When it comes to Florida real estate, economic forecasters predict that the housing market recession there will be turbulent. The greater Miami area, which includes Broward and Palm Beach counties, is the 11th most overvalued area in the country. Nine other metropolitan areas in Florida are part of the 15 most overvalued cities of the 100 that make up the list in the United States.
Jonathan Campeau, the CEO and founder of Luxuri and Luxuri International Realty, has been on the ground there, in the real estate business for over a decade, and spoke to Regarding Luxury about Florida real estate market trends.
What are some of the positives for the Florida luxury real estate market heading into fall and winter?
South Florida has been non-stop since the Covid pandemic. The “slow season” just means lower rates. There is no drop in occupancy. Season begins November 1 so the big rates and larger reservations are in the coming months. Miami has an Art Basel, Christmas, and New Year all in December, and this year we have five weekends in December which means much bigger than anticipated December payday. With big reservations come big demands. Both the Luxuri vacation rentals division and its real estate brokerage will be busy this coming season.
The South Florida real estate market and U-Haul reports are all showing steady south Florida growth. High-interest rates have also kept new investors from entering the market so this year Luxuri should do better than last year’s performance due to limited supply, increased demand, and an already 80 per cent sold-out season.
My advice is to buy well-priced and hold waterfront assets.
What are the negatives, the headwaters, that investors need to be wary of?
If South Florida municipalities increase tourism taxes like they did in Aspen from 11 per cent to 21.5 per cent or they add a “mansion tax” to purchases/sales like they did in Los Angeles (five per cent on homes sold over $5m!).
If you have 20 short-term rental properties then I would advise you to fill half of them with longer-term tenants. You make less but you cover your bases.
For vacation real estate investors, in countries like Canada, is the Miami area still a good investment, and if so why? What are some of the other areas in Florida that international investors should be looking at and why?
Of course, Canadians and other foreigners should invest in South Florida. When interest rates come down inventory will to zero and there will be nothing to buy. Remember, you can always refinance. You’re buying an asset, not an interest rate. Outside of South Florida, I believe Tampa and Fort Myers to be fantastic markets to be looking into.
But South Florida takes the cake. International investors oftentimes need to put down 50 per cent on residential real estate. If you do not have that amount to put down on a property perhaps look into buying pre-development condos from developers before they break ground.
You can put down sometimes as low as 5 per cent as an international buyer. You will be required to make more payments as the developer moves to the next phase in the project but often times initial acquisition costs are fairly low.
What are the average prices of real estate in the greater Miami area now?
Price per square foot varies drastically depending on the year of build and if it is waterfront or not on Miami Beach. Take for example my home – 3605 Flamingo Dr. that I sold for $10.5m at $1,720 per square foot. My neighbor at 3541 Flamingo Dr. sold for $27.5m which is $2,391 per square foot, a 39 per cent increase in price per square foot just three doors down in the same month.
It just depends on Miami. A property is only worth what someone is willing to pay. And up till right now … there is continually someone in line to pay a premium for a piece of the South Florida waterfront properties. My advice is to buy well-priced and hold waterfront assets. I do not see them going down in price in the near future.
Are large numbers of people still emigrating to Florida, as has been reported in the news, and what kind of an impact has that had on the real estate market there?
Increased demand for sure. Longer lines in all banks, restaurants, and entertainment. Harder to schedule inspections and get timely appraisals. Lenders are more difficult because they do not want to accept the appraiser’s numbers out of the fear of a 2008 repeat.
Keep in mind that 2008 involved unqualified buyers. This time the buyers are qualified and property prices are maintained. They are not dropping.