Driving forces behind South Florida condo market growth

The authors attribute the growth in the South Florida condo market primarily to the following three phenomenons: renewed in-migration to Florida, increased international demand, and a new construction finance model.

With a population nearing 20 million and 700 new net residents added each day, Florida is on track to become the third most populous state in the country, expected to surpass New York in 2013.

Added to this growth is increased international demand, not only from Latin America, but also Canada and Europe. As noted in the article, “Miami will always be a safe harbor, for both those that urgently need a safe place to house their money and those with great prosperity. Europeans and Latin Americans will continue to come to Miami after stabilization because of the cultural affinity. They can always find what they’re looking for.”

Finally, as previously reported, developers have found a new way to finance condo construction in the wake of the housing bust. Builders and buyers are now expected to commit funds up front–sometimes as much as 80 percent–and then incrementally pay as the building progresses. This pay-as-you-go model “serves to limit speculative excess in that as a project is completed, the buyer has more equity and [sh]ould be less willing to walk away should the market turn during construction. In addition, the pool of potential buyers is much smaller, thus fewer projects will be started in the first place, making overbuilding much less likely.”

This article was republished with permission from JDSupra.