Peter Zalewski: Luxury residential market’s inventory grows


Special To The Miami Herald

Concerns are rising that South Florida’s recovering luxury residential real estate sector may be losing momentum as an increasing amount of inventory — a combination of resales and new construction — comes onto the market at higher and higher prices in Miami-Dade, Broward and Palm Beach counties.

As more luxury residences are placed on the South Florida market, buyers are expected to inevitably pit sellers of high-end properties against one another in order to negotiate better terms — and ultimately slow the recovery.

At the current 2013 sales pace of about 235 luxury properties transacting monthly, South Florida now has about 20 months of high-end inventory available on the market at a median price of more than $540 per square foot, according to an analysis of Southeast Florida MLXchange data.

Healthy residential real estate markets typically have about six months of inventory available, industry watchers said.

South Florida’s residential real estate market for single-family houses, condos and townhouses priced at a minimum of $1 million — the basic criterion for luxury — has been in a growth phase since bottoming out in 2009 after the U.S. financial crash, according to the data.

Since slumping to a median price of less than $410 per square foot in 2009, prices for luxury residences in South Florida have increased to nearly $420 per square foot in 2010, more than $440 per square foot in 2011, and nearly $480 per square foot in 2012, according to the data.

Prior to the South Florida real estate crash in 2007, the median resale price for a luxury residence in South Florida was less than $450 per square foot in 2006. The pre-crash price has not been adjusted for inflation.

Despite the increasing median price per square foot for luxury residential transactions in South Florida, resale transaction activity for single-family houses, condos and townhouses has steadily increased on a year-over-year basis since 2009 when an average of about 136 high-end properties traded monthly.

Since 2009 in South Florida, buyers purchased an average of nearly 160 luxury properties monthly in 2010, more than 185 residences monthly in 2011, and nearly 240 properties monthly in 2012.

In the first quarter of 2013, the number of luxury resale transactions occurring monthly slipped slightly while the median price for high-end residences was unchanged in South Florida compared to 2012.

The results from a single quarter do not make a trend but the statistics are noteworthy given that the peak of the South Florida winter tourism season is usually about the month of February when the region is overwhelmed with wealthy visitors.

As the resale activity has slowed in South Florida in 2013, the number of luxury residences on the market has grown to more than 4,550 properties priced at a minimum of at least $1 million each.

As of April 15, 2013, more than 3,950 luxury residences — about 87 percent of the available luxury inventory — are on the market in South Florida with an asking price of between $1 million and $5 million each, according to the data.

An additional 425 luxury properties — about 9 percent of the available luxury inventory — are on the resale market in the price range of $5 million to $10 million each.

Nearly 90 more luxury properties — about 2 percent of the available luxury inventory — are on the resale market for between $10 million and $15 million each.

In the ultra-luxury price range, some 40 properties — about 1 percent of the available high-end inventory — are on the South Florida market between $15 million and $20 million each, and nearly 50 luxury residences — about 1 percent of the available high-end inventory — are on the market in South Florida for at least $20 million each.

Sellers today tend to range from profit-minded investors who bought at deep discounts during the downturn to long-term owners who finally see a chance to exit their luxury properties at an acceptable price following a prolonged boom-and-bust cycle.

Additionally, a number of developers are proposing infill single-family houses in highly desirable neighborhoods and oceanfront condo towers appealing to luxury buyers.

The top three priciest estates on the South Florida luxury market range from $100 million for the former Versace Mansion with 10 bedrooms on Ocean Drive in South Beach to $74 million for a nine-bedroom mansion on South Ocean Boulevard in Palm Beach to $59 million for a 10-bedroom estate on Middle Road in Palm Beach.

On the condo front, the priciest units available range from a proposed six-bedroom penthouse with 15,500 square feet for $55 million in the planned Mansions At Acqualina in Sunny Isles Beach to a pair of unrelated units located in the Continuum On South Beach project that are priced at $39 million and $35 million, respectively.

Going forward, the unanswered question is whether the steadfast optimism of bullish sellers will be persuasive enough to persuade skeptical buyers to pay higher and higher prices for luxury residences in spite of the amount of unsold inventory on the market in South Florida.

Peter Zalewski is a principal with the Miami real estate consultancy Condo Vultures. Zalewski, a licensed Florida real estate professional since 1995 and founder of CVR Realty and Condo Vultures Realty LLC, advises developers, lenders and institutional investors.

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