The real estate of Miami saw the first rush of slowdown in the sales of condominiums at the beginning of last year, 2016, with warnings that that could possibly result to a recession by the year end. Well, 12 months after, there was no imploding of South Florida real estate, but it seems the industry has started to feel the hurt of a market that’s bear.
Now in 2017, brokers, investors and developers think for brand new projects, construction financing will be more difficult to get and the sales of condos will retain it’s slow pace.
According to some big players in the real estate market of South Florida, here’s what to expect:
Too much inventory has been created in downtown Miami because too many projects are being marketed to buyers that seek investments in units. Dan Kodsi, the developer of Paramount Bay and Paramount Miami World center, said this.
He added that there will be some clips, though he doesn’t believe in cycles. There won’t be a mass sellout as these aren’t people who find it hard to pay up their mortgages. Most likely, these investor buyers will renting out their units and taking them off the market.
The managing principal of 13th Floor Investments, Arnaud Karsenti, also thinks that there is an oversupply in the condo market. Karsenti doesn’t think that by any means, it is dead, but it will definitely soften. “We stay aggressively confident on anything mixed-use or residential. We love properties that take benefits from the population growth of South Florida, which is its greatest trend,” Kasenti added.
According to Colliers International South Florida’s executive vice president, Mika Mattingly, currently, the urban core of Miami has a lot of inventory, selling all those units will take three years.
Even at that, she has a strong belief that compared to Brickell, Miami’s downtown is ready for a strong growth. She said that in downtown Miami, there will be more movement. For instance, there is no waterfront and no parking in Centro Lofts. Still, at close $500 per square foot, they are literally almost sold out entirely. “You will really see an urban dweller that desires to live downtown.” She said.
Though some observers think that 2017 is the start of an upward trajectory new cycle, the CEO of Douglas Elliman’s Florida brokerage, Jay Parker, said that the presidential election had a heavy impact on the 2016 slowdown. He mentioned that all the volatility and hostility during that period caused buyers to put a hold on purchase. People who normally would in the real estate market, whether as a transitional move or for investment, decided to pause.
Parker expects thatin the first two quarters of this year, 2017, the market will get benefits from held-back demand. He said he doesn’t think that anybody has a crystal ball, however, a continued anticipation of the rise in rates of interest will compel those who don’t feel buying is a necessity.
A Two Roads Development partner, Taylor Collins, said that 2016’s first two quarters were slow, however, there was a continuous growth in the 3rd and 4th quarters that will be carried over into this year. According to Collins, in 2016, the market took a long breath in 2016.
He said he doesn’t think there will be any of the mega projects of 800 to 1000 units happening this year because he doesn’t think those can stay in pace with the absorption. However, there will be more of high-end, smaller boutique products.
Collins warned thatthe financing for construction will be tighter this year, 2017. He said lenders now require that you are 50% sold before beginning to draw on a loan for construction. “They know very well what happened in 2008 and 2009, the last cycle. Such days are over.” He added
“I foresee the dramatic slowdown of the construction financing this year.” The CEO and founder of Aztec Group, Ezra Katz, said this.
He said that lenders are getting a lot more conservative, and underwriting standards are beginning to change. Lenders have, in their books, so many loans. Katz thinks it will be very challenging for projects that have not been financed and are seen as new constructions, particularly the new kids or newbies in town.