying costs (HOA, electricity, government "fees," etc.) and you have a "real bargain" going on!

I like this quote:
"Those factors, according to several people quoted in the article, include: nightclubs, jets, diversity, beautiful weather, great taxes, great restaurants, beaches, and the perception among Russian oligarchs that Miami is “the next Singapore."

We have all of that here (plus wonderful culture and beautiful women) on Phuket, Thailand, at a fraction of the cost.

Plenty of condos over here for you rich Brazilians to buy!

Thu, 03/05/2015 - 09:02 | 5857040 Realname
Realname's picture

"...great taxes..." WTF, is there such a thing as a great tax?

Wed, 03/04/2015 - 23:12 | 5856466 Vinividivinci
Vinividivinci's picture

Probably due to the jewish retirees opting for a condo in what was once Palestinian land, as opposed to Florida.

 

Wed, 03/04/2015 - 23:31 | 5856503 cart00ner
cart00ner's picture

Uber rich are buying NZ/AUS, average joe is priced out of the market here.

On the up-side it means we are the SHTFP.

Wed, 03/04/2015 - 23:46 | 5856534 RudeDog2
RudeDog2's picture

I want to say Phucket and move to Thailand too.

Wed, 03/04/2015 - 23:50 | 5856539 TheRideNeverEnds
TheRideNeverEnds's picture

oh so real estate may only appreciate another 10% or so this year in Miami?   Man that sucks, does that mean the S&P will only be up 10% this year too? 

Thu, 03/05/2015 - 03:52 | 5856831 mijev
mijev's picture

It's not only the USD strength that's hitting sales to rich Brazilians and Chinese etc. It's also the fact that their economies are getting pressured at the moment.

Thu, 03/05/2015 - 05:12 | 5856889 Dead Canary
Dead Canary's picture

Cough.. cough.... arrrggghh.....................................

Thu, 03/05/2015 - 09:16 | 5857081 TrustbutVerify
TrustbutVerify's picture

I remember how nice some of these areas were only a few years ago before the condos went up. 

Thu, 03/05/2015 - 09:33 | 5857126 Mike Honcho
Mike Honcho's picture

Maui is a micro version of this.  Timeshare condos being stacked on pristine beachfronts without the water, sewage, road infrastructure.  Dudes selling them make a killing, dupes buying them are aloof, and the locals have more people to irk at.

Thu, 03/05/2015 - 10:09 | 5857249 Kasperfx
Kasperfx's picture

at least 50% of the buying down here is from " straw men" ether backed by hedgies or builderse themselves making the market look hot as hell, i track sales and watch homes come off market , no one moves in and then back on months later for at least 10% higher , it's one big shell game, to attract the suckers.. it may take 5/7 years but i bet you 5/7 the $PSF WILL BE CUT BACK TO REALITY "AT LEAST 1/2  OF WERE THAY ARE NOW. 

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