Greater Downtown Miami — which encompasses the city's classic downtown area, plus Wynwood, Overtown, Brickell, Edgewater, and the Design District — houses South Florida's largest collection of young, hip urbanites. The area is all but engineered for people under 35; it's crammed with artisan cocktail bars, a never-ending supply of street art, and nightclubs where Diplo spontaneously appears. Without young people, Miami's downtown would be a drab concrete dystopia.
But thanks to rising real-estate prices, the area might be on its way to dysfunction. According to the City of Miami's Downtown Development Authority (DDA), condo prices are set to climb until 2025, to the point that every apartment in the area will be selling for a cool $750,000 and up.
The DDA's analysts predict that "the resale market [will begin] to see increasing sales velocity in 2017," according to the agency's recently released 2017 annual report. "This will be a combination of more aggressive sellers and a buyer’s mindset that interest rates are moving upward and locking in a downtown apartment in thriving urban area for under $750,000 will be unprecedented in 2025."
(Millennials: Raise your hand if you have that kind of cash. Nobody? Cool. Moving on.)
The figures contradict more dire reports from other independent real-estate analysts around town. Prices in Miami's Downtown Miami's condo market — one of the largest economic drivers in all of South Florida — have climbed rapidly in the last five years, leading to an absolute glut of developers charging into town, buying up land, and stabbing condo skyscrapers up into the skyline. Enjoying a Miami sunset is now an exercise in ignoring handfuls of construction cranes.
But 2016 saw the city's condo market hit a road bump. According to market analyst Andrew Stearns, who runs the website StatFunding.com, brokers are running into major trouble selling new condo units, since supply is just so damn high. In the last four years,3,000 condo units have been
Five years ago, the U.S. dollar was far weaker, thus encouraging outside investors from Latin America and Eastern Europe to buy up second (or third or fourth) homes in the Magic City. Now, with a surging U.S. economy, demand from foreign investors has slowed.
Stearns has warned that the flood of new condominiums and foreign-investment crawl could lead to a significant downturn in both condo-resale prices and apartment rental prices, since unsold condo units are often converted into rentals. This represents a nightmare for real-estate brokers, but could be welcome news for the millions of residential Miamians struggling to pay the city's astronomically high rents.
Then again, the DDA's annual report predicts a small dip in condo costs this year, but by the end of 2017, the analysts predict the market will rebound. The city's report basically reads like a tourism brochure:
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The DDA "forecasts that average prices may dip another 3 to 6%, but we caution buyers not to miss the market trying to time it," the report says. "Buyers who are waiting for pricing to bottom will have to watch interest rates which are likely to rise 9-12 months from now. This reality will move domestic buyers off the bench. If you desire an urban lifestyle in paradise, now is the time to be shopping for a unit in downtown Miami."
But there are signs that encouraging yet another condo-price arms-race downtown might not be the best approach to maintaining a hip, sustainable downtown. In September, the DDA released a report touting how many young Millennials ages 18-35 had moved into the area in the last decade. In a city that continues to lose young people to brain-drain and rising rents, the report seemed like good news — until that report rattled off Downtown's income demographics.
Those new, young downtown residents tend to be much wealthier than the average Miamian. And now, it's unclear how many more people can keep up if costs rise any higher.
(H/t The Next Miami)