The sales office for condominiums at Miami’s Brickell City Centre attracted more than 100 visitors daily last year, with prospective buyers crowding in and snapping selfies beside a scale model of the $1 billion project.
Now, the flow of people has trickled to about a quarter of what it once was.
“Buyers are asking really good questions” instead of rushing into deals, said Stephen Owens, president of the U.S. unit of Hong Kong-based Swire Properties Ltd., the developer of the 9-acre (3.6-hectare) condo, hotel, office and shopping complex. “Two years ago, it was, ‘Where can I sign?’”
Downtown Miami’s luxury-condo boom -- fueled by buyers from Latin America and Europe willing to pay half the purchase price up front -- is becoming a casualty of the year-long climb in the U.S. dollar. Diminished purchasing power and rising prices are holding back the overseas investors that make up the bulk of sales at new towers, cooling a frenzied market.
In response, developers are delaying projects, lowering down-payment requirements and turning their focus to Americans.
“We’ve seen a very strong shift in the last year in the dollar -- it has literally pushed whole countries out of the marketplace,” said Kevin Maloney, founder and principal of Property Markets Group, which is developing Echo Brickell, a 57-story luxury tower that will have a shark tank in the lobby.
“We look around as real estate guys and say, ‘Jeez, who is our buyer?’” he said. “Now you are going to allocate more of your dollars to domestic United States.”
Developers have broken ground on more than 7,600 new condo units since 2011, when construction resumed after the last crash, according to a report scheduled for release next week by the Miami Downtown Development Authority. After starting 16 major downtown towers in 2014, builders began work this year on just one. Sales of new condos slowed and prices flattened in the first quarter, the report showed.
More than 3,000 condo units planned for construction are at risk of delay, said Anthony Graziano, senior managing director at Integra Realty Resources Inc., which prepared the report. He estimates that international buyers account for as much as 95 percent of downtown’s new-condo market.
“We’re basically going to be in a period of slower growth for the next year, year-and-a-half while the market stabilizes,” Graziano said. “I characterize it as a healthy correction.”
South Florida had a higher share of international homebuyers than any U.S. market last year, led by purchasers from Venezuela, Argentina and Brazil, according to a survey released in April by the Miami Association of Realtors. Those countries, along with Russia and parts of Europe, have seen their currencies plunge against the dollar amid political and economic unrest.
Aaron Drucker, managing broker for Miami-Dade County at Redfin Corp., said condo prices in the downtown area may fall 1 percent to 3 percent in a “mini-correction.”
During visits to six sales offices last week, agents mostly outnumbered buyers. Developers are seeking to lure visitors with glitz, piping dance music onto the sidewalk, setting up lounge chairs overlooking the water, or offering valet parking. The sales office at the Brickell Flatiron is also an art gallery designed by artist Julian Schnabel.
The developments most at risk may be those away from the water, said Peter Zalewski, owner of construction tracker CraneSpotters.com. About 5,700 units were announced just for a 10-block stretch of inland South Miami Avenue, he said.
“None of this has water,” Zalewski said as he drove down the avenue. “You have the ability to walk everywhere. Other than that, I don’t know what justifies this high pricing.”
Ion East Edgewater, a planned 36-floor condo tower north of downtown and blocks from the waterfront, is instead becoming a mixed-use property, a move the development authority report said “gives pause to condo projects in secondary locations.” The builder, Sakor Development, said the change was the best use of the site given rising land values.
Related Group of Florida, the state’s largest condo developer, is waiting to begin sales for its Auberge Brickell project until completing enough contracts on the Gran Paraiso, the last piece of a four-tower waterfront project, said Carlos Rosso, president of the company’s condo division.
The sales slowdown stemming from the dollar’s rise is “going to separate the real developers, who can hold on for 20 or 25 months for marketing and pre-sales, from the guys who really are fly-by-night developers,” he said.
Some companies have become more flexible about the 50 percent deposit requirements that have become common since the last real estate crash. Maloney of Property Markets Group said he is willing to go as low as 25 percent in projects that are already profitable, because most units already have sold.
Brickell City Centre cut the required down payment to 35 percent from 50 percent. Its two towers have already topped off and the 780 condos will be finished by the end of this year, before the final deposit payment was going to be due, Swire’s Owens said.
Rosso doesn’t expect a repeat of the bust of the last decade, which left thousands of new units empty as speculators pulled out of deals, sending Miami-area home values plunging by half before bottoming in 2011.
“Everybody is looking at Miami and saying when is something bad going to happen?” Rosso said. “And I say this is a different market. You’re not going to have a bubble burst.”