We’ve written previously about Americans fleeing high-tax areas like New York and Connecticut for Florida. Many of these so-called “tax refugees” are CEOs and hedge fund managers who are buying up ultra-luxury real estate in the $10 million to $50 million range (and creating a run on private school spots in the process). But U.S. citizens aren’t the only ones scooping up property in the Sunshine State.
According to the National Association of Realtors’ latest Profile of International Residential Real Estate Activity in Florida, foreign buyers outlaid $22.9 billion for real estate in the state in 2018. This number was actually down from the previous year as a result of appreciated home values and a strong dollar making for poor exchange rates. Still, those headwinds were only enough to shave 5% from the total dollar amount, and all signs point to increased activity in 2019 and beyond, as we will show.
Other interesting stats the report turned up include:
- Two-thirds of foreign buyers paid all cash.
- 71% of foreign buyers purchased real estate as vacation or rental properties.
- 53% of properties were townhouses or condos, compared to 43% single-family homes.
- A whopping 54% of the total purchases were in the Miami-Fort Lauderdale-West Palm Beach area.
The Miami Frenzy
According to reporting by real estate firm Knight Frank, Miami was one of only three American cities that saw an uptick in luxury home prices between Q3 2017 and Q3 2018, rising 4%. And as they noted in their 2019 inaugural edition of The Global Ultra-Prime Market, Palm Beach/Broward County is the only second home market to see $25 million+ transaction levels close to some city markets, averaging five over the past three years.
Despite a glut of new properties, the city doesn’t show any signs of slowing down. Knight Frank expects Miami’s prime property prices to grow by 5% in 2019, more than twice as much as L.A. (2.0%) and infinitely more than New York (0.0%). The population of “wealthy” (net worth of at least $1 million) residents is also expected to rise by more than %12 by 2023.
So what is it about South Florida that’s drawing so much interest from luxury buyers, especially foreign buyers? Miami’s close proximity to Latin America and South America, which produces nearly half of the state’s foreign investors, plays a big part. Many of these areas are dealing with instability, making the relative stability of the US and the dollar attractive by comparison. Miami also home to the largest concentration of international banks in the United States.
Recently updated airports and the Brightline train connecting Miami and West Palm–and potentially Orlando soon–make area tourism, a huge piece of the local economy, much more convenient. Prime buyers also get much better relative value in Miami than in key cities like London or New York, both if which grant 334 square feet per $1 million spent, compared to 1,001 square feet in Miami.
The Wider Florida Real Estate Picture
International real estate investors definitely appear to have a “type” when it comes to location of Florida real estate. In the same way that interest in Miami is reverberating outward into Fort Lauderdale and West Palm Beach, other nearby metros are seeing home prices and rental rates spike along with investment pouring in, as well.
After Miami, the next most popular targets for foreign investors were Orlando and Tampa, and their respective neighboring areas of Kissimmee and Sanford, and St. Petersburg and Clearwater. According to the NAR, 89% of buyers purchased in the central city or suburban areas; only 15% purchased in a resort area.
In Orlando, much of the latest activity is happening on the northwest side, in the upscale neighborhoods of Winter Park, College Park and Lake Eola Heights. These locales are diverse, close to downtown and cultural centers, and dotted with lakes, providing ample selection of high-end lakefront properties. According to Zillow, 691 homes were recently sold in this area for least $1 million, the vast majority of them houses under 5,000 square feet.
Tampa’s luxury market is strikingly similar to Orlando’s, except the turnover is happening on the southwest side between two shores of Tampa Bay, in affluent neighborhoods such as Beach Park, Parkland Estates and Virginia Park. Of the 653 homes for sale at $1 million+, some show price appreciations of 150% or 200% or more since last being sold within the last five years.
Takeaways
Although it appears to be late in the game to get in and out of a Florida property quickly for a significant profit, cash purchases of luxury real estate in Florida that you intend to hold for the middle- to long-term look to be sound investments, especially for those seeking safe harbor from instability abroad. The luxury condo market is a proven source of value for five- to 1o-year investors, and indeed it does appear many foreign buyers are taking that approach.
At the same time, if analysts are correct that Miami’s growth will continue, there is still plenty of both new and resale inventory there, especially to the north as far as West Palm Beach. With so many available options, a buyer’s market could result in a great deal in a growing secondary area that could be used as a vacation home for as little as two or three years and sold at an appreciated valuation.
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