The downtown Miami condominium market is cooling, as many foreign investors retreat to the sidelines amid currency devaluations against the U.S. dollar, according to a report released Tuesday by Miami’s Downtown Development Authority.
The presale absorption of units has slowed, as South American and European investors have less buying power than before, leading to early indications of a downturn in pricing, the report said. “We are beginning to see the tempering of annual price appreciation in the resale condo market, and we are also beginning to see signs of a slower absorption of presale units,” according to the report, the “First Quarter Greater Downtown Miami Market Residential Real Estate Market Study,” conducted by Integra Realty Resources.
Amid a cool down of the international market, domestic buyers from New York, Boston, Chicago and other U.S. cities are making up 15 percent of the current buyer pool. Yet, “the requirement of 50 percent deposits is a big barrier to the domestic buyer,” the report said. Growing interest is coming from China — one of the few currencies seeing gains against the dollar, according to the report.
The DDA, an agency tasked with promoting Miami’s urban core, rang a cautionary note with the report, also citing the growing impact of rising construction costs on project completion rates as demand for skilled workers outpaces supply. The report attributes rising costs as the single biggest factor in determining if a project will move forward in the next six to 12 months.
According to the report, rental rates are continuing to rise in Greater Downtown Miami, with the current asking rate at nearly $3,300 per month. However, rents will begin to decline or plateau as new product comes on the market, according to the report, which cites nearly 2,600 conventional rental units that now under construction, with more than 1,000 of those set to be delivered this year.
The shifts in the market are expected to drive developers to switch course on marketing strategies, targeting domestic buyers more aggressively, as the international buyer pool narrows. According to the report, the projects with strong sponsorship and those with waterfront views are best positioned for success. The slowest presale absorption is among secondary locations in projects at lower price points.
“All indications point to stabilization of an active real estate market,” Anthony M. Graziano, principal of Integra Realty Resources, said in a statement. “With 6,000 units under construction and presold over the past three years, we are reaching equilibrium. Fewer buyers, rising construction costs and swelling land prices will see fewer developers come to market. Still, Downtown Miami is seeing strong momentum with rental and sales prices increasing and growing interest from Asian and domestic buyers seeking the lifestyle and affordability Miami offers relative to other major markets.”