Not long after facing what some feared to be a glut of new condos on the market, Miami developers and brokers could soon be facing the opposite problem. According to ISG World’s 2019 market report, South Florida is near the end of a development cycle that began in 2012 and saw a rapid transformation of the region’s skyline. That means at current absorption rates, Miami-area developers will sell out of new condo inventory within a year. While that’s good news on the surface, it’s troublesome considering the low number of new projects currently in the pipeline, which could lead to a shortage of new condo units and a much hotter resale market within the next two years or less.
As explained in the ISG World report, some of this may be a result of new dynamics in Miami’s property market.
“Over the past three decades, the typical high-rise condominium’s development cycle, from inception to delivery, was a two- to three-year process,” according to the report. “Today, real estate developers are building 50- to 100-story luxury residential towers, which easily doubles the development and construction timeline to five or six years.”
The current development cycle peaked in 2014 with 23 groundbreakings. In 2018, developers broke ground on only four projects in the Miami metro and are expected to have begun construction on another five by the end of this year. But as of yet, no groundbreakings are anticipated for 2020.
Meanwhile, Florida and the Miami area are adding new residents faster than at almost any point in the last 20 years. As of the most recent estimates from the U.S. Census Bureau, Florida is adding about 900 people to its population each day. That’s expected to continue for another 20 years, boosting the state’s population from 21.3 million to almost 29 million by 2040. New tax rules favoring states with lower tax burdens have only added to the influx of migrants from around the U.S. and the rest of the world.
Clearly, the demand for homes is there across South Florida. However, existing-home inventory hasn’t kept pace. ISG World found that, based on MLS data as of May 2019, only 3.3 percent of the more than 1 million housing units in Miami-Dade County were on the market. That percentage was as low as 2.3 percent for Broward County. Sure enough, as new condo inventory has steadily declined, resale activity in the condo market has grown 75 percent since 2012, ISG World found.
The same could be said for the region’s single-family home market, according to RelatedISG International Realty President Alex Vidal. Again, that’s been great for sellers so far, but could threaten future growth in the years ahead.
“In Miami-Dade and Broward counties, there are approximately 13,000 active single-family homes available for sale. This may sound like a large number, but it’s actually less than 1 percent of total housing units in these markets,” Vidal explained in the ISG World report. “Miami-Dade and Broward have sold close to 32,000 homes per year over the last three years, largely driven by our surging population growth.”