Mansion Global

Miami Beach Braces for a Market Correction

The strong dollar has dampened demand, but experts hope for a milder downturn this time around

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With sales sliding, some analysts fear a bust is coming to Miami Beach’s luxury market.

Henryk Sadura / Getty Images
With sales sliding, some analysts fear a bust is coming to Miami Beach’s luxury market.
Henryk Sadura / Getty Images

The number of luxury condos for sale in Miami Beach surged by almost 60% over the past year as demand continues to wane, fueling fears that the housing market could be heading for a bust. New figures from Douglas Elliman Real Estate showed that, in the first three months of the year, the number of homes on the market jumped 57.7% to 1,063, from 674 in same period of 2015. However, the number of sales slid 18.9% over the same period to just 73 as demand from international investors dampens against a backdrop of a strong U.S. dollar and concerns over the global economy. In a further sign of some developers’ struggle to sell these homes, the average condo stayed on the market for 119 days, up from 60 days a year ago. The report predicts it could take more than three and a half years for the supply to clear. As a result of the imbalance between supply and demand, the average sales price of a luxury condo — defined as being in the top 10% — fell 14.5% to $3.1 million in the first quarter of this year, compared with the same period in 2015. The data follows reports that developers are cancelling projects, cutting prices and offering incentives such as private-jet access to close sales. “The number one  driver of what we’re seeing in Florida is currency,” said Jay Parker, the head of Douglas Elliman’s Florida operations. “The Canadians, Latin Americans and Europeans have seen their buying power diminished because of their currencies.” Jitters over the global economy and the upcoming presidential election in the U.S. are making both domestic and international investors nervous about making any financial decisions. Some are worried there could be a repeat of the aftermath of the global downturn in 2008 and 2009, when Miami was hit particularly hard. Nevertheless, Parker believes the Miami property market will go through a short correction. “We’ve already seen prices falling by around between 7% to 10%,” he said. “I’m guessing the correction will be around 15% to 20%.” By November, Park said, prices will stabilize as developers hedged themselves against a freefall by securing sizeable deposits and pre-sales before putting shovels into the ground. Jonathan Miller, the CEO of Miller Samuel, the appraisal firm that compiled the data on behalf of Douglas Elliman, added that Miami’s cash-rich market (around 70% of condo buyers pay in cash) will make for a much softer landing than earlier, more highly leveraged cycles. MORE From Mansion Global: