When I was in Miami at the end of last year for the Elevate real estate conference, I was given the impression that every new development project has a luxury brand associated with it and that buyers from all over the world still have an insatiable demand for the city. The Toronto developers in the room had no choice but to commiserate amongst each other and make up excuses for why abundant sunshine and low taxes couldn't possibly be that nice.
But things seem to be changing quickly in Miami. I am seeing reports that the condominium market continues to soften and that unsold inventory is starting to accumulate. This seems to be happening for a bunch of reasons: lots of supply, relatively high interest rates, higher insurance costs (due to climate things), more stringent reserve funding requirements (following the tragic collapse of the Surfside tower), and perhaps even the hostile environment that the US is now creating for foreigners.
I don't have clear data for the pre-construction side of the market (like I do for Toronto), but typically you need a strong resale market to support new development. And that's because pre-construction pricing tends to be higher than resale pricing. If the latter is softening, then the value proposition for something new is weakened. On top of all this, there's right now a risk premium on US assets. The country is being viewed as less safe.
So it's easy to be bearish.
If any of you have any direct insights on the South Florida market, please leave a comment below.
Cover photo by Tomas Lundahl on Unsplash
