The answer to the question, “What’s driving South Florida’s housing recovery?” can be summed up in two words: foreign money. It can also be summed up, though not in total, in two groups: Canadians and South American investors.
According to the National Association of Realtors, money has been flowing in from these two groups in greater and greater abundance during the last few years. Back in 2007 foreign money purchased just over 7% of real estate through Florida.
More than $50 billion in foreign money since 2009
The latest statistics, which run through mid 2012, indicate that figure had swelled to 19% and was still ongoing. On top of that, we also know that residential sales in Florida account for close to 25% of all foreign home purchases through the entire United States.
Holy houses, Batman, that sure is a lot of property. In fact it amounts to more than $50 billion spent in Florida since 2009. More than 250,000 residences have been purchased by foreigners between then and now.
But Florida is not the only state that put foreigners in a real estate state of mind. California at 17% and Arizona and Texas, both tied at approximately 9%, also left foreign investors feeling very much at home with their purchases.
Foreigners think our home prices are still very reasonable.
Investors from afar feel that South Florida housing prices are still very reasonable, even with the recent price rises. In addition, the dollar is also currently cheap and our interest rates, even with mortgage rate increases, are still far below the rates in their own nations.
Because of this influx of non-domestically generated cash, property tax assessments in the 10 counties in South and Central Florida that foreigners favor (including Palm Beach, Broward, and Miami-Dade), have gone up by just over 4% this year.
Home still on the rise and so is new condo construction.
While we seem to have abandoned bidding wars, the piles of foreign money pouring in remain instrumental in pushing up prices, while inventory still remains somewhat below equilibrium. The S&P Case Shiller index suggests that Florida home prices, averaged on a state-wide basis, increased 14% through May of this year. Prices remain on the rise, albeit at a slower pace.
What makes this foreign buying spree so exciting for the South Florida region is that it eliminated the glut of condos that had been clogging the system. Because there are almost none left to purchase, developers in the area have indicated their intent to add upwards of 150 new buildings to the South Florida landscape. That means more than 20,000 new condos will be coming into the South Florida real estate market starting in 2014.
Sunny Isles Beach, at the top of Miami-Dade County, is an example of an area that is about to see a glut of new construction. It has seen home values leap by more than 10% recently, and has approved plans for eight luxury buildings. It also expects to see a nice increase in real estate tax revenues as a result.
Miami: a commercial and design leader
In Miami, a city that continues to assume more and more importance as an international banking and commercial center, there are several new condos already under construction.
One of them, the Porsche Design Tower, is particularly interesting because of one intriguing aspect. The building will include a car elevator that rises 57 floors in order to allow owners to garage their cars on whatever floor they live.
We thank these owners for helping to drive South Florida’s economy forward. We suggest they all be very careful when backing up.
Marc Jablon, the Jablon Team
Re/Max Complete Solutions