Florida’s Rebound Powered by Foreigners’ Money in HousingToluse Olorunnipa
Record foreign investment in Florida housing over the last three years is boosting property-tax revenue in the localities hardest hit by the recession.
In the 10 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 nearly twice as fast as the rest of the state.
“It’s all been attributable to the foreign buyer,” Norman Edelcup, mayor of Sunny Isles Beach, a city of 21,000 north of Miami where values jumped 10.2 percent this year, boosting tax revenue.
The purchases are helping localities in south and central Florida recover from the 18-month recession, which ended in June 2009 and left the state with the second-highest foreclosure rate, behind Nevada, depressing prices and tax revenue.
Even with the buying, prices in most parts of the state haven’t returned to pre-recession levels. In the metropolitan areas of Miami and Tampa, prices are about 40 percent below the 2006 peak, according to a S&P/Case-Shiller housing report released July 30.
Foreign investment in Florida residential property has been rising since the end of the recession, according to a March report by the Washington-based National Association of Realtors.
In 2007, overseas buyers accounted for 7.3 percent of statewide residential sales by dollar amount. The portion has since risen to 19 percent for the 12 months ending in June 2012, the most recent data available. Florida accounts for a quarter of all U.S. residential real-estate sales to foreigners during that period, the biggest portion of any state, the report found.
The investors, many from South America and Europe, helped Florida’s property-tax base expand this year for the first time since 2007, said county property appraisers, real estate agents and local officials.
While localities in other parts of the country are benefiting, including Phoenix and Las Vegas, the impact has been greatest in Florida.
Buyers from overseas have purchased more than 250,000 properties in Florida since 2009, spending more than $50 billion, the Realtors’ data show. Buyers from abroad are purchasing property as vacation homes and to rent.
The influx 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. Property-tax collections typically lag behind home-price gains by at least a year.
Developers are rushing to meet the demand of international investors, proposing more than 20,000 condos in more than 150 new buildings in South Florida.
That construction may add billions of new dollars to the property tax rolls of local governments, which had an influx of tax dollars during the last building boom followed by a drop when the recession hit.
“It feels like 2003 in South Florida,” said Peter Zalewski, owner of Condo Vultures LLC, a brokerage and consulting firm based in Miami. “Once domestic buyers move back into the marketplace, then the boom is on.”
Chris Lafakis, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, said Florida’s developers -- and local governments -- anticipate even more foreign money.
“We do expect construction to pick up in 2014 and 2015, related to stronger international demand and more domestic demand,” he said.
Daniel Arguelles, 33, a stockbroker in Bogota, said he bought three houses in the Miami area since 2009, having been attracted by depressed prices. He uses them as rentals.
“You have cheap prices, a cheap dollar and low interest rates,” he said in a telephone interview from Bogota. “And that’s a scenario that you haven’t seen in about 50 years.”
Prospective buyers say they aren’t happy about added competition.
Nicole Kenaston, 32, said she has been trying to purchase a house in Miami for the last three years, making offers on at least five. Each time she’s made an offer, a foreign investor has outbid her, paying cash, she said.
“I’ll find a place I like and can get financing for,” she said. “And the all-cash buyers will come in and pay above market for it.”
In one neighborhood where she’s been looking, prices have risen to $250,000 from $180,000 three years ago, Kenaston said.
“It’s heartbreaking,” she said.
The recovery in property-tax revenue is helping debt of the state and its localities beat the broader $3.7 trillion municipal-bond market this year through Aug. 13, according to Standard & Poor’s index data.
Florida debt lost 3.47 percent for the period, against 4.1 percent for the market this year. Last year, Florida was up 8 percent against 7.4 percent for the market. Since trailing the market during the recession, Florida state and local securities have beaten the broad market in three of the following four years, according to S&P, and are on pace to repeat that in 2013.
In Miami-Dade County, Florida’s largest, elected officials are trying to plug a $50 million budget hole, even with a 3.4 percent gain in assessed-property values this year. The mayor quickly scrapped a proposal to raise taxes last month after public outcry. County commissioners are considering shutting libraries and dismissing firefighters.
Miami-Dade Mayor Carlos Gimenez, 59, traveled to Spain and France this year and tried to lure homebuyers from those countries.
Edelcup, 78, the Sunny Isles Beach mayor, said he is preparing for his city’s $6.9 billion property-tax base to double after the completion of eight planned luxury condominium towers. He said 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 in Sunny Isles Beach is Porsche Design Tower Miami, a 57-story building with a car elevator and prices ranging from $4.9 million to $32 million. It may add hundreds of millions of dollars in taxable property.
“We’re blessed to have two and a half miles of coastline,” Edelcup said. “We’ve tried to market ourselves as Florida’s Riviera. It’s certainly been a boon to our tax base.”