July 10, 2014
Miami’s latest condo construction wave is attracting buyers from around the globe: Brazilians, Argentines, Venezuelans, French, Russians, to name a few.
Miami residents? Not so much.
Conspicuously absent from the roster of buyers are South Florida residents. That is primarily because condominium developers are requiring large cash deposits — typically 50 percent of the price of a unit — paid in increments during the construction process. The deposits provide cheap funding for construction, and developers say they play an important role in deterring speculators.
Most Miami residents don’t have that kind of cash. Indeed, few locals could afford to purchase the high-priced condominium units currently going up even if mortgage financing were available.
“We don’t have a local market capable of making those kind of payments and progress payments,” said Lewis M. Goodkin, president of Goodkin Consulting, a Miami-based real estate consulting firm.
“If it weren’t for Latin American and European sales in Miami, it’s really kind of a scary thing to think about: We’d have a very weak market. Not because people don’t want to buy, because they can’t get it financed.”
Developers acknowledge there is an issue. “We — Related — we want to see more of a local market coming into this market,” said Carlos Rosso, president of the condominium development division at Miami-based Related Group, which is leading the condo construction boom in South Florida. Over the longer term, Rosso said, “The real challenge is to attract more [good paying] jobs. People need to perceive Miami as a serious city.”
While wealthy foreign buyers are likely to keep the ultra high-end apartments for personal use, many investors buying the so-called “affordable luxury” units in the works in the Brickell area will likely end up renting them to locals, brokers predict. That is what happened with the last batch of new condos built before the housing market collapsed six years ago. Cash-rich foreigners purchased them at a discount and rented them out.
But even the rent will likely be a stretch for a lot of locals. Apartment and condo rents have been on the rise, especially in the downtown/Brickell area. The average rental rate for a condo unit built since 2003 in the downtown/Brickell area has spiked 24 percent since 2010 to $2.48 per square foot from $2, according to CBRE, a major real estate services firm. That amounts to rent of $2,480 a month for a 1,000-square-foot apartment, up from $2,000 a month four years ago.
A host of factors play into the affordability of housing in South Florida. Among them is the difficulty for buyers to get mortgages. Fannie Mae has stricter lending guidelines formulated especially for Florida condos that require, among other things, more equity than for other residential mortgages. That makes it tougher for would-be buyers to purchase existing condos.
Miami ranks among the top cities struggling with housing affordability. A September 2013 report by the Center for Housing Policy, a Washington, D.C.-based research group, said Miami tied with Los Angeles as the metro area with the biggest share of working households with a severe housing cost burden. For the Miami area, 38 percent of working households spent at least half their income on housing in 2012, the center said.
Source: Miami Herald