Wealthy Latin Americans have been among the most active home buyers in Miami, which now may be creating a "tough" sellers' market perceived by some as simply a haven for assets threatened by instability in home countries.
MIAMI — If New York is the city that never sleeps, Miami may well be the city that never stops growing. Florida's bilingual paradise with dreamy beaches is expanding both upwards and sideways, and has received almost 1,000 new residents a day since 2020, according to figures from local realtors ISG Realty and ISG World.
The attraction has spread to surrounding districts and counties, both for Florida's climate and beaches and for the security and stability the United States assures. Geraldo, a financier from Peru, has been living in Weston, in Broward County north-east of Miami, for almost a year. He decided to buy a house with a garden there for the area's reputable schools, infrastructure and "impressive security." These and other factors like Florida's lower personal taxes have all fueled demand for homes in several districts of southern Florida and also in Orlando, Jacksonville and Tampa.
The MIAMI Association of Realtors says total residential sales in Miami-Dade Country rose 20.2% in September 2021, year-on-year. Apartment or condominium sales rose by over 45% in that period, and if sales of detached homes fell slightly, it was for a dearth in supply. World Property Journal, which reports on the sector worldwide, observed last November that the pandemic had not halted foreign property acquisitions in the Greater Miami area.
For 2021, the National Association of Realtors identified the top Latin American customers in southern Florida as Argentines (13% of all buyers), followed by Colombians (12%), Venezuelans (10%) and Mexicans (7%).
Miami has been attracting foreign property investors for 13 years now, and Alex Horenstein, an associate professor of economics at the University of Miami, identifies Latin Americans as "historical" customers in Florida. Horenstein says the reasons are numerous: climate, livability, prices, the prevalence of Spanish and easy access by plane.
Miami is also "aspirational" for them, he says, but more importantly, buying property here is also a way of protecting money from depreciation, "given all the political ups and downs in [their] countries, and currency problems."
César Altamirano is co-founder of Chilean investment firm Invierta en USA, which offers properties for purchase and holiday rentals. He says his firm channeled some $40 million in investments "from Chilean clients taking their capital to the U.S., which is in response to inflation and political and economic insecurity locally."
His firm also aids customers with investments that can earn them green card residencies. Verónica Cortés, a partner of the Key Properties, says these are for people with money or readied credit facilities. Cortés says aspirants should not hope for a mortgage locally, due to stringent lending conditions for foreigners. An investor visa requires around $100,000 to $120,000 on top of your home purchase. "It's the price of stability," she says.
Problem in paradise
But as in other cities, the arrival of rich investors is fueling resentment among local residents. Andrew Otazo, a political and environmental activist and son of Cuban refugees, says 30% of locals, including professionals he knows, have problems paying the city's elevated rents, or even finding homes to rent or buy. Foreign owners, he says, effectively double local rents to pay for their investments.
Low taxes as a magnet for Florida
Both Otazo and David L. Kelly, professor of economics at the University of Miami, suggest this investment boom seems oblivious to the changes climate change may bring to local living conditions, notably through rising water levels that are ruining underground fresh water supplies and causing an increase in viral diseases.
This city was already adapting itself, and would take more protective measures, says Kelly, "but it'll be costly." He adds that protecting fresh water supplies from salinization was in particular "complex and costly," as would any recourse to desalination plants if water supplies run short.
Otazo says investors are now moving toward more elevated districts like Little Haiti and Overtown, where traditionally, poorer, Afro-Caribbean and Latino residents lived. Many, he says, "have had to move, as they cannot afford to pay the higher rents."
Miami has been attracting foreign property investors for more than a decade
Southern Wall Street
Horenstein sees low taxes as a magnet for Florida: "For Miami and for Florida, the greatest revenue comes from the real estate tax, precisely, because there is no income tax. So for the state's coffers, the most beneficial thing that can happen is the increase in the price of real estate, because that is where the main taxes come from."
Tony Rodríguez Tellaheche Jr., co-founder of the Prestige Realty Group, which sells luxury homes, tells América Economía that Miami had become a multicultural center with a tremendous cultural scene and international banking facilities and is even a budding investment center for cryptocurrencies, "which I don't see diminishing any time soon."
As demand exceeds supply here, his firm has expanded its activities beyond the city, to districts like Pinecrest, which still has plots bigger than an acre. Another developer, Masoud Shojaee, head of the Shoma Group, says there is little room left for sideways expansion, except west of the city. Shojaee says that inside the city, rising demand would have to be met by building higher.
More instability in Latin America could cause prices to burst in Florida
One of the thousands of eager investors is 27-year-old María Paula Jiménez from Colombia. She tells América Economía her recent purchase of an apartment in E11 Even Residences Beyond for $1.13 million was "a good opportunity to invest in central Miami" and very likely to give returns. The complex includes both residences and a range of business facilities including a hotel.
Miami's purchasers include individuals, banks and firms, according to the Downtown Development Authority, a municipal agency. It is currently the country's second foreign banking center and sometimes dubbed the southern Wall Street for the volume of investments flowing in from Latin America and the Caribbean.
Is this a replay of 2008?
Alicia Cervera, a managing partner of Cervera Real Estate and a DDA director, says the arrival of firms and their staff is further fueling demand for homes and offices. She says average commercial rent prices are at historic highs and new clients generally seek bigger surfaces.
Will the instability in Latin America that has fueled a boom in purchases also cause a price bubble in Florida? Chilean-born Verónica Cortés thinks this won't be the case. Cortés says the property crash of 2008 was because too many people had bought one or more properties entirely on credit. This is not the case now, and she insists property could ensure returns of between 10 and 12%. But Professor Horenstein is more cautious, terming real estate an inherently risky investment that could never guarantee returns.
Yet properties fly off realtors' lists and buyers are willing to assume all risks relating to an overpriced market. Geraldo, the Peruvian executive now living in Weston, says, "We struggled to find a home and that's because the market is very hot. There is a lot of demand and limited supply... It's a very tough market."
"It ended up being expensive," he continues, but "in any case, I'd consider staying here permanently because the quality of life is impressive and education is first class."
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