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Miami's Condo Craze Burns Out on Strong Dollar
The sales office for condominiums at Miami’s Brickell City Centre attracted more than 100 visitors daily last year, with prospective buyers crowding in and snapping selfies beside a scale model of the $1 billion project.
Now, the flow of people has trickled to about a quarter of what it once was.
“Buyers are asking really good questions” instead of rushing into deals, said Stephen Owens, president of the U.S. unit of Hong Kong-based Swire Properties Ltd., the developer of the 9-acre (3.6-hectare) condo, hotel, office and shopping complex. “Two years ago, it was, ‘Where can I sign?’”
Downtown Miami’s luxury-condo boom -- fueled by buyers from Latin America and Europe willing to pay half the purchase price up front -- is becoming a casualty of the year-long climb in the U.S. dollar. Diminished purchasing power and rising prices are holding back the overseas investors that make up the bulk of sales at new towers, cooling a frenzied market.
In response, developers are delaying projects, lowering down-payment requirements and turning their focus to 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,” said Kevin Maloney, founder and principal of Property Markets Group, which is developing Echo Brickell, a 57-story luxury tower that will have a shark tank in the lobby.
“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 United States.”
Developers have broken ground on more than 7,600 new condo units since 2011, when construction resumed after the last crash, according to a report scheduled for release next week by the Miami Downtown Development Authority. After starting 16 major downtown towers in 2014, builders began work this year on just one. Sales of new condos slowed and prices flattened in the first quarter, the report showed.
More than 3,000 condo units planned for construction are at risk of delay, said Anthony Graziano, senior managing director at Integra Realty Resources Inc., which prepared the report. He estimates that international buyers account for as much as 95 percent of downtown’s new-condo market.
“We’re basically going to be in a period of slower growth for the next year, year-and-a-half while the market stabilizes,” Graziano said. “I characterize it as a healthy correction.”
South Florida had a higher share of international homebuyers than any U.S. market last year, led by purchasers from Venezuela, Argentina and Brazil, according to a survey released in April by the Miami Association of Realtors. Those countries, along with Russia and parts of Europe, have seen their currencies plunge against the dollar amid political and economic unrest.
Aaron Drucker, managing broker for Miami-Dade County at Redfin Corp., said condo prices in the downtown area may fall 1 percent to 3 percent in a “mini-correction.”
During visits to six sales offices last week, agents mostly outnumbered buyers. Developers are seeking to lure visitors with glitz, piping dance music onto the sidewalk, setting up lounge chairs overlooking the water, or offering valet parking. The sales office at the Brickell Flatiron is also an art gallery designed by artist Julian Schnabel.