Miami’s condo euphoria treads a historically familiar trail | Miami Today

 

If you’ve been around Miami at least a decade you recall the euphoria that’s causing condos to spring up faster than we can count.

“At this rate, we’ll have 12,000 [units] just this year,” architect Willy Bermello told fellow members of the Miami’s Urban Development Review Board two weeks ago as more than 1,300 units in four unrelated towers sought approval.

Mind you, he only tallied what’s about to rise inside the city of Miami, the county’s hottest but not only boom area.

As with all of Miami’s many booms, this one has unique elements, the reasons those caught up in the cycle use to assure anyone worried about a bubble that “this time is different” – which is always true right up to the point that it isn’t.

This time indeed differs from the bust eight years ago: buyers now finance construction, not the banks that did it last time and certainly not developers, who for years have operated on OPM – other people’s money.

So if condo values should ever fall – and it’s a safe bet that they will by some percentage someday – it’s the buyers who’ll be losers, nobody else.

And since most buyers are foreigners who rent out their units, bankers and developers take comfort, telling us that none of us will get hurt if the bubble bursts.

Nobody wants to talk about this, because lots of jobs and income are at stake. Why shake up the market?

Well, nobody wanted to talk about it in the past decade, either. In fact, nobody ever wants to talk about it.

Last decade, the global economic slide left more than 20,000 unsold condos in the county. We all thought they’d linger on the market – but fortunately the current boom soaked them up, leaving a hunger for more.

Developers are more than happy to feed that hunger. They are feeding it quickly. In downtown alone, 49 projects with 16,843 units are listed in preconstruction, though in their frenzy developers may already have begun some of them.

Thankfully, they’re building high-quality buildings. They will fill a need. Condos won’t go begging. The only question is, at what price? How long will it take foreign buyers to regain their full investments in sales or to rent profitably long term?

At the right purchase price, these units are all solid investments. But defining “the right purchase price” is tricky as the frenzy sends the sale price per foot of new units soaring.

Before the last bust $300 per square foot defined a luxury condo. The same units bring more than $600 per foot today. New condos are pricing well above $1,000 per foot – and getting their price.

Continued > Miami’s condo euphoria treads a historically familiar trail | Miami Today