Business Monday

Is South Florida real estate becoming too expensive for many Brazilian buyers?

ZALEWSKI
ZALEWSKI

The World Wide Web — a technology some describe as a great procrastination tool — has emerged in recent years as a significant resource for collecting some of the purest information available on real-time trends in business, government and societal issues.

Users have learned to effectively leverage their opinions digitally on the Web to influence corporate business decisions, prompt governmental change and even create celebrities out of previously unknown individuals.

Web traffic is also apparently emerging as an important data source to predict sales trends in the South Florida residential real estate market.

The Miami Association of Realtors — the nation’s largest local professional residential real estate organization based on its membership of 36,000 — has taken to regularly releasing intuitive statistics collected from its website about the tendencies of internet visitors from foreign countries who are shopping for South Florida properties.

(For disclosure, I am a nonpracticing real estate broker who is a current member and former corporate board member of the Miami Association of Realtors.)

In the latest Miami Realtors press release about Web traffic issued on April 7, the organization points out that Internet users in Brazil — for a second straight year — were the most active visitors searching for information on real estate in South Florida in the month of February.

Internet users in Brazil topped the browsing activity of visitors from the countries — in order of rankings — of Colombia, Venezuela, Canada and India.

Rounding out the rankings of the top 10 countries searching for South Florida real estate information in February were Argentina, the United Kingdom, Russia, the Philippines and Italy.

To this point, Brazilians were some of the most active and deep pocketed foreign investors participating in the South Florida real estate market in 2014, according to the most recent report from the National Association of Realtors.

Last year, Brazilians accounted for 11 percent of all international real estate deals in South Florida even while spending more on average than the industry norm, according to the press release.

“Brazilians spend the most on South Florida properties among foreign consumers, paying an average of $495,000” per property, according to the press release. “On average, Miami’s international buyers paid $444,000 per purchase, compared to $245,000 statewide.”

Given the purchasing tendencies of 2014, concerns are growing locally now that investors from South America’s largest country no longer have the same buying power they did just a year ago despite their continued online interest in South Florida real estate.

Brazil — like many of the countries in Latin America — is experiencing increased financial challenges related to slumping commodity prices, a slowing economy and a weakening currency against the dollar.

The exchange rate to the dollar of Brazil’s currency, the real, has plummeted by 30 percent on a year-over-year basis to 31 cents on April 8 compared with 44 cents on the same date in 2014, according to the currency conversion website OandA.com.

On this same date in previous years, Brazil’s currency had an exchange rate of 50 cents in 2013, 54 cents in 2012 and 62 cents in 2011.

For context, the last time Brazil’s currency had an exchange rate of 31 cents to the dollar on the date April 8 of any year was back in 2003.

At that time, the country was involved in “a big austerity push” under the leadership of former president Luiz Inácio Lula da Silva, according to Reuters.

The bad economic news for Brazil does not stop there.

Earlier this month, Dow Jones Business News reported that economists are now forecasting that Brazil’s gross domestic product — a measurement of economic growth — is “seen shrinking by 1.01 percent” in 2015.

This is not to say that the troubling economic news will prompt Brazilians to withdraw entirely from investing in South Florida real estate.

It may be more likely that Brazilian investors opt to own less extravagant properties in the tricounty region given their weaker currency combined with rising South Florida real estate prices.

There is no doubt South Florida’s real estate market — which is seen by many international investors as a relative safe haven for parking money compared to their home countries — has always benefited from economic and political troubles overseas.

After all, foreign investment in deeply discounted South Florida properties is one of the primary reasons the tricounty region was able to rebound from the real estate crash of 2007 faster than many had anticipated.

Foreign investment in South Florida has also played a key factor in driving the current condo boom where 340 new towers with more than 44,000 units have been announced since 2011, according to the preconstruction condo projects website CraneSpotters.com. (For disclosure, my firm operates the website.)

In fact, preconstruction condo units in Miami-Dade County — a top destination for foreign investors — are currently being marketed for presale using a contract structure copied from South America that requires buyers to put down 50 percent deposits.

By comparison, new condo projects in Broward and Palm Beach counties — destinations that tend to be more popular with domestic buyers who have proven reluctant to commit to large deposits on unbuilt projects — are generally seeking between 25 percent and 35 percent on preconstruction units.

It is against this backdrop that the South Florida real estate market is bracing for the repercussions that could result from Brazil’s current economic challenges.

The unanswered question going forward is whether the Brazilian investors who so actively use the web to research the South Florida market are doing so for the purpose of buying — or selling — real estate in the tricounty region.

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, advises developers, lenders and institutional investors. Zalewski also runs the preconstruction condo project website CraneSpotters.com in conjunction with the Miami Association of Realtors.

South Florida braces as Brazil’s currency plummets

The Brazilian Real has lost 30 percent of its value against the U.S. dollar in the past year. Brazil’s currency has not had an exchange rate this low on an April 8 in any year since 2003.

Year

Brazilian Real-to-U.S. dollar exchange rate value

Year-over-year change

2015

31 cents

-30 %

2014

44 cents

-12%

2013

50 cents

-7%

2012

54 cents

-13%

2011

62 cents

11%

2010

56 cents

27%

2009

44 cents

-24%

2008

58 cents

18%

2007

49 cents

7%

2006

46 cents

21%

2005

38 cents

12%

2004

34 cents

10%

2003

31 cents

SOURCE: OandA.com

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