Foreign Buyers Finding Deals in the Miami Condo Market

February 21, 2008 by Lucas Lechuga

On February 20, 2008, Reutors published an article entitled “Miami Condos are ‘for sale’ for Foreign Buyers“. The article discusses how foreign buyers are stepping in to buy condos at a discount in Florida, where prices have dropped “20 to 30 percent”. The appreciation of their currency is another motivating factor in their decision to buy Miami condos. The story particularly focuses on Canadian buyers, who have a particular interest in buying within the United States, because the Canadian Dollar “has gained 25 percent against the greenback in the last two years”. The article also discusses that these buyers are willing to pay for these condos with cash.

I, for one, have met with a large influx of foreign buyers within the past six months from countries such as Ukraine, China, Russia, Canada, England, Italy, Germany, various countries in South America and territories of the United States, such as Puerto Rico. Many of these buyers came prepared to pay for South Florida condos with cash. In fact, two of the three pending sales that I have scheduled to close in March are cash deals, with no financing contingencies. Great deals in beachfront condo buildings are exactly what these foreign buyers have in mind.

The Reuters article also revealed the following which I found very interesting:

In a study by the National Association of Realtors last year, Florida was the top destination for foreign buyers, accounting for 26 percent of all transactions, ahead of California at 16, Texas at 10 and Arizona at 6 percent.

More than 7 percent of all Florida homes were sold to foreigners, the study found, and 65 percent of Realtors said they had brokered at least one foreign deal.

I would think that Miami homes sold accounted for much higher than 7 percent since Miami should have a much larger percentage of foreign buyers than the rest of Florida.

I’d also like to note that new buyers for Miami condos aren’t only coming from countries abroad. I’ve also found buyers from New Jersey, New York, California, Illinois and Texas. I will admit that local buyers remain a very small percentage of my overall business. In a nutshell, if I had never started this blog I’d probably be out of business. This blog allows me the opportunity to reach people all across the world (including the two people in Ethiopia and Afghanistan who found my site within the past week, according to Google Analytics). The Miami condo market is not a local market…it is a global market. It may not seem cheap to local buyers, but to foreign buyers Miami and Miami Beach condos are bargains to them.

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59 Comments on "Foreign Buyers Finding Deals in the Miami Condo Market"


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Anonymous
Terry
8 years 6 months ago

Lucas, you forgot me from Belgium (but living and working in Djibouti, Africa). Your blog is a great source of real info ! I have cash to invest, and would love to have a vacation residence in Miami (above all the other cities in the US) BUT the cost of ownership is prohibitive vs the cost of rent as long as you have this taxation system in Florida ! It does not make much sense for a foreigner, even with a weak USD, to buy in Florida right now… Let’s see again when this market really rocks bottom !

Anonymous
Julian
8 years 6 months ago

Terry – absolutely right. I’ll say it again. Change the tax system to something more or less equitable and your 6 years inventory will disappear.

Sorry if it makes Florida residents pay more for the services they consume 365 days a year (as they should do). But then again residents paying more – that would be part of the shift towards tax equality anyway…

Anonymous
Grant
8 years 6 months ago
Lucas, I’m in the UK and follow your blog. I know of at least 10 other bankers in the UK, originating from France, Morocco, Belgium, Holland, & Germany, who follow your blog. We find it very informative and we’re all buyers but find the market very unusual. As Terry mentions the whole property tax thing makes ownership relatively expensive. I do believe that if FL moved to an income tax, the whole property market would recover within six months. But this probably won’t happen soon and as mentioned in the article, the recent currency appreciation has helped our foreign cause.… Read more »
Anonymous
Grant
8 years 6 months ago

Julian – I agree 100%

Anonymous
Raffi
8 years 6 months ago

All I know is that hallandale beach if FULL of Russians, Ukrainins, etc. Everywhere I go I hear people speaking in Russian, it’s amazing.

Anonymous
Mikel
8 years 6 months ago

Well tell that to the euro buyers last fall who bought when the market was cheap and so was the dollar.

What happened? The market still fell and the dollar still dropped, so losses are multiplied on the way down. So much for a deal.

Anonymous
Raffi
8 years 6 months ago

Mikel,

It’s still a deal if you bought it for under the value, now maybe it wasen’t the best deal but it was still a deal. The dollar isn’t going to keep trading for 1.50 Euro, That number is just too off cue, a reasonable trade would be 1 us to 1.20 Euro, I think that’s where we’ll be by the end of 09′. Just gotta get out of 08′ alive. so if your a european that bought a good property, for a low price, while exchange rates were definetly on your side, I think it’s a good deal.

