Like the tide that laps Miami, Florida's famous coastline, the property cycle in America's "sunshine state" does tend to ebb and flow. The difference is that with real estate, you can never pick exactly when.
It appeared that Florida was one of the first to sink in the United States property tsunami but, as it turned out, the market was already on a collision course, weighed down by a top-heavy condo load.
Peter Zalewski, a principal with the Greater Downtown Miami-based real estate consultancy Condo Vultures LLC, says there were more than 60,000 South Florida condos on the market when Lehman Brothers failed in 2008, and with the US financial system on the brink of meltdown, whole towers remained vacant. A large number of foreclosures and distressed sales followed, and even though these still continue today, 49,000 of these units have at last been sold. Locals can feel a change in the wind: they take the rattle and hum of construction cranes now active once again as the sign of a city under development.
According to Zalewski, at least 21 new condo towers providing 7,300 units are proposed for Greater Downtown Miami, with more projects expected to be announced. Nearly 110 towers with more than 15,500 units are proposed for the tri-county South Florida coastal market of Miami-Dade, Broward, and Palm Beach. "Many of the proposed condo projects that never got built during the last boom-and-bust are being revived," he says.
Sales figures certainly indicate a revival. Natascha Tello, chairman of the board, Miami Association of Realtors, says: "The Miami real estate market came back in 2011 with record sales and continued growing in 2012, as prices posted double-digit appreciation and sales set a second consecutive record despite a housing inventory shortage. It exceeded even the boom in 2005."
The market "has surpassed even the most optimistic expectations", and recovered faster and stronger than any other market in the US.
"Heightened demand from domestic and international buyers and investors fuelled record sales that resulted in rapid absorption of excess housing inventory and rising home prices. Miami median residential sales prices have experienced double-digit increases since December 2011," she says.
There was 15 months of appreciation for single and family homes, while condominium prices posted 20 consecutive months of appreciation. Zalewski says foreign buyers "saved" the South Florida condo market, buying big over the past seven years, and industry data support that. According to the Miami Association of Realtors, Florida is "by far top state" for foreigners in the US, with Miami claiming the lion's share.
"Consistently a top market for foreign buyers, Miami continues to benefit from international buying activity from markets worldwide. Miami is a global hot spot and the most international city in the US due to the strategic location between Latin America and Europe, amazing weather, cultural diversity and exciting lifestyle. Record affordability, strong rental returns and strong foreign currencies enhance investment opportunities," Tello says.
While not traditionally buyers of Miami property, Asians' interest is piqued. This year, the realty association is targeting Chinese investors via a property show in Chengdu, hosting meetings in Guangzhou, Shanghai, Beijing and Hong Kong, and hosting inbound property tours. Tello says: "The expansion of the Panama Canal in 2014 will further generate interest from Asian buyers, investors and corporations. Miami is also the 'Asian headquarters' for business in Brazil and South America."
Zalewski says even Hong Kong's own Swire Properties is there, building a US$1 billion mixed-use development with three condo towers.
Analysts including Knight Frank have also been tipping the Miami market for some time. Henry Shaw, international residential development, Knight Frank, says: "We absolutely stand by that [prediction]. Miami has seen an exciting increase in demand from international purchasers since 2010 and with the combination of its year-round sun, culture and vibrancy of the city, excellent international transport links and active luxury real estate market, it remains one of the top global hot spots for 2013."
A standout is the luxury sector, which has recovered at "an extremely fast rate". Shaw says: "The Miami market hit a low in 2008 in line with the wider global financial crisis but since then, as global investors have sought to secure capital in strong real estate markets, Miami and, in particular, Miami Beach, has shown fast growth. Research from Douglas Elliman Florida shows that average luxury waterfront prices per sq ft increased over 25 per cent from Q4 2011 to Q4 2012, a phenomenal rise."
Shaw agrees that the return of developers to the market is indeed a sign of confidence. He says: "There is a lot of new luxury condo construction both under way and scheduled in the development pipeline for Miami and there are some extremely exciting condo developments appearing on Miami Beach such as the Porsche Design Tower - the first tower in the US where you can drive your car to the front door of your ocean-front apartment and relax in your own private pool on your balcony.
"The fact that prices have risen so dramatically over the past year in terms of completed deals is due to the fact there is a limited supply of luxury products available whilst at the same time demand from all over the globe remains very strong."
From the perspective of overseas investors, Miami remains a "very good market", according to Shaw. "Agents predict that the staggering capital growth owners of luxury waterfront condos have seen over 2011 and 2012 in Miami may cool this year. However, buyers who are able to act sooner may well catch some more of this fantastic growth."
Zalewski says: "The tide has been rising gradually for South Florida real estate since 2010. It now appears the condo market is back in open water in 2013 with no storms on the horizon … but the weather can change rapidly in South Florida."
What you can buy for US$55 million (pre-construction)
A two-storey penthouse of 15,500 sq ft in the proposed Mansions at Acqualina in Sunny Isles Beach. The oceanfront condo has six bedrooms, eight bathrooms, an indoor/outdoor theatre, outdoor dining room, wine room, billiard room, and grand salon with indoor pool. Also includes a sky garden with waterfall and cantilever glass pool.
What you can buy for US$147,500
A South Beach bank-owned condo unit in an art deco building on famed Ocean Drive. One bedroom, one bathroom, and 410 sqft. Has direct ocean access, and use of a heated pool and hot tub.