There are many reasons to be optimistic about the South Florida real estate market – from its strong tourism industry to its world class developments to its growing population, driven in large part by high net worth individuals bringing their money from tax-burdened states. And of course, there’s the appealing weather.
But therein lies the rub. According to a new survey conducted by the law firm Berger Singerman, whose attorneys have worked on real estate transactions throughout Florida, the growing realization that climate change will eventually impact the Miami market is beginning to temper that optimism.
While the majority (58 percent) of the 2,000 real estate professionals surveyed said that climate change will have “zero impact” on how they plan to develop or invest in 2020, 35 percent said that climate change is the most pressing issue facing the South Florida real estate market this year.
“Climate change is undoubtedly a big issue and adapting to it is going to be extremely expensive for the state of Florida,” said Berger Singerman partner Iryna Ivashchuk. “However, while real estate investors and developers have started to factor climate risks into their business deals and projects, many do not consider climate change an immediate threat that will affect their holding period, which is likely why a majority of respondents do not see it as an alarming issue that will require them to change their 2020 investment and development strategies.”
The survey also revealed another concern: a decline in foreign investments. More than a third of the respondents said they felt it was the most pressing concern for 2020, although the majority (62 percent) said they don’t anticipate a correction in the South Florida real estate market in 2020.
“We’ve seen a slowdown in international investment over the past year for reasons such as rising property prices and the strong U.S. dollar,” said Berger Singerman partner Marc Stephen Shuster. “This is something that is affecting the entire country, with the number of foreign buyers in the U.S. dropping by 31 percent from April 2018 to March 2019. However, when foreign investors are looking at U.S. locations, Florida remains an attractive option over high-tax states like New York and California.”
Because Florida also remains an attractive option for those seeking to flee their high-tax states, Berger Singerman partner Jeffrey R. Margolis predicted continued growth in 2020. “As more buyers from New York and other states with state income taxes flock to Florida, it makes sense that there is a continuing demand for residential development, including multifamily products, to accommodate the population growth,” he said.