Miami is experiencing its second housing bubble in the past 10 years because condo prices have now become less affordable for foreign home buyers particularly from Brazil and Argentina following the weakness of their currencies against the greenback.
That’s the drama of the Miami real estate market and the entire economy of Southern Florida: whenever Brazil and Argentina sneeze, Miami catches a cold.
The number of Miami Beach condominium transactions fell about 20% in the fourth quarter from a year earlier, while inventory surged by nearly a third, the Wall Street Journal reported, citing data from appraisal firm Miller Samuel Inc. The median sales price skidded 6.6%. (Source: “Another Condo Bust Looms in Miami,” The Wall Street Journal, March 29, 2016.)
Condo developers have been canceling projects, slashing prices, and offering incentives to attract potential buyers from Latin America and elsewhere.
The Argentinean peso weakened to nearly 16 pesos against the U.S. dollar earlier this month from nine pesos per one dollar a year ago, whereas the Brazilian real depreciated to an average four reals this year, compared to an average of 2.5 reals two years ago.
Argentina’s economy was in recession toward the end of last year with gross domestic product (GDP) contracting 3.5% in the fourth quarter. The country’s inflation is hovering around 30% per year. Brazil’s economy, in turn, suffered its worst slump in a quarter of a century last year, pressured by a global commodity tumble, a domestic political crisis, and rising inflation. Official figures showed Brazil’s GDP fell 3.8% in 2015, the steepest decline since 1990.
Miami’s largest condo developer, Related Group, said its 60-storey “Auberge” development is seeking $600.00 a square foot, compared to the $850.00 per square foot that was attainable a couple of years ago, the Wall Street Journal reported. The company has sold 70 units of the 350 available. (Source: “WSJ: Miami Faces Second Condo Bust of Past 10 Years,” Newsmax, March 30, 2016.)
The pipeline of active projects has dropped by 42%, the Wall Street Journal reported, citing a report from Integra Realty Resources.
About 1,200 condo units in Miami were built last year, down from the peak of 10,000 units in 2008, while more than 7,300 units are being built. (Source: Ibid.)
Russians and Canadians have also backed away from the Miami real estate market because of the tumbling currencies. The Canadian dollar is down nearly 25% from its 2012 levels, while the Russian ruble has lost half its value over the past three years.
The city of Miami is a major center and a leader in finance, commerce, culture, media, entertainment, the arts, and international trade.
Miami’s metro area is the eighth-most populous and fourth-largest urban area in the United States, with a population of approximately 5.5 million.