Nicole Kenaston’s dreams of owning a home in Miami keep getting dashed. The 32-year-old federal government worker says she’s bid on at least five houses in the past three years and each time lost out to an overseas buyer paying cash. “I’ll find a place I like and can get financing for, and the all-cash buyers will come in and pay above market for it,” says Kenaston. “It’s heartbreaking.”
Foreign investment in Florida real estate—a perennial favorite for Canadian snowbirds and wealthy South Americans—has been on a tear since the end of the recession, according to a March report by the National Association of Realtors. Overseas home buyers accounted for 7.3 percent of statewide residential sales by dollar amount in 2007; the figure climbed to 19 percent in the 12 months ended June 2012, the most recent data available. Florida accounted for a quarter of all U.S. residential real estate sales to foreigners during that period, the highest level nationwide. “It feels like 2003 in South Florida,” says Peter Zalewski, owner of Condo Vultures, a brokerage and consulting firm based in Miami, looking back to the early days of the state’s housing boom.
Buyers from overseas have spent $50 billion-plus on more than 250,000 properties in Florida since 2009, the Realtors’ data show. Daniel Arguelles, 33, a stockbroker in Bogota, has bought three houses in the Miami area over the same period. “You have cheap prices, a cheap dollar, and low interest rates. And that’s a scenario that you haven’t seen in about 50 years,” he says. Arguelles, like many international buyers, is renting out his properties. Others are using them as vacation homes.
While Arizona and Nevada are also drawing foreign buyers, the economic impact has been greatest in Florida, the state with the highest foreclosure rate in the nation. In the 10 South and Central Florida counties that have had the largest influx of international cash since 2010, property-tax assessments have risen by an average of 4.1 percent this year, according to state records. That’s almost twice as fast as the rest of the state. Miami-Dade Mayor Carlos Gimenez, who is struggling to plug a $50 million budget gap, traveled to Spain and France this year to lure home buyers from those countries.
The influx of foreign money has boosted demand and helped push up prices, sparking bidding wars, according to real estate agents and buyers. South Florida home prices were up 14 percent in May from a year earlier, according to the S&P/Case-Shiller real estate index—though they remain about 40 percent below the 2006 peak. Kenaston reports that in one Miami neighborhood where she’s been looking, prices for a three-bedroom, single-family home have risen to $250,000 from $180,000 three years ago.
Developers have seized on the trend and are proposing to add more than 20,000 condos in more than 150 new buildings across South Florida. “We do expect construction [in Florida] to pick up in 2014 and 2015, related to stronger international demand and more domestic demand,” says Chris Lafakis, a senior economist at Moody’s Analytics (MCO).
In Sunny Isles Beach, a city of 21,000 north of Miami where home values jumped 10.2 percent this year, Mayor Norman Edelcup says he is preparing for his city’s $6.9 billion property-tax base to double by 2018 after the completion of eight planned luxury condominium towers. He says some of the extra revenue will go toward new parks, expanding a school, and saving for costs associated with the next hurricane. One of the projects under construction is Porsche Design Tower Miami, a 57-story building equipped with a car elevator that will transport unit owners’ vehicles right into their apartments. Prices start at $4.9 million and top out at $32 million. “It’s all been attributable to the foreign buyer,” says Edelcup. “We’ve tried to market ourselves as Florida’s Riviera. It’s certainly been a boon to our tax base.”