The real story of the Miami Luxury Market
Lately every news source wants to jump on the bandwagon of the luxury market in Miami, it has been my experience so far that they contact top agents like my self to get our opinions on why there is an inventory build up of condos and luxury homes in the Miami market, once the reporter hangs up the phone they take bits and pieces from each conversation and report a version that fits the narrative of the story they want to tell it seems, not the real story but the juicy sexy version of the truth. Although most of the reporting is touching on a subject that is factual and a reality of today's Miami luxury Real Estate market, not one article so far has talked about the real reason behind the 20% or more price drops on some of the listings in the condo market above $1 Million and in the Miami Luxury Home market. It is important to point out that we see two completely separate luxury markets, the new and pre-construction market and the resale of existing condos and luxury homes and although both are affected by some of the realities like a strong dollar, the new construction market is more in tune with reality.
Here is what I see that has happened in the last 5 years in the Miami market, in early 2012 the pre construction boom started in the Miami and South Florida area, as an example let's talk about one of my favorite buildings Acqualina which announced that it will be having a sister "The Mansions at Acqualina". Pre construction sales of the ultra luxury condos started at over $1,000 per SQ foot for the first time anywhere in Sunny Isles Beach, and although it was setting new price records many buyers where willing to buy into the project because of the quality of the finish and the prestigious brand.
This announcement and pre-sales launch at $1,000 per SQ foot and higher of The Mansions at Acqualina caused for unit owners of the original Acqualina to start raising prices, at the time Acqualina was selling for about $680 per SQ foot, but quickly shot up to over $800 per SQ foot with the announcement of the new building, it wasn't long before prices soared to over $1,200 per SQ foot at the original Acqualina and I found my self scratching my head as to why a Milano model lines 02 and 05 at the original Acqualina which was selling for $1.4 to $1.6 Million in 2012 was now being listed asking more than $3 Million and the larger corner units the Toscana Model line 01 and 06 were selling for $1.8 to $2 Million in 2012 were now listed for sale in most cases above $4 Million, in fact today there are at least two sellers who in my opinion are in denial of reality asking above $4 Million for a Toscana model. The conclusion and reason why we keep reading about 20% price drops and above with a narrative of gloom and doom is because all news sources and reporters alike keep getting it wrong, it is a good thing to have an incorrect resale market correct it self, and the sample above of what happened with the original Acqualina echoed across the Miami market with all the near by buildings of any new construction building. STOP, cut it out, just because I'm willing to pay over $1,100 per SQ foot at the new construction Park Grove and pay $1,300 per SQ foot at Jadesignature does not mean I'm willing to pay $1,200 per SQ foot at 9 year old Jade Ocean and 10 year old Jade Beach, but this is exactly the mindset of the sellers of every condo building in Miami. I call it the (it's mine) factor, "well, they are getting $1,200 a foot at the new building next door and my neighbor 2 floors down is asking $900 a foot but this unit is mine and I painted the ceilings a special color so I want to list at $1,000 a foot" are you getting the picture? News Flash! buyers don't care, it is important for the listing agent to educate the sellers and advice them to leave the emotional attachment to their asset out of the equation when pricing their home. The market is the market and there are plenty of buyers out there but in today's market buyers will not over pay. Some sellers are starting to understand this reality and they are pricing their home the correct way. The reality of the Miami market is better explained by pointing out the truths that have been ignored by most news sources, is this done intentionally to make their stories sound sexier? Who knows, but I thought it was time for me to introduce reality to fiction and maybe news sources will cover this story accurately. The price drops that we are seeing (In the resale luxury market), is a price correction to what the price should have been all along, some of those $3 million condos which are now listed at $2.5 is a sign of some owners realizing they have been wrong and too ambitious, as soon as someone gets it right and lists at the correct price, $2.1M at best in my opinion, then the buyers will step in. In the resale market, it is not lack of buyers we are dealing with, it is lack of real sellers who are willing to list at a correct price.
As far as the new and pre-construction market, although we have seen a slow down in general due to the strong dollar, that market is more realistic and buyers who are on the sidelines waiting for brand new condos on the beach at $800 per SQ foot will continue to be disappointed, the cost to build and the cost to acquire premium build-able land is what it is, a developer will either build at a profit or not build at all, since the beginning of 2017 we at The Santidrian Real Estate team have seen a tremendous increase in demand for new construction from buyers all over the World and the North East US. That demand will slowly improve over the next few years in my opinion and from what I'm personally experiencing in my sales.
Executive Director of Sales