Because of its proximity to New York City, Miami has long been considered the 6th district of the Big Apple. Even more so through the spectrum of luxury real estate. Not only are buyers coming ashore but developers also like to converge towards Miami, thus bringing along their New York City pricing.
Indeed, overall beachfront prices in Miami have increased by 11,5% over the past year from an average $907/sqft to $1011/sqft. Prices such as $3,000 to $4,000/sqft are high for Miami but real bargains for New Yorkers who compare them to the best Manhattan neighborhoods. After opting for Palm Beach to purchase their vacation residences, New Yorkers now see value in Miami, pushing pricing up and becoming responsible for a new buying spree. As a result, Miami has been ranked the 7th most important city for high-net-worth people – more than $30M in assets – in 2014. It was ranked 29th back in 2009!
As an example, New Yorkers bought ¾ of the newly-launched penthouses sold at 1 Hotel & Homes South Beach last month! They invest thanks to the convenience of flying to Miami, and the warm weather less than 3 hours away. Miami has evolved into an art and food mecca, gathering the most refined dining and effervescent art galleries. Moreover, Miami real estate market is still in the middle of its growth while New York’s has already popped. Among the 20% of domestic buyers, 90% of them are New-Yorkers. Everybody tends to come to Miami because it is less expensive than New York, but in the meantime, prices are bursting.
With Echo Brickell and Muse Sunny Isles under way, Property Markets Group is an early champion that has now become a veteran of Miami real estate. The key to its success: aggressive pricing. Indeed, its latest unit on sale is an Echo Brickell penthouse of 10,500-foot listed at $37 million. If sold, that would be a record for this downtown Miami area. Despite both the high price and the location, the unit has already received a full-price offer from a Latin American investor.
While prices are going up, some concern arises as to a potential market correction. Even though the market has quickly recovered, supply is skyrocketing with more than 300 announced condos in the past 4 years. Only in the downtown Miami area, not less than 70 condo towers are under construction in a 60-block perimeter.
The most common buyers for these new constructions are either non-residents looking for a secondary home or investors. The purchasing model has also become safer since the previous recession: developers ask for 50% deposit at least instead of 20% before. This model has been imported from Latin America where investors are already used to pay full price upfront to close their deals. This way, it gives less chance for potential buyers to walk away.
Even those who did not believe Miami would get back on its feet are now forced to acknowledge the fact that Miami now sells at 50% more expensive than back at the peak of the last cycle. It is particularly promising as the very difference between New York and Miami real estate markets is that Miami’s is fed by the flow of capital and people from Latin America. Miami has still some great days ahead until the economic and political situation of South America stabilizes.