Developers of luxury condo high-rises in Miami have had it pretty good for the past few years. Grab some famed starchitect, give your property some outrageously expensive and kind of silly amenities, slap a vague name on it like 2200 Ocean, and then just sell a bunch of condos to foreigners to use as investment properties and occasionally as pied-à-terres.
Well, that era is coming to a close thanks to the rising value of the dollar. Some foreign countries no longer find the exchange rate quite as favorable, and now condo developers have realized that they might have to start marketing their properties to actual Americans.
"We've seen a very strong shift in the last year in the dollar — it has literally pushed whole countries out of the marketplace," Kevin Maloney , founder and principal of Property Markets Group tells Bloomberg News.
"We look around as real estate guys and say, 'Jeez, who is our buyer?'" he said. "Now you are going to allocate more of your dollars to domestic U.S."
Indeed, the news comes as the Downtown Development Agency releases its quarterly Residential Real Estate Market Update.
However, the report isn't one of doom and gloom, and the DDA finds the results to be indicative of a healthy but stabilizing market. It's not a crash, but the boom times are expectedly slowing down.
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“There is no doubt that it’s a great time to be a domestic buyer in downtown Miami,” Anthony M. Graziano, principal of IRR and author of the report, said in a statement. “With less competition from foreign all-cash buyers, we should see domestic buyers increasingly come off the sidelines in lockstep with the strengthening dollar.”
The reports find that both rental rates and pre-construction sales velocity have essentially stabilized after a few years of rapid growth. Average price-per-square-foot has also stabilized at an average of $430, the same price at the end of last year.
Unlike the last boom, this cycle has seen developers require 50-percent down payments on properties before they're even built, but some projects have begun to lower that requirement. Brickell City Centre, for example, has downgraded its down payment requirement to just 35 percent.
The end result is that we should see fewer mega-luxury projects announced over the next year or two, and some may be pushed back, but from a local perspective the slowdown is healthy. Who knows, maybe someone might be even start developing real estate that actual Miamians who live and work here can afford.