Miami condo crush luring foreign investors

updated 5:41 p.m. ET Aug. 8, 2005

MIAMI - They have thought-provoking names like Opera, Axis and The Venture, condominiums that will line Miami’s bayfront skyline.

These high-rises are part of a condo crush spawned by the nation’s housing boom and buoyed by active investors from Europe, Latin America and the U.S. Northeast that target the city because of its worldly feel and relative affordability.

“When you look around the world and you consider the factors of the environment, climate, amenities, risk and appreciation, Miami ranks way high up there,” said Jorge Perez, chairman of The Related Group of Florida. The Miami-based developer plans to build more than 15,000 units in South Florida and Las Vegas in the next four years — with buyers already lined up for many of them

From Florida to California, condos are a growing housing option for people who have been priced out of the single-family home market or are seeking a more upscale, all-in-one lifestyle for a second home. They are also a growing market for speculators — many from abroad — looking for units to resell, or “flip,” to take advantage of low interest rates, cheap dollars and attractive supply and demand.

But prices are rising, community activists are railing against development, and observers are wary of a possible bust because of speculation fueled by investors in the pre-construction and condo-conversion markets. Perez and others say they don’t anticipate a collapse, but instead are preparing for a price correction that would level out the sales prices for condos.

According to the National Association of Realtors’ statistics, 960,000 condos sold this year as of June, 12.4 percent more than all of 2004 and up 46.1 percent from all of 2002. The average condo price was $223,500 in June, up 14.8 percent from last year and 57.1 percent from three years ago.

In Miami, thousands of new condo units have been built in the past three years, and more than 30,000 units ranging from about $120,000 to millions of dollars are planned within the next few years, combined with retail and office space for more than $13 billion worth of mixed-use development, said Otto Boudet-Murias, head of planning and economic development for Miami.

The supply of new units, either through converting apartments into condos or building brand new ones, is being met by an international demand.

Alberto Saiz, assistant professor of The Wharton School at the University of Pennsylvania, said several factors have fueled the condo boom. He points to low U.S. interest rates and the weaker dollar, but also to the steady stream of immigrants from South America who come with cash.

Vacation destination
Miami has long been a vacation or second-home destination for people from the Northeast United States, but low interest rates, economic problems in Latin America and the dollars’ struggles against the euro have led foreign investors to target Miami as a more affordable alternative to European real estate.

“We’re getting a lot of second home buyers from New York and Chicago and Boston,” Boudet-Murias said. “Miami is also the destination of choice right now for European buyers.”

One of the brokers seeking out new foreign investors is Igor Acosta Rubio, who regularly travels to Venezuela, Colombia and Mexico. Acosta said investors in countries such as Venezuela and Argentina that are experiencing economic or political instability are looking north.

“We’re the Latin American door for the United States,” said Acosta, of America Real Estate in Coral Gables. “People there are realizing there are other governments who are more reasonable in terms of investment.”

Acosta said many of clients prefer to “flip” the properties. With a 20 percent down payment, one of his investors bought a one bed, one bath condo at 650 square-feet for $225,000 a year ago near Miami’s downtown. It can sell for $350,000 today, Acosta said.

Hernan Gleizer, a broker for ReMax Best Seller Realty, prefers the skyrocketing condo-conversion market to lure foreign investors. According to Real Capital Analytics, 60,844 apartment units were bought in 2004 with the intention to turn them into condos, compared to 15,806 the year before and just 5,865 in 2002.

One of Gleizer’s clients is Marcelo Klucznik, 34, of Buenos Aires, who currently owns eight units and has been “flipping” condos for years. He said he first entered the Miami market around 1998, before Argentina’s economic crisis in 2001.

“Two years ago, if you asked me, I would have told you that I was done buying,” Klucznik said while on a visit to Miami. “But the prices have gone up 100 percent.”

MORE FROM REAL ESTATE

Real estate Section Front

No sign yet of a bottom in home prices House passes housing-rescue bill Paulson: Support for mortgage giants needed For commuters, economic woes pile up Credit crisis halting commercial construction The New Yorker: Sponsoring recklessness Freddie Mac CEO got $19.8 million in '07 Freddie Mac moves toward stock sale Little foreclosure relief seen from housing bill Housing starts at slowest pace in 17 years Real estate Section Front   Add Real estate headlines to your news reader: