Condo-hotel overflow in Florida market
South Florida’s condo-hotel market is risking a glut.
Florida has more condo-hotel units in the pipeline than anywhere else in the country, but analysts say the expected 31,500 condo-hotel rooms may be too much for consumers. At least 30 projects are under way in Broward and Palm Beach counties, the Sun-Sentinel newspaper reported. Miami-Dade County, where total figures weren’t available, also has been an ideal spot for condo-hotels because of its booming hotel market.
Investors often choose condo-hotels as a good alternative to second homes, and buy hotel rooms from developers who also rent the properties when owners aren’t there. Condo-hotels can sell for between $200,000 and $3 million and rent for as much as $300 a night.
As of July, there were nearly 106,000 condo-hotel rooms planned nationwide. Nevada developers’ ambitions rank second to Florida, with more than 30,000 rooms planned, while California is a distant third.
Homeowners hit again with insurance charges
South Floridians with homeowner insurance will pay more to bail out a state property insurance fund. New charges are intended to lower the $1.7 billion deficit of the state-backed home insurance Citizens Property Insurance Corp., which is considering adding another extra charge to all homeowners as the scandal-plagued organization tries to recover from the cost of recent hurricanes. The approved cost will be $20.70 for every $1,000 of annual premium paid.
The extra charge will go into effect in late 2006 and early next year, reported the Sun-Sentinel. South Florida homeowners have already seen insurance price increases as a result of the deficit.
Brokers say the housing market in South Florida has suffered as a result of the home insurance increases.
Condominium market continues to slow
According to the Florida Association of Realtors, condo sales statewide dropped 37 percent during the first six months of 2006 from the same period last year; 4,260 condominiums sold this year as opposed to 6,739 units in 2005.
In Miami, 837 units were sold January through June, a 12 percent decrease from last year’s 949 units. Market watchers say the recent lull is a short-term issue due to the surge of units.
Developers shift to affordable housing
As Miami’s luxury condo market softens, the affordable housing market is picking up.
Developers recently announced plans to build residential developments that provide affordable units to the middle class.
One local developer, MFM Construction Corp., is bringing forth the 132-unit River Grand condo project to NW 15th Avenue, just west of Downtown. Units run from the low $200,000s to the high $300,000s.
Another developer is building a 168-unit condo at 5400 West Hallandale Beach Boulevard in Pembroke Park. Units start at $165,000.
“There’s been such a surge in luxury condominiums over the past five years,” said Cara Mantovani of Mantovani Real Estate, which is brokering sales for the Pembroke Park project. “There’s a tremendous demand for this type of housing in South Florida.”
Vulture funds swoop in on cooling South Florida market
Investors are looking to profit from the downturn in the South Florida housing market through vulture funds and by picking up preconstruction condos that speculators are desperately looking to sell, according to the Sun-Sentinel.
Mark Zilbert, president of Zilbert Realty Group in Miami Beach, said that half the buyers who hold contracts on preconstruction condos — most of them speculators — don’t want to complete the purchases on their condos.
“They just want their deposit back to get out of it,” he told the newspaper. “So an opportunity lies for someone approaching a buyer who bought an apartment in 2003 or 2004 and offering them their contract price.”
Zilbert said that the investor has to be prepared to settle on the unit and hold it for a year or so in order to turn a profit — which may or may not be the case depending on how the market fares going forward.
Others are putting money into vulture funds to pick up bargains when they think the market has hit bottom. Deerfield Beach real estate analyst Jack McCabe, who has formed McCabe Acquisitions LLC for such investments, is taking minimum investments of $5 million for the fund. He plans to acquire blocks of condos in multifamily developments and said he’s prepared to hold the properties for up to 10 years.