Home buyers are likely to absorb Miami’s abundance of unsold condos within the next two years, as developers hesitate to break ground on new projects, according to predictions from developer and consultant ISG World.
Over the past two years, demand for newly built condominiums failed to keep up with frenzied development in the South Florida city, so much so that multiple developers have put previously announced projects on hold.
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But ISG’s research shows that much of the newly built and under-construction condo inventory will be purchased in 2019 and 2020, when demand will start to put price pressure back on the Miami’s condo market.
The softness has pushed many developers in recent years toward rental developments. For example 25 Edgewater, a development under construction in Downtown Miami, was originally offered as a condo tower, but has changed course and is now a rental, according to ISG.
Three other downtown developments were canceled or postponed in recent years, as "developers have been winding down their plans to launch new condominium developments until 2019 or perhaps even later," according to the report.
Some of the softest neighborhoods include the city’s beaches, such as South Beach, Miami Beach and Sunny Isles, where developers have canceled three major condo projects. About one-fifth of all condo units in the beach areas that have hit the market since 2011 are still unsold, according to ISG.
Along the stretch of Miami east of Interstate-95, there are around 3,290 unsold units in new, under construction and pre-construction developments.
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There will be only five groundbreakings on new condominium buildings this year, according to predictions from ISG’s principal, Craig Studnicky, merely half the number of such projects launched the previous year and a sliver compared to the 23 ground breakings in 2014.
Next year, developers are likely to break ground on only three new condos.
Analysts have pinned the slowdown on myriad political and economic factors outside of the oversupply, including a slowdown in demand from Latin American buyers.
"The strength of the U.S. dollar against most foreign currencies and the changing political climate in South America and Europe have recently slowed the investment of foreign capital in United States real estate," according to the report.
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Shifting migration trends are likely to pay off for the South Florida market in the long run, however, and will start putting pressure on condo prices as early as 2020, according to the report.
Canadian buyers, fueled by a strong real estate market back home, turned to South Florida in droves in search of second homes in 2016 and 2017, Mansion Global previously reported. Florida has the second-fastest population growth in the United States after Texas, with 900 people moving to the state each day. About 45% of them make Miami-Dade, Broward and Palm Beach—all counties in South Florida—their home.