Prices for condos and rental apartments in downtown Miami are up, as the market reaches a midpoint in the development cycle in advance of a major shift in supply next year, according to a new report to be released on Thursday.
Condo prices have risen 6.74 percent over the past six months, with the average unit at $459 per square foot, according to the Miami Downtown Development Authority Residential Market Update, conducted by Integra Realty Resources.
Price appreciation has been being fueled by rising demand and a relatively stable supply, with only 1,878 new condo units delivered to the market so far this cycle, according to the report, which used data collected between April and August. By comparison, the peak of the last development cycle saw nearly 15,000 new units delivered between 2007 and 2008, Integra Realty Resources said.
Yet the first half of 2015 “required recalibration by the developers, as increased inventory, rising land and construction costs, and fewer international buyers changed local market dynamics,” the report said.
The rising U.S. dollar against foreign currencies, in particular, has led to a slowing of the market, developers say.
Carlos Rosso, president of Related Group’s condominium division, calls it a “self-leveling.” Related, which sold 100 units per week in the beginning of this year, is now selling 20 units per week, although they tend to be larger and more expensive units, he said.
“The market will find its pace,” Rosso told The Real Deal. Miami is still in demand, with new shopping centers rising, and neighborhoods like Wynwood and the Design District transforming, he added.
According to the DDA‘s report, the downtown Miami market “is firmly into the middle of its market cycle. The report predicted that the close of 2015 “will truly indicate how well the dip in international demand has been absorbed.”
Indeed, the market is expected to shift by mid-2016, when more than 3,000 new apartments and condos will be delivered, representing the largest increase in supply in nearly a decade. Those units are expected to lead to a stabilization in pricing, the study found.
“Downtown Miami’s residential market has hit its stride when it comes to pricing for condos and rental units, thanks to steady demand and a trickling supply of new units,” said Anthony M. Graziano, principal of Integra Realty Resources, in a statement. “The delivery of more than 3,000 units in early 2016 will be this cycle’s first barometer of how international demand is holding up and the market’s ability to maintain strong pricing.”
According to the report, of the 1,878 condos that have delivered so far this cycle, 1,617 units, or 86 percent, have been sold to pre-contracted purchasers, with an additional 150 units or 8 percent expected to close within the next 60 days.
More than 27,000 condominium units have been proposed this development cycle, with 6,716 units now under construction. Projects with strong sponsorship, premium locations and/or water views demonstrate the best market acceptance at current pricing levels, according to the study.
“Given the measured pace with which new units are delivering and the cash-heavy deposit structure that’s become the new normal in Miami’s condo market, it’s clear that the development community has learned from its past mistakes,” said Alicia Cervera Lamadrid, managing partner at Cervera Real Estate, in a statement. “No two development waves are exactly alike, but this cycle is already proving to be far healthier than the last.”