The Florida Preconstruction Condo Market Is Back In BusinessPosted: January 19, 2015
It’s been a few years but the Florida condo pre-construction industry is back in business in much of the state. After years of halted condo projects and almost nothing new while developers liquidated the glut, the green shoots of a number of planned condo projects and even construction cranes have reappeared in some parts of Florida. Pre-construction is attractive to buyers and investors who are usually getting in at the lowest possible price, the price is locked in, and there will be a couple years of appreciation before the building is complete. Developers frequently increase prices as much as 25 percent between the project’s launch and completion.
The Miami condo market has been strong for several years with over 250 new projects either under construction or on the drawing board. New York City developers and their clients have been especially active in the Miami Beach condo market pushing prices higher. According to the New York Times, prices along the beach have increased 11.5 percent in the last 18 months while inventory has dropped by over 60 percent. According to the real estate website, Tulia, the average listing price for a Miami Beach property is over $1.6 million.
While much of the Miami area has been riding high with prices close to their 2007 peak, the rest of the state has been quiet with very little new construction since 2008 as nervous developers who managed to survive the condo crash waited to test the recovery waters. Finally, construction plans are popping up again in the most popular areas such as Naples, Fort Lauderdale and Longboat Key. Most of the activity is concentrated near the ocean with projects starting around $500,000 for something very small up to many millions of dollars for the largest Florida luxury condos. It almost seemed like old times again in December when a new development by Minto Communities in Lauderdale-by-the-Sea launched sales for their new project of 51 condos. Five people camped out two days early to be first in line to buy one of their pre-construction condos.
Pre-construction mania was a big part of the problem in the early 2000’s lead up to the Florida condo crash days when buyers waited in line, sometimes for days, to buy a condo they planned on flipping as prices increased when the building rose closer to completion. But the good times didn’t last and prices stopped increasing around 2006. Buyers walked away in droves losing their 10 percent deposits. Buildings that had sold out in just a few hours were now almost empty and new buyers were hard to find. Developers went bankrupt and banks were left holding the bag. To prevent a repeat scenario, today’s developers are requiring 30 to 60 percent deposits before they start construction.
Even with the higher deposit requirements, it appears flippers have gone back to work. According to Peter Zalewski, of Condo Vultures, over 60 units at the new Brickell Heights condo tower in Miami are already for resale by early buyers looking to make a good profit at prices about 25 percent higher than what they paid. Brickell Heights sold out 98 percent of its inventory within 90 days of the project’s launch.