Anonymous
8 years 6 months ago
The tax argument against foreign ownership of a condo in Miami seems a bit strange to me. If you can buy a a condo that was $750,000 a year ago for half that amount, $375,000 today, your taxes would be about $8,000 versus $16,000 a year ago. That amount does not seem excessive to me, but you can mitigate that amount by renting the condo for a short period each year if you wish. Assuming you rent the condo for $1,000 a week to friends and family for 8 weeks a year, you would recoup the entire tax cost. To… Read more »
Anonymous
Julian
8 years 6 months ago
Dave 1. Most half decent condos will not allow the kind of renting you describe, for the periods you mention. You might be OK – but am sure most people wouldn’t actually feel comfortable taking cash from family and friends like this anyway 2. Assessed values lag at least a year, sometimes 2 , so you could well be paying $16k a year tax for a couple more years at least. 3. You’re assuming friends and family would want to rent. So you must be talking about beachfront. Beachfront hasn’t halved in a year, or even 3 years (yet). 4.… Read more »
Anonymous
8 years 6 months ago
Kevin Tomlinson of the South Beach Real Estate Blog has one upped me. I have to give him props for his latest post which reveals two videos about the Miami condo market which aired this morning on “The Today Show”. I must say that the videography work is fantastic. Fabulous work by “The Today Show”, and Kevin for bringing this to my attention. I can’t believe Barbara Corcoran was in Miami Beach this morning. I’m a big fan! For those of you who aren’t aware of Barbara Corcoran, she is the New York City queen of real estate. Her words… Read more »
Anonymous
8 years 6 months ago
I agree with Lucas Completely the dollar is very weak and I get traffic to my foreclosure site from the UK, Canada, a lot from NYC, France and Russia. In the stagflation that we are facing right now it makes sense to keep the dollar exchange low to increase foreign direct investment, lower imports and increase net exports thus mainting GDP growth. I think anyone with a different currency understands that some bank owned foreclosures are 50% of what they were selling for 2 years ago and their currency is up another 25% from 2 years ago so it makes… Read more »
Anonymous
8 years 6 months ago

Hey, hey!
Wow, Thanks!

I love Barbara Corcoran. That woman knows her stuff!

I’m also a big fan of Pam Liebman, COO of Corcoran.

Anonymous
8 years 6 months ago

Thanks Kevin for posting that, that video was amazing, i loved how they showed the jade, vibrant during the day then they film it at night and theres no lights on

Anonymous
jcrimes
8 years 6 months ago

Julian
add argentina to your list. bought a place in palermo soho (amazing that my first home purchase was in a foreign country) a few years back. bought it with cash and my carrying costs are minimal. rent it out to US students studying abroad and spend about a month there when i get the chance.

Anonymous
Isabel
8 years 6 months ago

Hi Lucas – no big deal, but when you post your story later tonight please correct Kevin’s error…both of those clips were from NBC/CNBC’s “The Today Show”, not Good Morning America which is CBS.

Anonymous
Julian
8 years 6 months ago

I keep reading somewhere that comparing Miami to Miami Beach is like comparing the Bronx to the Upper East Side.

Just that the Upper East Side doesn’t have six and a half years of inventory.

Also, I know it’s a blog, and we all make typos, but just a suggestion for some realtors who post here – if you are trying to come across as a serious economist/market strategist then make some effort with the grammar and spelling.

Anonymous
Raffi
8 years 6 months ago

I dont agree that comparing Miami Beach to Miami is like upper east side to the bronx. come on guys, thats a little harsh. when we say Miami I am assuming we all mean downtown miami and not kendall or sunset. downtown miami to south beach is NOTHING like the bronx to upper east side, sorry.

Anonymous
jcrimes
8 years 6 months ago
keeping the dollar weak so you can sell real estate is south florida is not a good strategy for the long term health of this country. frankly, its moronic. as for foreigners buying up real estate down here…yeah, maybe there is increased traffic. but at the end of the day, it’s not enough to clear the overhead that’s out there in any meaningful way. the sales figures back that up. and as the global economy catches a cold from the us’s troubles, those foreign buyers, including the wealthy, aren’t going to be caring so much about about condos in miami… Read more »
Anonymous
Julian
8 years 6 months ago

Jcrimes – spot on.

My hunch is that 2008 (maybe the end) sees a pricing bottom but volumes don’t recover for many many years (and never to previous levels, and I mean never)

Look at existing home sales as a % of housing stock and you’ll see why.

Anonymous
8 years 6 months ago

Isabel, that was actually my error. I will correct it right now. Thank you!

