South Florida real estate developer Martin Margulies has been sitting on prime ocean-front property for five years, waiting for the condo market to rise from the grave. When the market here crashed in 2007, amid overzealous speculators and an abundance of cheap and easy credit, condo construction ground to a halt. The joke had been that the unofficial bird of Miami was the crane, but that bird flew the coop. Apparently it is now swooping back in.
"This is the moment because we're going to be delivering this property next year, and so by that time there will be good demand, there is good demand now," says Margulies, who began construction on a brand new high-end condo tower in December.
And he is right.
Foreign buyers, largely from South America, but also from Europe, Russia and China, are flooding into the Miami area, and that has developers rushing to keep up with demand.
"The kind of buyers we get they don't need financing, they're all cash buyers."
"The music started again in South Florida," says Peter Zalewski of CondoVultures, a Florida real estate data and investment firm. "We have an arms race of developers moving into the marketplace trying to put up condos or planned condos in anticipation of a recovery in the next two years or so."
And they are doing it fast. Twenty five new towers with 5200 units are proposed while there are still 4200 unsold units left from the crash. Sounds crazy, but the foreign demand developers and real estate agents are seeing now is just that hot.
"The foreign buyer is coming in looking for wealth preservation or taking advantage of the weak U.S. dollar, or coming in because of problems back home, whether it's Venezuela or Mexico with the drug war," says Zalewski, who has been watching and working this market for the past decade.
Foreign buyers are investing as well as foreign developers, like the Melo group, a family business from Argentina. They began construction last August on the first new tower in Miami in at least four years. A lot of people thought they were crazy, but now the tide has decidedly turned. The Melo's say they have pre-sold the entire building, and they required buyers to put 50 percent down. Most of their buyers, again, are foreigners with cash.
This new condo boom, while reminiscent of the recent one, is not built on easy credit. In fact, credit is still very tight here, especially for developers. Martin Margulies tried to get a construction loan for his Hollywood project, the Bellini, but could only get 50 percent financing along with putting up collateral. He called that "onerous," and instead took out a personal loan, using his massive art collection as collateral. He says he's not concerned, as his buyers will be putting down 30 percent on one to four million dollar units.
"The kind of buyers we get they don't need financing, they're all cash buyers," says Margulies. "It's a lifestyle they have, so they're not reliant on a bank to give the money."
Most of the foreign buyers in Miami are renting the properties to locals who have either lost their homes to foreclosure or whose credit is not good enough to get a home loan in today's tough U.S. mortgage market. The question now is, what happens to all these renters when Florida's single family housing market recovers and credit opens up again? Will all these foreign investors want to unload their units at the same time?
"You wonder if we're not kicking the can, where we dealt with the problem at hand by dumping it off to foreign buyers, and now as the domestic buyer starts to move back into the marketplace, is that domestic buyer going to pay the same price that the foreign buyer is willing to pay or take the same chances that the foreign buyer is willing to pay?" asks Zalewski.
It all sounds frighteningly familiar.