The Real Deal Miami

Foreigners, low inventory help keep high-end afloat

By Jennifer LeClaire | June 09, 2008 01:32PM

What residential real estate slump?

The Elmes Group of SOL Sotheby’s International Realty in Fort Lauderdale hasn’t felt it lately. In the wake of two multimillion-dollar sales, Tim Elmes is cautiously optimistic about the market.

On May 15, Elmes closed on 1 Isla Bahia in Harbor Beach at $15 million. Elmes represented the seller. That same month, Elmes also closed on a $10.5 million penthouse at the Coconut Grove Beach Residences on Fort Lauderdale beach. Elmes strategy: focus on international clientele.

“When someone wealthy wants to move, they’ll move,” Elmes says. “In general, the current market offers sale prices that are discounted 20 percent and the currency exchange rate affords international buyers a great opportunity to buy a home.”

And sometimes these foreign buyers seek mansions.

One Isla Bahia, an Italian palazzo-style mansion sits on a point lot with spectacular water views and 320 feet of waterfront with dockage for two mega yachts. The estate features six bedrooms, eight full baths and three half-baths, tropical gardens and intricate stone fountains.

Sellers of homes like Isla Bahia – luxury mansions – are not suffering the same level of losses as traditional middle-class single-family homeowners, according to Ken Meierling, managing director in the Jupiter office Engel & Volkers, a high-end global real estate brokerage. One reason why is simply location.

“There’s a scarcity factor of supply and demand for beachfront homes,” Meierling says. “If you want to be on Palm Beach in the water or in Miami on one of the islands, there’s only a handful of houses available. So they will always be in demand.”

Meierling has been closing some big-dollar deals himself in recent months, including a $3.4 million home in Miami, sold to a German executive. He’s about to close another sale on an $8 million Palm Beach home to an Irish buyer. Meanwhile, Elmes is readying to close on yet another home to a Canadian buyer for $10 million. His average transaction runs around $5 million.

But while luxury homes are still selling, as Elmes noted, the prices are dropping. According to independent research firm Housing Predictor, homes in the $5 million-plus market have come down an estimated 10 percent to 15 percent in the past two quarters. The market likely hasn’t seen bottom yet according to Housing Predictor, which predicted prices in the $5 million-plus market could fall another 10 percent over the next 12 months.

“Some of these properties are selling for less than they would cost to replace,” Elmes says. “The biggest challenge is getting sellers to understand this is still a commodity marketplace – and there’s a lot more assets out there right now than there are buyers. If you want to sell it, you have to price it accordingly.”