Demand from Miami’s burgeoning, young population for rentals and condos suggests that the region is at the beginning of an extended boom, Fernando Levy Hara, a principal of the mckafka development group, told The Real Deal.
“This is the time to jump back into this market,” he said. “Those who enter during the next 24 months will be buying at the beginning of a new, virtual cycle of real estate expansion.”
Argentina native Hara and fellow mckafka principal Stephan Gietl met at Harvard Business School, where they focused a thesis on Miami’s recovery they are now hoping to realize by developing a 90-unit condo tower called The Crimson in Miami’s Edgewater neighborhood.
Miami’s explosive population growth, especially foreign immigrants between 25 and 45 years old, has gobbled up most of the inventory from the last boom and created demand for new construction.
“There is a demand for 6,542 new units every year in Miami’s urban core due to the new trend of young professionals looking to live near the city in order to avoid long and tedious hours of commuting in the car every day. This demand is not currently satisfied,” Hara said.
Of 42,000 unsold units in the city in 2008, leftover supply from Miami’s last cycle, only 850 are left. The city’s residential vacancy rate of 1.4 percent is roughly a third of the national average, Hara said. Only 200 new condo units have been built in the past seven years, he said.
Tight supply spurred rental rates to jump 10.6 percent in 2012 and an estimated 6 percent this year with 3.5 percent annual growth over the following four years, according to Hara, who says where rental rates rise, property prices follow.
“As investors can finance 50 percent or 60 percent of the investment with a bank loan, this will allow them to “leverage” their investment, achieving profits between 40 percent and 60 percent when they sell the property, an unthinkable scenario not so long ago,” he said –Emily Schmall