Anonymous
8 years 6 months ago

Lucas & Kevin – great info (I just had to blog about – thanks to you guys – http://www.condo.com/Community/UserBlogPage.aspx?ID=1583 )

Anonymous
Julian
8 years 6 months ago
Could one of the Miami Beach experts please explain why (fundamentally and empirically, not waxing lyrically) why we should treat Miami Beach any differently? No one doubts they are different beasts lifestyle/buyer wise but the numbers don’t distinguish. Data published here by Lucas suggests the inventory problem is just as bad in Miami Beach, sales volumes have slowed (or at least are now back in normal levels as a % of housing stock). I grant you there would appear to be less new stock coming to market than Downtown, but what are the numbers empirically? I drive past MEI, Paradiso,… Read more »
Anonymous
8 years 6 months ago

Julian – you just gave me a good idea for this weekends blog post

And yes – i started my blog because no.3 blog spot is up for grabbing :+)

Anonymous
8 years 6 months ago
The major media is shifting their spin on the Miami condo market. It’s happening. You may not want to believe it but it is happening. Just wait until the Wall Street Journal publishes their story next week. When I first moved to Miami I planned to be here for about 5 years. My plans have changed. I’m going to live in Miami until I’m on my deathbed. You couldn’t remove me from this city even if you had Arnold Schwarzenegger and Jay Cutler trying to remove me. I’m here to stay. Where else in the United States would I want… Read more »
Anonymous
8 years 6 months ago

Lucas whats the WSJ article on? I look forward to reading it

Anonymous
jcrimes
8 years 6 months ago
Lucas i’ll disagree with you. you will not see any major corporation move here any time soon. three, connected reasons 1) cost of housing – where are your secretaries going to live? how about your young professionals? everything is too expensive? 2) the quaility of the help at all levels – unlike other major cities, the intellectual capital in miami is severely lacking. no knock on the U, or for that matter UF, but there are no top universities in this state. although this isn’t dispositive, most major cities have some strong academic outposts. as for lower levels of employment,… Read more »
Anonymous
DAVID
8 years 6 months ago

About the lenders “blacklisting” most of the
new condo developments in Miami; wasn’t
the PMI “required” to be paid by purchasers who didn’t put at least 20% down going to protect the lenders? If not, why was it always purported to be the reason that it is required? The lenders appear to be fully protected (at least that’s why PMI is required). I guess the lenders do not want to own Miami real estate at “any” price! Tell me what I’m missing here!

Anonymous
Julian
8 years 6 months ago

David – probably because the Bond Insurers are in trouble for insuring rubbish, so no doubt insurers in general do not want to commit capital to PMI, or the banks don’t believe there’s enough capital/ability in the insurance/reinsurance industry to genuinely offset their risk today.

Anonymous
Jeremy
8 years 6 months ago
I think all you wide eyed optimists should take a good look at this article, http://www.marketoracle.co.uk/Article3701.html. Suggestion, you will need a stiff drink after you read it. Nobody is bashing Miami or the lifestyle in the city. The question is whether most of these condos are way overpriced and where the market can and will go from here. My view is only a fool would buy, and if you find some foreign fools, well, they have less to lose because their currency is strong. But foreigners are classic “dumb money” and if those are your buyers, ouch. And for you… Read more »
Anonymous
Buyer Tom
8 years 6 months ago

Try this link without the period:

http://www.marketoracle.co.uk/Article3701.html

Anonymous
BFG
8 years 6 months ago
Foreign buyers are nothing new. Yes, the weak dollar helps brings them in, but they don’t compose a big enough percentage of the market to make a meaningful difference – especially in this market. I think Jeremy is right – aside from the weak dollar, the fact is that most of these buyers simply aren’t as in-tune with the market as the locals are. That includes New Yorkers and other out-of-towners – who have yet to see the pain that the worst bubble markets have experienced and really don’t have a grasp on reality yet. Some of the dumbest purchases… Read more »
Anonymous
8 years 6 months ago

DAVID the lenders are not fully protected because the insurers that sold the PMI’s cannot cover the losses that they are facing

Anonymous
Raffi
8 years 6 months ago
I’ve read some dumb ass apocalyptic articles in my days but that takes the cake. first of all I wouldn’t listen to someone called the market oracle, from england on top of it. no matter what you say Miami real estate will never crumble like other markets will, because everyone wants to live in Miami. People from other countries and people from other parts of THIS country want to move to Miami. If the U.S. has a flu the world gets pneumonia, The U.S. economy is much more resilient than people think, and the Miami condo market will always be… Read more »
Anonymous
GG
8 years 6 months ago

If real estate collapse as severe as many predict ,the entire financial institution of U.S. and the rest of world will collapse as well. Then the cash will lose its value at all. The U.S. economy will survice…Wait for a couple of years, and we all we see how Europe ‘s economy and its currency will enter into a long-term recession worse than we have right now in U.S.

Then, we in the U.S. we will be having parties…

Anonymous
jcrimes
8 years 6 months ago

Raffi
if everyone wants to live in miami why is there a 6+ year supply of housing? ‘splain dat papi.

Anonymous
raffi
8 years 6 months ago

well papi (as you say) there was obviously too much built, I’m not questioning that but eventually it will be absorbed. well before an entire doomdsay collapse…….sound good papi?

