Condo developers who are relying on foreign buyers to purchase a significant number of the more than 41,000 new units proposed for South Florida during this cycle were stung with more bad news on Monday.
Less than two weeks after central bank monetary maneuvers in Western Europe sent the euro plummeting, the influential rating agency Standard & Poor’s has downgraded Russia’s foreign-currency sovereign credit rating to “junk” status, according to Bloomberg.
The S&P credit rating downgrade means the cost for Russians to access capital on the international market will likely rise to levels that could curtail any notable economic growth and further weaken that nation’s currency, the ruble.
Even before the downgrade, the ruble was already trading at its lowest exchange rate against the U.S. dollar in at least 15 years, according to the currency conversion website OandA.com.
In fact, the ruble has lost about 46 percent of its value against the U.S. dollar in the last 12 months due to falling prices for oil and ramifications from international sanctions that were imposed following Russia’s annexation of the Ukrainian region of Crimea.
In announcing the downgrade, S&P forecast that Russia will be faced with increasingly difficult times for the foreseeable future with the nation’s economy expected to grow only by “about 0.5 percent annually” for the next few years, following growth of nearly 2.5 percent in each of the last four years, respectively.
“We do not currently expect that the government will be able to effectively tackle the long-standing structural obstacles — perceived corruption, the weak rule of law, the state’s pervasive role in the economy, and the challenging business and investment climate — to [lead to] stronger economic growth over our 2015-2018 forecast horizon,” according to an S&P statement.
Even before this week’s downgrade, concerns were already being raised about the ability of Russian investors — a key buying pool for condos in the tri-county region for at least the last two decades — to continue their pace of purchasing some of South Florida’s most luxurious units.
“An apartment in Miami, even the most glorious beachfront apartment, is not a priority right now,” New York Attorney Marlen Kruzhkov reportedly said in a recent press report.
Arguably, no city in South Florida knows the impact of Russian condo investors more than Sunny Isles Beach in Northeast Miami-Dade County.
The Russian presence in Sunny Isles Beach is so prevalent that acclaimed U.S. author Tom Wolfe included a fictional Russian oligarch who lives in the barrier island city in his 2012 book “Back To Blood,” which examines the interaction of cultures in South Florida at the beginning of the 21st century.
To meet the perceived international investor demand for luxury condos in Sunny Isles Beach, 19 new towers with nearly 2,500 units are slated to be developed in this city of less than 22,000 residents, according to the U.S. Census Bureau and the preconstruction condo projects website CraneSpotters.com. (For disclosure, my firm operates the website.)
The unanswered question going forward is whether the Russian investors who had planned to purchase preconstruction condos in South Florida — and especially Sunny Isles Beach — will still have the interest and buying power to do so once the new towers are eventually built.
Peter Zalewski is a real estate columnist for The Real Deal who founded Condo Vultures LLC, a consultancy and publishing company, as well as Condo Vultures Realty LLC and CVR Realty brokerages and the Condo Ratings Agency, an analytics firm. The Condo Ratings Agency operates CraneSpotters.com, a preconstruction condo projects website, in conjunction with the Miami Association of Realtors.