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Miami Real Estate Market Is Hot Hot Hot. Is It Boom Or Bubble?

Construction in Miami's Brickell business district.
Construction in Miami's Brickell business district.
Jaime Mejía

MIAMI — Luis Flores has been on a roll of late, handling real estate deal after real estate deal and helping close, in the past 18 months, on no less than $1 billion worth of property.

As the lawyer's hot streak suggests, property investment has made a serious comeback in Miami, which is attracting capital from the world over and from Latin America in particular. Investments are pouring in and settling in luxury construction projects in the desirable Brickell business district, in the bohemian midtown area and, as always, along the long, narrow island that is Miami Beach. There is also more action in nearby coastal areas like Sunny Isles and Aventura. Prices, as a result, have risen steadily — to the point that Miami-area land values have begun surpassing the levels reached just before the bubble burst and prices collapsed in the late 2000s.

People in the United States have not forgotten the global financial crisis of 2008 and recession of 2009, when millions of families, unable to make their mortgage payments or sell their properties to pay off their debts, ended up losing their homes. The crisis hit all sectors of the U.S. economy. And many towns and cities have been slow to get back on their feet.

But in Miami, for all the damage done, the recovery began relatively quickly and is now, by all indicators, in full swing. Cranes are visible all over the city as workers erect dozens of new towers, some reaching 40, 50 or even 60 stories high. Someone returning to Miami for the first time in five years would hardly recognize the skyline.

From the 40th floor of a building in Brickell, a public relations executive shows me the landscape outside his office window: skyscrapers, cranes and more skyscrapers, rising on islets in the bay. "There," he says, pointing at an empty plot of land, "they're starting to build an 80-story tower."

Building with capital, not debt

The market's present exuberance and memories of a decade ago are unnerving to some observers. But experts and investors we talked to do not see a bubble about to burst. Things may slow down a bit, they say. But they're unlikely to crash.

"The current boom will last at least another two years, after which the market will continue to grow but at more normal rates," says Raoul Thomas, head of the investment firm CGI Merchant Group, which is investing in a big hotel in Miami in partnership with Spain's Meliá hotels.

The biggest difference between now and the "loco" years leading up to the crash, he explains, is that the current growth is "based on capital, not debt." Lawyer Luis Flores of the firm Arnstein and Lehr's agrees. The new boom, he says, has a far more solid financial base. "Developers get financing from banks only if they show they have already sold 50% or more of the units in their building projects," he says.

Liliana Gómez, head of international sales for the realtors ISG, says the recovery was widely expected to take a decade. But investors, keen to take advantage of suddenly low prices, didn't wait that long. Money began pouring in relatively soon after the 2008 crash, and within five years, "any excess stock there might have been was absorbed," Gómez explains.

Much of the post-crisis investment has come from Latin America. But European investors are also making their presence felt, as are the Chinese, according to Harvey Hernández, managing director of Newgard Development Group.

Bargain hunters

Miami's real estate boom is not just residential. It is also fueled by a growing number of firms settling here and adding to their business infrastructure. The traditional presence of banks, for example, has expanded to encompass other financial services.

"There are bankers moving here from New York and Los Angeles. And family offices (wealth management for families) are moving from Colombia and Venezuela to Miami," says Jean-Pierre Trouillot, a partner at the auditors KPMG in Miami.

Trouillot expects demand to continue, not not necessarily at the current rate. "The growth rate is too high to continue indefinitely so it should stabilize, though I couldn't say when," he says.

With the discounted prices that followed the 2009 crisis, investors were able to buy property in Miami that earned them annual returns in the double-digit range. Now that the market has corrected itself, the numbers are coming down.

But there's still money to be made, according to Antony Graziano of Miami's Integra Realty Resources, a firm of property consultants. "Now we are returning to a more normal market and the rise in property values could be between 5% and 8% over the next two years," he says.

Prices are also being driven up because of a labor shortage that resulted from the building boom and is affecting construction costs. Another factor to watch out for is the U.S. dollar's rising value against Latin American currencies, something that could temporarily dampen demand. But a stronger dollar, assuming it stays that way, can also be an investment incentive, says Luis Flores. Either way, Miami is about a safe a bet as there is, the lawyer says.

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Utter Pessimism, What Israelis And Palestinians Share In Common

Right now, according to a joint survey of Israelis and Palestinians, hopes for a peaceful solution of coexistence simply don't exist. The recent spate of violence is confirmation of the deepest kind of pessimism on both sides for any solution other than domination of the other.

An old Palestinian protester waves Palestinian flag while he confronts the Israeli soldiers during the demonstration against Israeli settlements in the village of Beit Dajan near the West Bank city of Nablus.

A Palestinian protester confronts Israeli soldiers during the demonstration against Israeli settlements in the West Bank village of Beit Dajan on Jan. 6.

Pierre Haski


PARIS — Just before the latest outbreak of violence between Israelis and Palestinians, a survey of public opinion among the two peoples provided a key to understanding the current situation unfolding before our eyes.

It was a joint study, entitled "Palestinian-Israeli Pulse", carried out by two research centers, one Israeli, the other Palestinian, which for years have been regularly asking the same questions to both sides.

The result is disastrous: not only is the support for the two-state solution — Israel and Palestine side by side — at its lowest point in two decades, but there is now a significant share of opinion on both sides that favors a "non-democratic" solution, i.e., a single state controlled by either the Israelis or Palestinians.

This captures the absolute sense of pessimism commonly felt regarding the chances of the two-state option ever being realized, which currently appears to be our grim reality today. But the results are also an expression of the growing acceptance on both sides that it is inconceivable for either state to live without dominating the other — and therefore impossible to live in peace.

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