Foreign Buyers Drive Florida's
Housing Recovery
Courtesy of
Businessweek.com
August 22, 2013
Nicole
Kenaston’s dreams of owning a home in Miami keep getting dashed. The
32-year-old federal government worker says she’s bid on at least five houses in
the past three years and each time lost out to an overseas buyer paying cash.
“I’ll find a place I like and can get financing for, and the all-cash buyers
will come in and pay above market for it,” says Kenaston. “It’s heartbreaking.”
Foreign
investment in Florida real estate—a perennial favorite for Canadian snowbirds
and wealthy South Americans—has been on a tear since the end of the recession,
according to a March report by the National Association of Realtors. Overseas
home buyers accounted for 7.3 percent of statewide residential sales by dollar
amount in 2007; the figure climbed to 19 percent in the 12 months ended June
2012, the most recent data available. Florida accounted for a quarter of all
U.S. residential real estate sales to foreigners during that period, the
highest level nationwide. “It feels like 2003 in South Florida,” says Peter
Zalewski, owner of Condo Vultures, a brokerage and consulting firm based in
Miami, looking back to the early days of the state’s housing boom.
Buyers from
overseas have spent $50 billion-plus on more than 250,000 properties in Florida
since 2009, the Realtors’ data show. Daniel Arguelles, 33, a stockbroker in
Bogota, has bought three houses in the Miami area over the same period. “You
have cheap prices, a cheap dollar, and low interest rates. And that’s a
scenario that you haven’t seen in about 50 years,” he says. Arguelles, like
many international buyers, is renting out his properties. Others are using them
as vacation homes.
While Arizona
and Nevada are also drawing foreign buyers, the economic impact has been
greatest in Florida, the state with the highest foreclosure rate in the nation.
In the 10 South and Central Florida counties that have had the largest influx
of international cash since 2010, property-tax assessments have risen by an
average of 4.1 percent this year, according to state records. That’s almost
twice as fast as the rest of the state. Miami-Dade Mayor Carlos Gimenez, who is
struggling to plug a $50 million budget gap, traveled to Spain and France this
year to lure home buyers from those countries.
The influx of
foreign money has boosted demand and helped push up prices, sparking bidding
wars, according to real estate agents and buyers. South Florida home prices
were up 14 percent in May from a year earlier, according to the
S&P/Case-Shiller real estate index—though they remain about 40 percent
below the 2006 peak. Kenaston reports that in one Miami neighborhood where she’s
been looking, prices for a three-bedroom, single-family home have risen to
$250,000 from $180,000 three years ago.
Developers have
seized on the trend and are proposing to add more than 20,000 condos in more
than 150 new buildings across South Florida. “We do expect construction [in
Florida] to pick up in 2014 and 2015, related to stronger international demand
and more domestic demand,” says Chris Lafakis, a senior economist at Moody’s
Analytics .
In Sunny Isles
Beach, a city of 21,000 north of Miami where home values jumped 10.2 percent
this year, Mayor Norman Edelcup says he is preparing for his city’s $6.9
billion property-tax base to double by 2018 after the completion of eight
planned luxury condominium towers. He says some of the extra revenue will go
toward new parks, expanding a school, and saving for costs associated with the
next hurricane. One of the projects under construction is Porsche Design Tower
Miami, a 57-story building equipped with a car elevator that will transport
unit owners’ vehicles right into their apartments. Prices start at $4.9 million
and top out at $32 million. “It’s all been attributable to the foreign buyer,”
says Edelcup. “We’ve tried to market ourselves as Florida’s Riviera. It’s
certainly been a boon to our tax base.”
The bottom line: Overseas buyers accounted for 19 percent of residential
sales in Florida at last count, up from 7.3 percent in 2007.
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