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Can China Keep Miami's Condo Bubble From Bursting?
After Xi Jinping’s anti-corruption campaign emptied the VIP baccarat tables in Macau causing gaming revenue to plunge 40% month after painful month, China’s stock market miracle might well have functioned as a convenient outlet for the gambling propensities of the country’s ultra rich.
That all came to a rather unceremonious end three weeks ago when the unwind of as much as CNY1 trillion in backdoor margin lending triggered a terrifying 30% collapse in Chinese equities.
Fortunately for China’s ultra rich, dollar strength has served to completely eliminate the South American bid from Miami’s once-booming condo market. As a reminder, here is the situation in South Florida:
As you can see, price increases leveled off in H1. The reason (according to Kevin Maloney, founder and principal of Property Markets Group who spoke to Bloomberg last month): “A very strong shift in the last year in the dollar ... has literally pushed whole countries out of the marketplace.”
Yes, whole Latin American countries (and maybe a few Russian oligarchs), but certainly not China, and what better way to shore up a market in which price appreciation has recently flatlined after three consecutive years of 15%+ gains than to lure in Chinese buyers who, having helped send Manhattan condo prices to nosebleed levels and who are perhaps now looking for less volatile places to park their fortunes having watched their domestic stock market take a nosedive, may now be looking for a fourth, fifth, or sixth home away from home. WSJ has more:
Wealthy buyers from Brazil, Venezuela and Argentina have fueled a real-estate frenzy in Miami in recent years, sending luxury-condo prices soaring. Now, Miami developers and real-estate agents are setting their sights on a more distant part of the world: China.
In April, representatives for several Miami condo buildings made the 8,000-mile-trip to the Beijing Luxury Property Show, a trade show that attracted more than 5,200 wealthy Chinese to look at international properties. Sales agents for the Fendi Chateau Residences, a luxury development going up near Florida’s Bal Harbour, handed out brochures in Mandarin for condos priced from $5 million to $22 million. Nearby was Lauren Marks, the marketing coordinator for two luxury-condo buildings: Palazzo Del Sol and the forthcoming Palazzo Della Luna, on Miami’s Fisher Island.
“I’m here on a fact-finding mission,” said Ms. Marks. “I’m trying to decide if this is the right place for us to facilitate a meaningful relationship with Chinese buyers.”
Executives of the Miami Association of Realtors, the largest local group of the National Association of Realtors, were there, too, handing out Miami market data and gold palm-tree pins attached to a card with the tagline, written in Chinese, “Enjoy the unique taste of life.”
Part of the reason for their journey: South American buyers, who comprise the largest foreign buying group in Miami, aren’t buying as rapidly anymore. A recent study by the Miami Downtown Development Authority found that sales of new condo units still under construction have slowed, in part because South American investors have less buying power, due to the increase of the U.S. dollar compared with South American currencies.
Meanwhile, Chinese buyers are beginning to take a closer look at the city. “The Chinese are coming along very strong,” said Simon Henry, co-founder of Juwai.com, a China-based website that connects wealthy Chinese with overseas properties. “Miami looks relatively cheap compared with some of the big cities like San Francisco and New York.” Juwai says the average budget for Chinese buyers shopping for overseas properties on its site is $2.3 million.
Currently, only 2% of international buyers in Miami come from China, according to the Miami Association of Realtors. But potential changes in Chinese investment policies, and the relatively strong Chinese yuan, are making the Chinese look like a good bet to Miami developers. The Chinese government is expected to begin raising annual limits on how much an individual can invest overseas from the current $50,000 cap—a rule often skirted.
And Chinese buyers have become an increasingly dominant force in U.S. real estate overall. According to the National Association of Realtors, Chinese buyers recently surpassed Canadians as the top foreign buyers of homes in the U.S., purchasing $28.6 billion of properties in the 12-month period ending in March.
There it is. The reason why Carlos Rosso, president of Related Group of Florida so confidently told Bloomberg last month that this time is "different" and that the current deceleration in condo price appreciation will not soon turn into a rout.
In short, Miami condo developers are depending on the China bid to rescue the market from overbuilding much as the entire world depended on China to absorb oversupply in the lead up to the financial crisis. We'll check back next quarter to see if an influx of Chinese buyers was enough to stop prices from posting their first Y/Y decline in seven years.
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What the hell - is the whole world unraveling?!?
China can't even stop the Shanghai Stock Exchange from crashing.
The answer is nope. The zero down flippers are buying some of our crap but that too shall soon shit the bed. Look for another 40% haircut on all the real estate "investors" er, hairdressers, er speculators, soon enough.
Floriduh did not learn its lesson from 2005-2009.
I'm with you on this one. Miami is not the mix for Chinese imo plus that market is way overpriced.
Miami is not appealing to Chinese
most Chinese HATE the sun and a tan... they like warm Cali because it's LA and Hollywood, glamour and celebrities and LV...
but Miami? just beaches and latinos? (no offense) ....ZERO appeal
anywhere in Florida would not even make a top 10 list for North American top cities
Even on its best days, Miami sucks. Hot, humid, crime-ridden, urban sprawling hell hole. And that's before you get to the fact that they'll first lose their fresh water supply due to rising ocean levels, and later slowly disappear under the waves.
