The real estate market goes through cycles, and as discussed in last week’s article, we at Rise Realty believe that Miami is currently healthy in mid-cycle. The market’s health can largely be attributed to foreign investor activity. Despite the rising dollar, foreign money is still flowing into Miami. Keith Darby, Rise Realty President says, “Foreign investors see real estate as a safe place for their money, especially when the economic situations in their home countries are volatile. They like Miami for the culture, nightlife, lifestyle and beautiful beaches. They can’t get this anywhere else, especially for the price.”
Miami is a bargain compared to other foreign cosmopolitan cities, with square foot prices considerably more affordable compared with the likes of London, Hong Kong and New York City. And in Miami, they are able to find an array of investment options. Foreign money was once focused in condo developments and vacation homes, but now they are expanding their investments into commercial real estate. In addition to the belief that Miami real estate is a safer place to park their funds, they are able to achieve turnkey income and returns of 5-8%. They focus their attention to buildings with single, or few, tenants; preferably buildings home to national chains.
Foreign investors want their capital secure, so they are willing to pay higher prices. The mean price for foreign transactions is twice the local mean price. This is due in large part to purchasing higher end properties and larger commercial real estate, especially the single tenant buildings. And with the stronger dollar, the investors are still purchasing in mostly cash to secure their funds, even if it takes more of it.
Miami has the highest concentration of foreign investors in the US, with approximately 72% of Miami-Dade and Broward brokers reportedly working with an international client. And where are these investors coming from? Most are still from Latin American countries, with Brazil and Venezuela continually ranking high in investment volume. While Chinese investors are getting a lot of buzz, they currently represent only a small portion of foreign interests. The Chinese market and influence in Miami is expected to grow, especially with the increasing uncertainty of their domestic market.
China, Venezuela and others seem to be staying true to the foreign investment trend – the more volatile the home market, the more investors we see in Miami. With this high percentage of foreign investments, and the increasing volatility of many foreign markets, we believe that the Miami market will stay in mid-cycle and healthy for a longer period of time.