Huge price spreads exist between new, existing condos in SoFla
What is the future outlook of the condo market for improved properties compared to the preconstruction boom?
Some four years into this South Florida real estate cycle, the supply of condo units — both new and existing — available for purchase is on the rise at the same time that asking prices are also increasing in the tri-county region.
Unlike most other parts of the state, the tri-county region of Miami-Dade, Broward and Palm Beach has enjoyed strong demand in recent decades from both domestic buyers and international investors who want to own residential properties in South Florida.
As a result of this perceived demand, developers have announced about 336 new condo towers with more than 43,000 units to be located east of Interstate 95 in the tri-county region of Miami-Dade, Broward and Palm Beach since this cycle began in 2011, according to the preconstruction condo projects website CraneSpotters.com. (For disclosure, my firm operates the website.)
To date, about 125 condo towers with a combined 13,500 units have recently been completed or are currently under construction. The other 211 towers with 29,700 units are in the planning or presale stages of the development process.
As of the last CraneSpotters.com Developers Price Survey completed in March, the mean minimum price for an available presale unit in a new South Florida project was $773 per square foot.
On a county-by-county basis, the minimum price was $907 in Miami-Dade, $481 in Broward and $507 in Palm Beach, according to the survey.
Contrast this with the present state of the resale market for existing units located east of I-95 in South Florida.
Currently, more than 13,500 condo units are listed for sale in the tri-county region as of today, according to data from the Southeast Florida MLXchange.
The average price being asked for a South Florida condo is about $487 per square foot. On a county-by-county basis, sellers are asking for an average price of nearly $545 in Miami-Dade, about $310 in Broward and $221 in Palm Beach, according to the data.
A quick comparison reveals that condo resale asking prices are dramatically less than the amounts being sought by developers of preconstruction projects.
Before concluding that resales are the better option for buyers based on the price difference, it is important to remember that existing condos come in a variety of conditions that are not necessarily up-to-date with the latest styles and technology, as is the norm with new units.
Another key factor to consider is that presale condo projects offer buyers an ability to lock in prices years before the new units are ever constructed. This aspect can be attractive for investors who are bullish on the condo market long term.
The risks and rewards of purchasing preconstruction units in new condo towers are primarily tied to a developer’s ability to build what has been promised, as well as the reception of the buyers upon completion.
The other important factor that is less predictable is the condition of the real estate market upon completion.
It can be argued that South Florida’s last cycle showed the industry the importance of not only delivering a new condo project as marketed but also at the right time in the cycle.
The unanswered question going forward is whether investors who are focused on returns in the near term still see the preconstruction market as an attractive opportunity at this point of the South Florida real estate cycle.
Thought Of The Week: No Friday columns during summer
Summer may be a time for family vacations — but that will not be the case for me this year.
Even though this is my last Friday column for The Real Deal until September, I have no plans to kick back and relax.
Instead, I plan to focus more of my attention on writing a book about the Miami condo market.
Not to worry, I intend to continue writing a weekly Tuesday column for The Real Deal about South Florida’s preconstruction condo market.
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.