Amid a strengthening dollar and shaky economies across the world, Downtown Miami has stood its ground.
A report released Thursday by the Miami Downtown Development Authority that tracked the period between January 2015 and January 2016 outlined a shift in transactions across the downtown condominium market, suggesting that the days of risky financing are over. The study, done by Integra Realty Services for the DDA, covered downtown, Brickell, Edgewater, Midtown, Wynwood, the Arts & Entertainment District and Overtown.
“Since the last downturn, there has come much more prudent use of leverage,” said Daryl Shevin, CFO of investment management firm 13th Floor. “It’s a combination of investor acumen and bank mandate. Overall, it’s a sign of a smart marketplace.”
Currently, 78 percent of all new transactions are all-cash, yielding a market that can more resiliently weather economic turbulence.
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“Our finding is that there’s a lot of equity and there continues to be a lot of equity,” said Anthony Graziano, senior managing director of Integra Realty Services. “You’ve got a lot of cushion for price correction and a lot of cushion overall, which I think adds stability.”
Sales are similarly solid, with 78 percent of existing under-construction inventory pre-sold, and 85 percent of the inventory slated to become available in 2016 pre-sold, as well. Pre-construction sales have softened, from
Sales of pre-construction units softened in 2015. Developers have responded by halting or postponing projects in the pre-sale pipeline, narrowing the number of units to about 2,000, versus about 3,600 in 2014. Graziano qualifies this reduction as healthy.
“There’s fewer projects to choose from, and that will direct buyers to the under-construction,” he said, creating a balance between pre-sold under-construction units relative to te supply.
Overall, there are more than 8,000 units in the works, an influx to inventory that could stabilize rents after three years of 5-percent increases in year-over-year rates.
Graziano does not foresee palpable changes in pricing. However, the market may become relatively more accessible, through incentives, like lower deposit thresholds, and new financing options as developers work to close out inventory and seek Fannie Mae approval for projects.
“As that appears, it will allow more domestic buyers to participate,” Graziano said.
Debora Lima is on Twitter @dtdlima