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Introducing Miami

Nicknamed the ‘Capital of Latin America’, Miami has a 5.5 million population and is located at the southern-eastern tip of the United States, acting as a gateway from the USA to the Caribbean, Central and South America. It also tends to be a first port of call for those entering the USA from these regions.

Miami is a vibrant, cosmopolitan city and a major international trade centre, leading in finance, commerce, culture, media, entertainment, the arts. Downtown Miami is home, for example, to one of the largest concentrations of international banks in the United States. The city, with its tropical climate and beautiful beaches, is also a major centre of tourism, attracting more than 38 million visitors annually. One in seven of all the world’s cruise passengers start from Miami.

The USA and Miami’s residential markets

The United States’ housing market has turned a corner as the flood of repossessed housing has been staunched, and a lack of new developments and inventory in many major US cities has driven up prices. The Case Shiller index recorded price rises of 12% in the year to June 2013, following total falls of 34% between April 2006 and January 2012.

Very little housing development took place in the USA between 2008 and 2012 but new home starts were up 28% in 2012 and mortgage lending increased by 38% (albeit from very low levels).

Miami was a hotspot of the mid-noughties housing market boom, fuelled by cheap credit it saw a huge amount of condominium development in the run up to its housing market peak of 2006. The city suffered severely in the market downturn, and prices across the whole market fell by more than half.

In June 2013, Miami’s prices stood 41% below their former highs, according to the Case Shiller index, despite having grown by 22% from their November 2011 low. By contrast, prices in the prime condominium market are now within 3% of their 2006 high (see Graph 1), pushed by strengthening demand and a very limited supply inventory (Graph 2).

Miami’s prime residential markets

Miami’s prime stock is usually in the form of high end condominium developments, typically with direct beach or waterfront access and benefiting from high levels of amenities and services. Most condo development has been focused on beach-front sites in South Beach, where prices average $800psft and peak near to $4,000psft (see Map 1).

In common with cities across the world, central districts are being favoured and the urban is preferred to the suburban. As prime plots have been built out in South Beach, a new wave of high value condominium schemes are emerging on waterfront sites in the Central Business District, Brickell and the Arts & Entertainment District. These schemes benefit from proximity to the centre, and prices here are being pushed to new levels.

High-value single family home neighbourhoods are also found in the city, on the Venetian Islands and concentrated in the northern half of Miami Beach, around Indian Creek.

New development

Miami-Dade and West Palm Beach counties have had a reputation for high levels of new housing supply but condominium completions have plummeted; having peaked at 16,220 units in 2007 they fell to a low of just 1,140 in 2011.

The fundamental strength of occupier demand, even in these counties, is revealed by their strong rental markets. Stabilising prices in Miami’s condominium market owes much to the latest wave of South American buyers (see below), who are accustomed to putting down large deposits, thereby helping to mitigate developer risk. (A 60% down payment is now typical on off-plan purchase, compared with just 10% prior to 2007). These fundamentals have sown the seeds for a new wave of condo development.

Achieved sales prices on the very top tier of prime condominium schemes have averaged between $1,300psft and $2,500 in 2013 to date, with some individual sales peaking close to $4,000psft (see Table 1).

Taken from
Market in Minutes: Miami Prime Residential Markets Autumn 2013