MIAMI – The tragic collapse of a tower block terrified homebuyers and property investors in South Florida alike to reassess the risk of buying in the Miami housing market.
Before Covid, the market was booming. Then it rose even higher as the culture of working from everywhere took hold. But in late June, dozens of people were crushed to death when the Champlain Towers South collapsed in Surfside.
Now the market is focused on technical inspection reports from older towers that need to be re-certified by the state every 40 years. Insurers are also being scrutinized as they hold the keys to new purchases in the market.
“No one in their right mind is going to buy a condominium that was built before 2000 unless they have a safety certificate on the structure of the building, and it doesn’t exist today,” said Peter Zalewski, an expert in condominium in South Florida, Consultant and Analyst.
The Miami area has long been a history of two condominium markets: those built before and after 2000, when tough new building codes went into effect due to damage from Hurricane Andrew. Now, after the tower disaster, the gap is suddenly even wider.
“Zoning has been upgraded to the point where zoning in Miami Dade County is probably one of the most difficult in the state or country, and as a result we have been able to build again,” said Zalewski. “The thing is, before Champlain, people didn’t know about it. Now everyone knows about it, so there will be a big gap.”
As condominium authorities rush to send insurance statements to owners, Zalewski said potential buyers cannot see inspection reports.
“No condo I’ve ever seen, and I’ve been here since 1993, has ever shared that information openly. There’s a lack of transparency in the housing market here, it’s inherently a sell-side market, ”he said. “The housing association could publish the information now.
Condominiums along the Miami coast.
Jeffrey Greenberg | Universal picture group | Getty Images
That makes potential buyers a little nervous, even though Miami was possibly the hottest real estate market in the nation last year.
Pending Miami-Dade County condominium sales, which represent signed contracts, rose 86% year over year in June, according to Jonathan Miller data for real estate company Douglas Elliman. According to the Miami Association of Realtors, the average price of a condominium is up 25% year over year.
A complicated market
Figures from Zalewski, who runs a local condo data and analytics website called Condo Vultures, show that older condos were much busier in the first half of this year, with an average of 259 sales per month. Condos built after 2000 averaged 154 sales per month for the period.
The older ones are cheaper, with an average retail price of just under $ 485,000. The average for construction after 2000 is just over $ 2 million.
Miami saw essentially two major condominium building booms in the 1970s and the last 15 years. There are 79 condos built before 2000 in Miami Beach alone. 60 were built in the last 20 years. On the Miami mainland, east of I-95 on the bay, 166 new towers have been built since 2000, and the number is growing.
The collapse of Surfside could now shift the demand momentum towards new construction.
“Builders are not cutting prices on new buildings and there will likely be more people coming to their sales center than they expected,” said Paul Sasseville, an agent at Compass in Miami.
Sasseville said demand for some older condos should continue as long as they can provide technical reports.
“Most of the large, well-run condos have already sent a letter to all owners from an engineer that all brokers are now requesting. What have they done in the past two years, what have they done in the past five years, and how are the reserves, “he said.
However, it remains to be seen whether potential buyers can see these reports. Buyers now also need to consider the potential of much higher condominium fees for repairs that may previously have been ignored.
“I think this will be a bit of a deterrent for older condos. While not entirely off-putting, people will be much more careful and ask a lot more questions about building maintenance before making purchase decisions, ”said Sepehr Niakan, an agent at Blackbook Properties in Miami.
Niakan said agents in the past would simply ask if the building had its 40-year recertification, but it was always a financial issue regarding possible future repair costs.
“I think what is going to change now is that besides the money, they also ask for their health and safety,” he added.
In this aerial view, search and rescue workers work after the partial collapse of the 12-story Champlain Towers South Condo building on June 24, 2021 in Surfside, Florida.
Joe Raedle | Getty Images
Buying in Miami usually slows down during the summer, largely due to the heat and the lower urgency of shoppers in cold climates. So far, agents say the interest is still there, but it’s definitely different.
“People are still looking at them, but they are careful,” said Niakan. “You want to see the job is done. So a red flag is when you see a condo with half the monthly HOA [homeowners association] Fees of all other buildings. If it looks too good to be true, it’s too good to be true. “
Miami has long been a market full of international investors. The largest real estate exchange in China, Juwai, just issued a warning: “We are advising buyers not to purchase units in South Florida buildings that are more than 10 stories high and 30 years old without first buying for at least 12 months. ” Obtain an independent assessment and estimate of potential future maintenance and refurbishment costs. “
The question now is whether there are any bargains? Zalewski said he’s already getting calls from property owners wondering whether to sell and investors looking to buy.
“You will see a huge chasm emerge. Investors looking for a return will focus on these older buildings with a plan that the condos will be demolished and new towers will be built on them, probably about two.” up to three times higher per square foot, “he said.
Sasseville said he received calls barely a day after the collapse.
“People called to see if it was an opportunity to buy. We absolutely had calls that said, ‘Hey, I’m confident the well-run condos will be built. I like Buildings A, B and C, please leave See me if I can get a really good price, ‘”he said.