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Article Courtesy of The Miami New Times
By Jerry Iannelli
Published August 7, 2016
Since the 1980s, Miami residents have been able to judge
their city's relative economic health by counting the number of cranes in
the sky. More than ten? Congrats, the city is in the midst of a housing
bubble. Zero? Recession.
Right now, the downtown Miami skyline is absolutely flooded with cranes, and
it's impossible to drive more than ten blocks in any direction without
hitting construction traffic. But a study released this week by the Miami
Downtown Development Authority (DDA) might be the first hint that the city's
latest construction boom is finally ending: Following five straight years of
price hikes, downtown Miami condo resale prices have dropped 4 percent this
year.
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After the 2008 housing
crisis evaporated much of the city's wealth, it's long been
expected that foreign investors — many of them shady
characters laundering dirty money away from their home
countries— have been propping up the city's latest
real-estate boom. As the Real Deal South Florida reported
yesterday, more rental units will be built in Miami this
year — 6,500-plus — thanin any year since 1999.
Additionally, a whopping 11,000 condos are slated to be
built across the county in the next two years.
According to the DDA, the greater
downtown area might be reaching a point where it really
can't sustain additional growth. (For the purposes of the
study, "greater downtown" stretches from Brickell up to the
Design District and includes Wynwood and Edgewater.) |
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Through the first half of the year, "few projects continued to be announced
and planned, and some observers and media continue to issue dire predictions
as to the future of the downtown market," the study says. "However, most
developers are taking a wait-and-see approach."
In essence, the price drop shows there have been so many new condos built
over the past few years that investors simply have no need to buy old units.
This is a problem, because gigantic condo towers are a bit harder to dispose
of than last year's BMW X6. A city with no resale market means entire towers
could end up empty in a few years' time.
"A review of monthly listings indicate[s] a large increase in the level of
inventory offered for sale," the study says. As more condos get built, the
DDA predicts that "resale pricing will adjust. This will likely continue if
for-sale inventory remains at a level exceeding 2,500 units a month."
(The study was also published before the Zika virus hit Wynwood, and it's
unclear how, or if, the virus will damage the city's economy in the long
run.)
Though the DDA expects things to "level off" as more condos are built, Miami
doesn't exactly weather that whole "leveling off" period well. As famed
cocaine importer Mickey Munday told Vice in February: This city is basically
one gigantic pyramid scheme, centered around selling condos to an
ever-increasing list of outside investors.
Granted, the study took only condo prices, not overall rents, into account.
But until the city diversifies its talent pool and starts drawing in more
high-earning millennials in science and technology jobs, building new towers
is pretty much all we've got.
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