The feverish Brazilian investment in South Florida residences might seem unprecedented, but to real estate veteran Bruce Weiner the trend mirrors the early 1990s.
“Brazil lifted its currency restrictions and had an emerging middle class,” recalled Weiner, principal at Fort Lauderdale-based Weiner, Vollrath & Partners LLC. “All of a sudden the middle class was coming here and buying. It was a great three or four years, then the bubble burst.”
These days, a similar buying surge has Brazilians moving ahead of Canadians as the most active foreign investors searching for South Florida residences, according to the latest report from the Miami Association of Realtors. The association tracked South Florida property searches by nationality on its website in February 2013 and compared the results to February 2012. It defines South Florida as “the Miami-Fort Lauderdale area.”
Besides Brazil, other countries that are the source of increased interest in the region include Colombia, which also moved ahead of Canada to become the second-most active foreign country, Venezuela, France and Peru. The French activity is notable because French nationals did not appear on the list of 10 most active countries in February 2012.
Such enthusiasm from international buyers is fueling the region’s residential market, which is experiencing sharp pricing increases and inventory declines.
The median price for single-family homes in Miami-Dade County jumped 16 percent to $200,000 in February 2013, while condo prices rose 28 percent to a median of $162,000, according to Esslinger Wooten Maxwell Inc. Broward County median single-family prices increased 19 percent to $228,000, and condo prices climbed 22 percent to $93,000.
Esslinger president Ron Shuffield attributes the pricing increases to a lack of available for-sale product. He estimates that Miami-Dade County only has five months of single-family supply and six months of condo supply. Broward is down to three months of single-family supply and four months of condo supply.
“The world has become small, and Miami is at the center of this,” Shuffield said.
LATIN CATALYST
Latin America is always going to be a residential real estate catalyst for South Florida, and Brazil has been leading the charge during the current market cycle.
Weiner’s company is currently handling sales at the luxury condo complex St. Regis Bal Harbour, where about half of more than 200 units sold over the last 30 months went to Brazilians and Russians. The average sale price at St. Regis exceeds $4 million.
“The purchasers we’ve met for the most part are extremely wealthy international business types,” Weiner said. “They may have an apartment or co-op in New York and one in Monte Carlo.”
Another longtime residential real estate professional in South Florida, Related ISG LLC principal Craig Studnicky, also sees the parallel between the Brazilian economic boom of two decades ago and the country’s current growth.
“In the early ’90s Williams Island was like the north region of Rio,” Studnicky said. Williams Island is a high-end 84-acre community in Aventura.
“When it collapsed in the late ’90s, we were grateful for Colombia and Venezuela,” he said.
Those who recall the last Brazilian boom-and-bust cycle wonder how long the county’s current growth can be sustained. Inflation is already rising in Brazil, which is also spending exorbitant amounts on infrastructure to prepare for the 2014 World Cup and 2016 Olympic games.
The long-term viability of Brazil’s economy is a “valid question,” according to Stephan Gietl, principal and co-founder of Aventura-based mckafka Development Group LLC.
But the risk for South Florida’s residential market “should be limited because these are all equity deals,” Gietl said. “There is no leverage. These are sophisticated investors. … I don’t think we’ll see a lot of fire sales if something happens there.”
FRENCH INFLUENCE
The influx of French investment in South Florida residential real estate coincides with the country’s election of President Francois Hollande nearly one year ago.
The association’s website had the seventh-most property searches from France in February 2013.
Hollande’s proposal to levy a 75 percent tax rate on wealthy French citizens spurred a flurry of flight capital to the United States, and specifically to South Florida. France’s constitutional council in December 2012 determined such a tax rate would be unconstitutional, but the ruling came too late to stop the monetary exodus.
“Since the beginning of 2012, a lot of French people bought a lot of property in Miami and Fort Lauderdale,” Gietl said. “People became scared about the new president.”
French buyers still represent a much smaller percentage of the region’s residential activity than Brazil, Canada and several others, but their market share is growing, Shuffield said.
“It’s no secret they are looking to move their money out of their country,” he said. “When people feel pressure from their home country, the first purchase they usually make is a home.”
Some of France’s European neighbors remain wounded from the continent’s economic crisis, however. Italy dropped out of the Realtor association’s February top 10 list after ranking eighth in February 2012.
Activity from the “south belt of Europe,” such as Italy, Portugal and Spain, has dried up, Gietl said.
“I don’t see a lot of buyers coming from this area,” he said.
Any shortfall from those countries could be partially negated by growing interest from certain Scandinavian nations, according to Shuffield. Esslinger Wooten Maxwell tracks how many visitors the company’s luxury residential website receives from 163 countries. Over the last three months, residents of Sweden had the 12th most website visits, while Norway and Denmark ranked 14th and 16th, respectively.
“I don’t think we should underestimate the value of” Miami International Airport, Shuffield said.
“When you have more international flights per day than any other U.S. airport, that’s a huge draw for us to sell real estate because people realize they can get there in a matter of hours.”
Even during its strongest economic times, Europe never accounts for much more than 10 percent to 15 percent of South Florida’s total residential sales, according to Studnicky. Developers and owners would be wise to continue focusing on Latin American, Canadian and domestic buyers.
“It’s not significant enough to spend too much money on,” he said.
ASIAN INFLUENCE DIMINISHED
On the other end, interest from India has dropped off considerably, according to the association. India and other Asian countries were expected by residential observers to be the next international growth generator for South Florida. But India fell from being the sixth most active property searcher in February 2012 to a six-way tie for 10th.
“I heard similar anticipation a year-and-a-half ago about not just India, but all Asian markets,” Studnicky said. “They have been pretty much non-consequential. The Chinese people we see buy in Miami are mostly Canada-based, not from mainland China.”
Studnicky and his residential real estate peers have examined why South Florida acquisitions from Asian buyers are not increasing, and they concluded “Miami is just geographically too far away,” he said.
“We will remain dominated by South America, dominated by the northeast U.S. and Canada,” Studnicky said, “where it is nothing more than a nine-hour plane ride.”
Source: DBR
