Dwindling residential sales inventory and still-tight financing is driving a significant hike in rental prices in downtown Miami.
Brokers say they’re seeing multiple offers on rentals, particularly from young professionals who don’t have the cash for a 20 or 30 percent down payment.
“It’s definitely a hot market right now — either they’re second homebuyers hoping to live here, or homeowners who’ve sold their homes and want to come downtown,” said Sheila Ferguson-Gasson, a broker-associate with One Sotheby’s International Realty. “People are coming in and paying the asking price.”
Greater downtown Miami is seeing an average of 12 leases per day, according to Condo Vultures Realty.
“It’s out of control,” said Peter Zalewski, founder of Condo Vultures. Downtown Miami “is really cowboy country — it’s really, really tightened up.”
According to Zalewski, Multiple Listing Service data shows an average of 362 leases signed per month in downtown Miami, with a median price of $1.82 per square foot; in 2009, that number was just $1.52 per square foot — almost 30 cents more per foot in just two years.
What’s not clear is what kind of impact the increased rates will have on the downtown market, which has proven to be a magnet for those looking for residential life at prices below those of Miami Beach.
“What’ll be interesting is as Greater Downtown Miami gets closer to a South Beach-type of price, at some time the value proposition of downtown can start to go sideways,” he said. “I’m not sure if people are going to go [downtown] — you’re getting into a situation where there’s no longer the value play.”
It could be a boon for some of the bulk purchasers who have taken large swaths of condominium units in Miami in the past few years.
“I would almost suggest, and no one will listen to me, that it makes more sense to fill up the units, take advantage of the strong rental rates and, a year from now, as financing comes back, if you can get a strong rental rate, why not rent it out for the foreseeable future,” he said.
That is a strategy some owners are already taking, Ferguson-Gasson said.
“We’ve got investors coming in from Europe, looking for cash on cash return,” she said. “They might get a 4 to 4.5 percent return on a bond, but when they look at real estate, they can get a good, solid cash on cash return until the property gets back to its appraised value five years down the road.”
Miami’s not alone, however.
Miami Beach’s market, especially on the very high-end, has seen increased rental demand, much of it coming from snowbirds from New York.