The Real Deal Miami

South Florida condo developers seek even richer premiums

Preconstruction asking prices about 102 percent more expensive than resales

May 20, 2014 12:00PM
By Peter Zalewski

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Aerial of Miami (inset: Peter Zalewski)

Aerial of Miami (inset: Peter Zalewski)

As South Florida’s real estate boom gains momentum, developers are proposing a wave of new condo towers equipped with the latest luxury amenities, state-of-the-art engineering solutions and designs by star architects at prices doubling that of the region’s available resale inventory.

Presale prices of preconstruction condo towers proposed east of I-95 in South Florida are now averaging a minimum asking price premium of about 102 percent above the price of units currently on the resale market in the coastal part of Miami-Dade, Broward and Palm Beach counties. As of May 2, the average minimum preconstruction condo price for a presale unit in South Florida is about $768 per square foot, according to the latest Developer Pricing Survey conducted by researchers with (For disclosure purposes, my company operates the website.)

On a county-by-county basis, presale condos are asking an average minimum price per square foot of about $856 in Miami-Dade, $503 in Broward and about $555 in Palm Beach. Compare this latest preconstruction condo pricing survey with the existing condo units built before 2011 and located east of I-95 on the resale market, which has an average asking price of less than $385 per square foot as of Monday, according to the Southeast Florida MLXchange. On a county-by-county basis for units located east of I-95, resale condos are on the market at an average asking price per square foot of about $484 in Miami-Dade, about $265 in Broward and about $213 in Palm Beach.

The notable difference in the asking prices of presale units versus resale units comes at a time when nearly 31,000 condo units have been proposed – or recently completed – for coastal South Florida since the latest building boom began in 2011. As of May 2, nearly 15,500 proposed – or recently completed – condo units from the overall total of 31,000 units are being – or have been – marketed for presale in coastal South Florida.

By comparison, about 13,700 existing condos built before 2011 and located east of I-95 are available for resale in South Florida, with nearly 7,900 units available in Miami-Dade, nearly 3,200 units available in Broward and less than 2,700 units available in Palm Beach.

In the first four months of 2014, buyers purchased a monthly average of more than 1,770 condo resales located east of I-95.

At the current resale pace, South Florida has about 7.7 months of inventory available for purchase as the region enters the traditionally slower summer months for condo sales to second-home buyers.

A healthy market typically has about six months of resale inventory available, industry watchers say. Any more than six months of resale inventory suggests a buyer’s market while a lesser level represents a seller’s market.

The unanswered question going forward is whether buyers will be inspired in the humid summer months to pay rich premiums for preconstruction condo units at a time when South Florida’s existing resale inventory is being offered at a fraction of the price.

Peter Zalewski is real estate columnist for The Real Deal who founded Condo Vultures LLC, a consultancy and publishing company, as well as Condo Vultures Realty LLC and CVR Realty brokerages and the Condo Ratings Agency, an analytics firm. The Condo Ratings Agency operates, a preconstruction condo projects website, in conjunction with the Miami Association of Realtors.

  • tiredofzalewski

    zalewski is a professional troll.

  • Really???

    First, I don’t know if using averages is painting the most accurate picture. If one units is $450/sf another is $550/sf and another is $2000/sf the average is $1000/sf even though 2/3 of the units are under $600/sf. I think a better metric would be to use the median instead of the mean. In this case being $550 which is a bit more indicative of where pricing is.

    We’re only building to the top of the market so of course the mean would be a lot higher. So just like the previous example in reverse you could have a couple of really old outdated condos sell for $150/sf and drag the mean down. So again the median would give you a better sense of where existing condos are selling as well.

    You want to be out front on record before the next crash happens so you can be the condo Nostradamus, we get it. But instead of pointing out and rehashing the exact same facts in every article why not do some real analysis. There’s a lot of units coming, we all know this. Will we crash hard like before or will we go through a prolonged period were prices flatten. If people are putting down 50% on a $700k condo why would they pull out and take a loss when they’re already put up $350k cash and have an abundance of renters to cover them? Sure rental rates will flatten but do you really see them decreasing much? With City Centre, World Center, etc. these are becoming extremely desirable neighborhoods. It was one think to convince people to move into Brickell in 2007 when there wasn’t much here. Now people who cant even afford to be here want to be here.

    You can have people search through county records and count up the number of condos coming, great. How about providing some real analysis to go along with it.

    • frank

      well said!

  • Fla realtor

    When you threaten profits or commissions you’ll rattle some feathers, but this perspective is absolutely dead on. It’s a very small and humble reply needed to counter the deluge of sales pitches. In Miami, the pace of the price increases, and magnitude of the development approvals is way out of line with future demand, even if you are an unrelenting optimist. No property in Miami costs you 40% more than an equivalent in Broward, except for the property being marketed to inexperienced foreign buyers, mostly from Latin America. There’s already a buyer’s market there, even though the majority of units haven’t entered the market. Most are being sold for speculation or (upside down) rentals, and they will be listed for sale soon after the pre-con buyers close. In 2016 the headlines will be different. Great article.