Investing in South Florida Real Estate
Real Estate is a highly attractive investment opportunity. Unlike the stock market that has a history of crashing, real estate
has rarely let anyone down. History has shown that real estate is proven to be the safest and most secure investment one can make.
Unlike stocks, however, purchasing real estate is not as easy as clicking on a broker's web site. The guidance and experience of
a knowledgeable Realtor is key in ensuring a successful investment in real estate.
Over the last ten years the South Florida Real Estate market has been
experiencing a rate of at least 10 percent annual appreciation.
Historically, the appreciation rate in South Florida has been at least twice
that of the national market. Integra Realty Resources of South Florida, a real estate consulting and research
group, reported that across Miami-Dade the median sale price for new condos has more than doubled in a decade, leaping to $305,804
in 2003 from $141,068 in 1993. The data also showed that the median sale price for new single-family homes in Miami-Dade escalated
to $257,391 last year from $131,061 a decade earlier.
The latest shorter term figures reveal that South Florida is currently experiencing much higher appreciation rates.
The most recent Metro Area Home Price Report by the National Association of
Realtors puts Miami and West Palm Beach in the top 10 housing markets in the
United States, both with an average price increase of 25.9% for the year ended
in Q2, 2004. Ft. Lauderdale/Hollywood was close behind with an average price
increase of 24.8% for the same time period. The national median was 9.1%,
propelling the appreciation rate in South Florida to almost three times that of
the national market.
A real estate investment grows based on the leveraged value of the cash
invested. The extraordinary appreciation rate in South Florida combined with
today's all-time low interest rates greatly amplify the power of this leverage. Based
on the historical average rate of 10 percent annual appreciation, a buyer that invests a 20% down payment will double the initial investment in two years. This assumes that the
property yields a rental income sufficient to cover the mortgage payments.
The South Florida Market
South Florida is a unique market with extraordinary appreciation potential. The cities of Miami, Fort Lauderdale and Palm Beach,
which were first built up during the 1920s land boom, are now experiencing an influx of new residents as well as an east side
gentrification. This is not only a demographic phenomenon, but also a geographical certainty, as there is virtually no
undeveloped land left between Palm Beach and Miami.
It is no wonder that many Real Estate investors all over the world are turning their attention to South Florida.
The attention is obvious: strategic geographical location, limited supply of land, massive future population growth,
great all year round weather, and beautiful beaches. Although no place is immune from economic problems, these conditions
insulate the South Florida Real Estate market from possible downturns in the economy. Here's why:
Strategic Geographical Location
South Florida is often referred to as the capital of Latin America. Its geographical location, cultural diversity,
vibrant international trade community, strong financial sector, and outstanding seaport and airport facilities offering
routing options that are difficult to match, are some of the many features that make South Florida a global hub and
the Gateway to the Americas.
Difficult economic and political problems in Latin American countries like Venezuela, Columbia, Brazil and Argentina have
created heightened migrations and increased flow of capital into South Florida. Much of the capital is directed toward real
estate in South Florida, a longtime favorite safe haven. The migration and the flight capital has contributed to a real estate
Limited Supply of Land
South Florida is sandwiched between the Atlantic Ocean on the south & east, and the Everglades National Park on the west.
With almost no land left to build, strict height and density growth controls, and a massive population growth expected in
the next 25 years, there is very little risk of oversupply.
With available land in South Florida's suburbs dwindling, developers are returning to the eastern cities they left behind during
their westward push. A flurry of redevelopment in those areas is fast driving up prices and property values, as young professionals
seek to live in the same area they work. Fueled by ultra-low interest rates, population growth, foreign investors and
move-up buyers, demand has been outstripping supply --even supply that won't be available for occupancy
in the next one to three years.
In June 2003, the U.S. Office of Management and Budget officially recognized what South Florida's residents have known for a long time:
Miami-Dade, Broward, and Palm Beach counties comprise one large urbanized region. With 5.2 million residents in 2003 South Florida is now the sixth largest urban area
in the nation.
Numerous studies by both governmental and private agencies all reach the same conclusion: South Florida will be experiencing
a massive population growth in the next three decades. South Florida's population is expected to increase to
over 7.4 million by 2030.
The following data gathered from the South Florida Regional Planning Council, University of Florida's Bureau of Economic and
Business Research, and the U.S. Census Bureau reveals the expected population growth trend in South Florida by county:
(1) The population data shown in the table refers solely to permanent residents. Temporary residents such as tourists and
snowbirds are excluded from the data, since they are residents of other states or countries. If this significant number
of temporary residents making South Florida their choice for secondary homes is included, the population and growth figures
will actually be larger than those reported above.
(2) To see the full population
growth report click here.
The climate in South Florida is the envy of the rest of the world. With great weather all year round, it is no wonder that so
many people look to make South Florida their primary or secondary residence. Between December and March,
South Florida's winter months,
temperatures typically range between 60 and 80 degrees Fahrenheit on average. Outside these months temperatures range
from 80 to 90 degrees Fahrenheit, with high humidity and frequent ocean winds.
The New Construction Market
Historically, purchasing property during pre-construction in South Florida has been very attractive for homebuyers and investors.
With the fast population growth and the diminishing availability of buildable residential land, prices are rising
at a rapid pace. When you buy your property pre-construction, you are purchasing tomorrow's construction at today's prices.
Developers often offer the first 50 percent to 60 percent of their condos at discounted prices to sell them fast.
That's because hefty presales are generally required to secure project financing. If you buy at the beginning you are able to
select the best units at the best pricing.
The key is knowing which areas have the most appreciation
potential and which development is offering the best value that meets the purchaser's
needs at the time of purchase. This is where the services of an experienced Realtor that specializes
in new construction become invaluable.
Please feel free to browse new construction projects in South Florida or to
contact me if I can be of further assistance.