The convergence of dwindling foreign capital and a bountiful inventory of luxury condominiums is grinding down South Florida’s once-robust residential real estate market. Gone are the days when buyers ran each other over to be among the first to purchase an ultra-luxurious residence in a building designed by Zaha Hadid, Norman Foster, Richard Meier and other starchitects. Listings for multi-million dollar condos are staying up longer, while price points are dropping from downtown Miami to Golden Beach.
“We currently have an oversaturation of units priced $1 million and up,” said Jack McCabe, a real estate analyst based in Broward. “Coupled with a significant drop in sales last quarter, it raises questions about the market’s strength.”
The slowdown is affecting every type of condo — whether it’s a two-bedroom rental investment or an expansive penthouse with oceanfront views. Using multiple listing service (MLS) data and real estate reports, The Real Deal analyzed the market under $10 million, breaking it into three price brackets: $500,000 to $1 million, $1 million to $5 million and $5 million to $10 million. Sales of properties in the first two price brackets have gradually declined, while sales of those priced above $5 million are barely moving off the MLS, according to several sources.
Craig Studnicky, a principal with the luxury real estate brokerage ISG World, said his firm recently completed an analysis showing that buyers picking up condos in the $500,000 to $1 million range accounted for 59 percent of the South Florida market in 2015. Buyers purchasing condos in the $1 million to $5 million range accounted for 36 percent, while buyers of condos priced between $5 million to $10 million accounted for the remaining five percent.
“It’s gotten considerably slower in the $500,000 to $5 million range,” Studnicky told TRD. “In the $5 million to $10 million range, buyers are moving even slower.”
Fourth-quarter Douglas Elliman reports for the Miami, Miami Beach, Fort Lauderdale and Palm Beach markets show luxury condo sales in the last three months of 2015 were down 15.1 percent, 18.9 percent, 14.6 percent and 25 percent, respectively, compared to 2014 fourth-quarter figures. Median condo sales prices slid by 13.6 percent in Miami and 9.4 percent in Miami Beach.
The number of closings on condo units priced between $500,000 and $1 million fell by 12 percent to 316 in the first two months of this year from 359 in the last two months of 2015, while the number of closings on units priced between $1 million and $5 million fell by nearly 11 percent to 164 from 184 in the same time frame, according to MLS data.
Meanwhile, closings for units between $5 million and $10 million tailed off from 10 in November 2015 to 10 total for December and January. In February, only three closings for residences in that price range took place.
Andres Asion, Fortune International Group’s vice-president of sales, said buyers are taking longer to make decisions because there is far more new inventory than one or two years ago, coupled with resale units that have recently hit the market. Though some buildings, including the Ritz-Carlton Residences in Sunny Isles Beach, continue to pull in fantastic sales numbers, Asion said.
“We sold around 20 units there in the past month,” he told TRD. “And buyers are paying an average of $3 million to $3.5 million.”
McCabe said new projects like the Ritz-Carlton and the Porsche Design Tower, both of which are being built by Dezer Development, will continue to attract buyers with millions of dollars to spare due to the quality of the buildings and their sponsorship.
“The ones with unique designs in excellent locations built by well-capitalized, well-known developers will be the ones that maintain value,” McCabe said. “Buyers are looking for that sense of comfort.” TRD