Anonymous
Buyer Tom
8 years 6 months ago
I re-posted that link since it had a period in the original post. I have read the article now and wasn’t overly impressed. Yes, real estate prices will continue to go down some more for some time. Probably reverting to the trend line (see Case-Shiller) in the Miami area and possibly could dip below that if the overall U.S. economy goes into a bad recession. If you sold at the peak you are well off. I don’t think there will be an Armageddon since from Econ 101 people change their behavior as we go up and down these curves…..just like… Read more »
Anonymous
8 years 6 months ago
Jeremy There is no doubt that the worst is yet to come. But Miami is not going to end. Let’s put this into perspective okay. Miami has suffered MUCH worse set-backs than our condo-glut (it’s almost sounds ridiculous as I write this), for example, Hurricane Andrew. I’ve been in this business since before the first high rise was built on SoBe, Portofino Tower. You can look at it two ways: 1. Developers over-built for the actual demand of the END USER, and we will have to “suffer the consequences until the inventory is absorbed”. 2. This is the worst thing… Read more »
Anonymous
8 years 6 months ago

For the record:

It’s gonna get nasty, bloody and worse than anyone EVER imagined.

But you know what? We will get through it.

Here’s another way to look at it: Before the bubble burst in 2004 & 2005 what was the #1 concern about housing here in Miami?

Answer: Affordable housing. It looks like these nice new digs all over the city will come down enough to actually be “affordable” for a “regular” person.

So something good will come out of all this, after all.

Anonymous
Cyrus
8 years 6 months ago
Lucas, eventhough i’m negative on the real estate mkt in miami, i do agree w/you that miami COULD be a fantastic place to live. initally they need to get a mayor like Rudy Giuliani (like him or not, he cleaned UP nyc over a decade…) or like previous Mayor Williams in DC (cleaned up DC and brought people back to living downtown from the suburbs). remove crackheads from lincoln rd…clean up derelicts…clean up crime and improve daily qualities of life. IF a new mayor can accomplish this AND provide large incentives to corporations to bring a chunk of their business… Read more »
Anonymous
8 years 6 months ago

Alejandro, I can’t say. I don’t want to ruin their story. It’s going to be great for the Miami condo market though.

Anonymous
8 years 6 months ago

i KNOW, I KNOW.

Anonymous
SAS
8 years 6 months ago

Me too!

Anonymous
George
8 years 6 months ago

My personal input.
I was in Miami last week ready to make an all cash deal on a couple of units in a Sunny Isles condo. I offered a 15% discount from asking and the best I could yet was a 3%. One realtor was so “offended” that she did not even reply to the offer.
With this kind of attitude no wonder Miami is in such a mess

Anonymous
jcrimes
8 years 6 months ago
Raffi not really. any doomsday scenario will play out well before the absorption of all these units. suffice to say, we’re entering very interesting global economic times. let’s see what happens in the next two years with corporate defaults, the CDS market and growth of economies outside of the US. i wouldn’t be surprised if all three sectors will suffer some major negative event. that in turn will have significant consequences on all tangible asset sales, including real estate. at a minimum, the deal flow in the securitization market (commercial and residential), which provided the lifeline for the real estate… Read more »
Anonymous
Jeremy
8 years 6 months ago
Just to be clear, I was throwing out that article as food for thought. I don’t agree with everything in it either. However, I do believe the risks to the downside in the Miami condo market FAR outweigh any potential upside, and that scenario will continue for the forseeable future. I am looking at it as a potential buyer, and I have plenty of cash, but there is simply no reason to buy. Just like the article said, I would rather run the (slight) risk of the market turning up to avoid the (major) risk of the market continuing to… Read more »
Anonymous
8 years 6 months ago

Lucas,

When is that article dropping.

Anonymous
8 years 6 months ago

Samir,

Not really sure. The WSJ reporter contacted me a few days ago to verify the names of the buildings that he photographed that will be included with the article. One of those buildings was Quantum on the Bay. He said the article would be published next week but he wasn’t 100% sure. My guess is Monday or Tuesday.

Anonymous
Renter in Miami
8 years 6 months ago

A lot of people are bringing up income tax as something that would induce foreign buyers. Don’t forget that Miami would lose significant demand from second home buyers and retirees who are attracted to Florida to avoid paying state income tax…

Anonymous
carbonblackcab
8 years 6 months ago
The homestead exemption is what is driving up property taxes for new residents, non-residents and 2nd home owners. To give you an example of how bad things are, lets compare my prop taxes to my neighbors. I bought a townhouse in coconut grove in 2004 while my neighbor bought in 1997. I am paying $11K/year in taxes, while my neighbor is paying $4K/year. My neighbor has a homestead exepmtion and his prop taxes cannot rise more than 3% a year. My taxes are high as I had recently moved to FL from CA and had to pay taxes on the… Read more »
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