Prices for luxury real estate are breaking records in Miami.
But, wait! We thought you couldn’t give away condos in Miami.
True, but that was yesterday. Today is a new day, says CNBC: Miami real-estate agents are hyping the market with a level of heavy breathing not seen since 2006. Prices can only go up, they say. Sales of million-dollar condos in 2011 are up nearly 20% over the previous peak year of 2006.
Great big prices
Here are three examples of the new Miami boom:
A buyer recently paid $25 million for this three-story, five-bedroom, 7.5-bath Miami penthouse. It has 25-foot-high walls of windows commanding ocean and city views. The record price for a Miami condo was shelled out by an Italian buyer who wishes to be anonymous, says CBS Miami.
Another Miami home — this one a house — is under contract for a record-breaking $52 million, reports Curbed (with photos). The lavish, high-style, beachfront home has 10 bedrooms and 14 bathrooms spread over 30,000 square feet. Included are a “chromotherapy” spa (your guess is as good as ours), a limousine-sized garage, a 100-foot pool, hidden art storage, a greenhouse and a panic room.
The Versace mansion — aka Casa Casuarina — was listed this month at a price of $125 million, another record, says CNBC. Of course the selling price may be a something else entirely. The home — a palace, really — belonged to the late fashion designer Gianni Versace. He was murdered there. The mansion has 10 bedrooms, 11 bathrooms and a mosaic pool lined in 24-karat gold. “Ornate” doesn’t begin to describe the place. There’s a hookah room, for example, and it’s lined with murals. The entire property is an extravagance of murals, gilt, plush fabrics, chandeliers, fountains, pools, statuary, arches and balconies. See for yourself. The South Florida Business Journal recounts the mansion’s complicated history and legal battles.
“Flight to safety”
Miami’s luxe market run-up is driven by “an especially speculative species of wealthy buyer,” CNBC says.
A large proportion of these buyers are from outside the United States. International buyers scooped up $66 billion in U.S. real estate last year, 31% of which was spent in Florida, according to the National Association of Realtors’ Profile of International Home Buying Activity.
An investment and a “flight to safety” are what Jonathan Miller of New York’s Miller Samuel Real Estate Appraisers and Consultants calls the buying frenzy. It could end suddenly if global markets go south, Miller told CNBC.
On the other hand, The Miami Herald says the entire South Florida real-estate market has done surprisingly well in the last 10 years. The Herald has an eye-opening chart showing Miami as the third biggest U.S. bubble city (after Las Vegas and Phoenix), with prices down 50% from their peak. Yet that’s 11% higher than in 2002 and 40% greater than in 2000.
In fact, Miami’s track record on prices looks good compared with Chicago, where prices now are 10% below 2002. Or Atlanta, where they’re 25% beneath the pre-bubble 2002 mark.
Florida has by far the largest proportion of sales to foreign investors, the NAR report says. Next are:
Arizona and Texas, each 7%.
New York and Georgia, each 4%.
Portrait of foreign buyers
Buyers cluster together by countries of origin, probably because of word-of-mouth and shared experiences and also because of relative proximity to their home countries, with more Europeans on the East Coast and more Asians in the West.
International buyers run the gamut. Some want trophy properties, others are after more modest vacation homes.
The report finds that Canadians are the biggest buyers, accounting for 24% of purchases by foreigners. Other countries making up sizable proportions of foreign buyers:
United Kingdom and India, 6% each.
Brazil, France and Germany, 3% each.
As high as some U.S. home prices may still seem to people earning a living in the United States, foreign buyers tell their real estate agents that American real estate is cheap compared with prices back home.
Other reasons for their U.S. purchases:
Some want their children educated in the United States.
Many are in the United States for jobs, school or to be near family.
Buyers cite the security of the United States — for laws safeguarding property rights and as a safe haven from turmoil in their own countries.
A number seek vacation homes in warmer climates.
Foreign buyers are expected to spend about $82.5 billion on U.S. real estate in 2012 — up from $66.4 billion in the 12 months ending in March.
Lisa Mundahl Greene is an agent with RE/MAX in Seattle with clients from Vietnam, China and Canada who are looking for previously foreclosed single-family and multifamily properties. She told HousingWire that the Vietnamese group makes about 20 purchases a month.
In Denver, Tatyana Chashnik, a broker with Home Real Estate, speaks Russian fluently, a boon in selling two to three homes a month to Russian clients. Says HousingWire:
Many, she said, aren’t actually investors. They’re looking for someone to help them assimilate.
… “But they don’t just ask for your advice on real estate. They want advice on how to live here.”