Sales of new condos have picked up in 2017 as many developers have lowered prices, according to a study of the coastal Miami and Fort Lauderdale markets by ISG World.
The residential brokerage released its fall construction update on developer sales in new condo projects in eastern Miami-Dade, plus coastal Hollywood, Hallandale Beach and Fort Lauderdale. It covers both closed sales in recently completed buildings and pre-sales in projects under construction or taking pre-sale reservations.
ISG World’s last report was in March, so this updated version covered the five-month period through August. The market looked better this time.
As of August, there were 15,933 units sold, or 83 percent of total units. That’s compared to 15,432 units sold, or 80 percent of total units, in March. In October 2016, there were 77 percent of total units sold, so the remaining inventory has been steadily decreasing.
For the five months ended in August, there was a net increase in 501 units sold, or about 100 per month. At that pace, it would take 33 months to sell out the 3,311 units of inventory in new or pre-construction buildings.
By comparison, the ISG World report based on January through October 2016had a sales pace of 140 units per month.
ISG World Principal Craig Studnicky said sales in condos under construction closing faster this year because developers have started discounting units, sometimes as much as 20 or 30 percent off.
“If a project is under construction and will be completed in six to 12 months, the interest on construction loan and carrying cost on the unit and taxes will eat the developer’s profit anyway. So developers will take a haircut today and sell the unit so they can take some profit on that project.”
Given that the value of the U.S. dollar remains high against many South American currencies, it often takes a discount to convince buyers to close, Studnicky said. The good news is the U.S. dollar has lost some value over the last year, some buyers from Brazil have a bit more buying power now, he noted.
The top countries for buying new condos are Brazil, Colombia and Argentina, Studnicky said. Buyers from Venezuela, with its economic and political crisis, are not really in the picture. Fort Lauderdale has been getting more attention from Brazilian buyers, in addition to people from the Northeast U.S., he said.
“You are getting a better buy now than in 2015 or 2016,” Studnicky said. “Real estate isn’t about location. It’s about timing.”
Sales have been slower for condo developers in pre-construction because it’s harder for them to discount when they’re trying to convince construction lenders and general contractors to sign onto the project, Studnicky said. Because of that, projects under construction are typically less expensive than pre-construction projects and they offer lower commissioners for brokers, he said.
That’s why some pre-construction projects have placed sales on hold until the market improves.
ISG World removed both Naranza and 25 Edgewater, both in Miami’s Edgewater neighborhood, from the study because they were no longer actively selling. Meanwhile, the Related Group has discounted units in the Paraiso towers under construction in Edgewater by 10 to 15 percent, and they will be ready next year, Studnicky said.
“Based on the current sales pace we will be left with very little new condo inventory by the end of 2018,” Studnicky said. “Then we will see a dearth of new supply because they haven’t started many new projects. What’s being discounted now will appreciate by 2019 and 2020.”
Original content South Florida Business Journal