Well come on don't be so negative folks! The Chinese can always swap their gold for a nice Miami condo!
The shitty part about owning a condo in Miami is that it is in Miami.
It was all downhill after Crockett and Tubbs left.
since when did they start making condo buildings look like cruise ships?
About the same time they made cruise ships that look like condo buildings.
About the same time they made cruise ships that look like condo buildings.
I've never been there. But outside the luxury condo towers, I have been told that large strectches of Miami are just third world slums. With the people to match.
Correct. The time I took a wrong turn in East L.A. was nothing compared to getting lost on my way to Coconut Grove. Yikes!
Yeah. Miami is shitty. Miami Beach is built out to the max with very high population density. The people are shit too. A pretty nasty brew of scum from around the world on Miami Beach. Every scammer, mobster, drug runner, gun runner, mobster from around the world ends up on Miami Beach.
Coconut Grove was crowded and busy back when they were making Scarface.
China cannot save the condo mkt in Miami Beach especially when the Chines stock market is tanking.
Yes, make a wrong turn a few blocks west of Biscayne Blvd/Hwy 1 in Miami and the next time you'll be seen will be on the side of a milk carton. The trick is to use effective covering fire. You'll need a passenger, an AR15, lot's of hi-cap mags, and a sliding sunroof. Have the passenger stand-up through the sun roof and liberally spray each side of the road alternately with three round bursts continually. This will keep the the savages crouched behind cover as you put the pedal to the metal.
The biggest hazard for newcomers is to mistake NW, NE, for SW, SE. That can land your ass in the hood real quick.
the tip of the spew, Miami.
If China's so great how come they always want to get their wealth out of the country as quickly as possible?
Because they know that 1.2 billion people eating, pissing, shitting, and being the world's "workshop" is going to leave their own country in desolation. Why does that never get discussed? How long can they be the supplier of the world's plastic crap before every stream, river, lake, and swimming pool spontaneously combusts?
nobody wants to talk about slaves. i cant wait till a quarter billion of them or so go ape shit over one of their pending disaters.
China has to spend its US Dollar reserves before the SHTF, and Miami condos are as good a bet as any. We wouldn't mind some of those USDs coming to us here in the Cayman Islands, actually. We're just south of Cuba, and the weather's just as good. It's many years since I managed the Chamber of Commerce here, but I still have an interest in seeing our local real-estate market flourishing. At the moment we have Russians building and buying, but no Chinese. Would some kind soul spread the word around?
just waiting for miami market to tank so i can move in for cheap condo
Here's an article on condo investing:
http://www.biggerpockets.com/renewsblog/2012/11/15/why-condos-arent-good...
Read the comment a few up from yours. The monthly association costs are terrible and what the poster didn't mention was what happens when the bubble pops. The more vacancies in a building, the more association dues have to be raised for the remaining tenants which can get out of control.
The HOA's are murder. When the foreclosures start, like you said, the due can skyrocket.
I am not sure what windstorm insurance is but i am sure it is a fortune, taxes too. And if you get hit by a hurricane then good luck with that. The people Miami Beach attracts are vile too. Drug dealer types, Russian/Israeli and other mafia, Chinese and South American looters moving money out.
How does a condo bubble burst, if everyone pays in cash?
More buyers simply fail to show up. Real Estate is always priced at the margin. It only takes one transaction at a lesser price to wipe out prices.
Is it silly for me to say that I remember when the Japanese were buying expensive US real estate?
How did that turn out?
expensive US real estate is where 'hot' foreign money goes to die...
I had looked at the Miami condo market after the real estate crash and decided against buying. Why??? Fixed costs are crazy. For a normal 2 bedroom condo in a high rise your fixed monthly costs are $1,000 or higher. Real Estate taxes are high and so are the Condo Association dues. Maybe I should have bought and sold a couple of years later, but I did not like it from a cash flow analysis point of view. Let the Chinese pile in. Lets see how long it takes them to wake up and realize that they are getting bled on a monthly basis. It will get even more interesting when the county start having major financial difficulty and starts to jack up real estate taxes. Now, that will be fun to watch,
^+100. My thoughts exactly after the same analysis in 2010. I was looking for an excuse to buy a house or condo there, but even mortgage free, fixed costs were and still are a big turnoff.
"Wealthy buyers from Brazil, Venezuela and Argentina have fueled a real-estate frenzy in Miami in recent years..."
So by wealthy buyers, you mean socialist-cronies who hauled ass with "other peoples money"?
Those and also individuals who used to have flourishing business that are now squized by those socialists. While the first group is robbing, the second is trying to hide the money so it does not get robbed.
Fair enough, my dark mood has clouded my judgement...plus one.
what's particularly amusing about this is both parties end up living next door to each other... makes for some interesting neighbors lol
It would appear 2 weeks ago probably. Today not so much.
China is crashing. I wouldn't count on much biz from China!
Oh great, its just like the Vancouver scam, where a miniscule portion of the sales are conducted by "Chinese", but the local Realtors run around claiming that the Chinese are buying up everything. The real buyers, are, of course, US citizens taking out credit from US banks.