Cash-rich Brazilians are leading a revival in South Florida real estate – one of the markets hit hardest by the US property crash – underlining the diverging fortunes of the two largest economies in the Americas.
Brazilians, along with other Latin Americans and Canadians, have driven up prices of condominiums in the popular coastal neighborhoods of Miami by an estimated 50 percent from their lows in 2009, according to Condo Vultures, a Miami real estate consultancy.
One welcome feature of the boom is that Brazilians are paying in cash for 85 percent of their properties, according to the US National Association of Realtors. Developers have responded by unveiling projects in Miami for the first time since the crisis.
“Right now everything’s all about Brazil,” says Peter Zalewski, principal of Condo Vultures, which tracks supply. “Brazilians are rock stars in Miami right now.”
Miami and other parts of Florida have for years attracted investment from abroad – from Latin America in particular. Along with the property markets of Texas, Arizona, New York and California, the Florida real estate market has tended to benefit from foreign investment during US downturns.
But the prolonged US property slowdown has occurred at a time when the Brazilian economy has shown a sharp improvement. Brazil’s currency, the real, although not at its high, remains sharply stronger against the dollar compared with the end of 2008.
The crash three years ago in the Miami real estate market, when condominium prices fell to about one-third of their peak levels, coincided with the start of a boom in São Paulo and Rio de Janeiro. Property prices in those cities have more than doubled, leading Brazilians to look elsewhere for cheaper investments.
“We have seen a tremendous increase in Brazilians coming to Miami or Florida and buying property here,” said Frank Robleto, president of the Florida International Bankers Association.
He said his institution, BAC Florida Bank, had doubled its volume of real estate lending to Brazilians.
The National Association of Realtors calculated that Brazilians accounted for 8 percent of foreign buyers in Florida as of August, up from 3 percent a year earlier and the most of any nationality except Canadians.
But while Canadians were bottom-fishing for rental properties, Brazilians were buying luxury real estate, paying a median price of over $200,000, more than any other foreign buyers.
One São Paulo couple, Roberto and Adriana, who declined to give their surnames, said they bought in Orlando, Florida with a view to eventually retiring there.
“We bought because the prices had fallen so much,” they said. The weather is similar to that of São Paulo, security is better, car prices are more affordable and culturally Florida is a popular option because of large numbers of Brazilians, Latinos and other foreign citizens living or visiting there.
Condo Vulture’s Mr Zalewski said the oversupply in Miami was disappearing fast, and he predicted that in a year there would be no unsold units left from the last boom in seven popular coastal neighbourhoods, which include Greater Downtown Miami, South Beach, Sunny Isles Beach and others.
Average prices of these condos have risen from a trough of $200 per square foot to $300 per square foot – still short of the 2008 peak of $600 sq ft. Developers are beginning to respond, with plans for 17 new towers, including some by Latin American builders.
Experts warn, however, that demand could disappear if the Brazilian real takes a tumble or Latin American economies begin to weaken.
After strengthening nearly 40 percent against the dollar since 2009, the real has slipped about 15 percent since August.
“If the real goes down another 15 percent I think then the Brazilians might be incentivised to sell their properties because in [Brazilian local currency] terms there will be a huge incentive to make a large return in a short period,” said William Hardin, professor of finance and real estate at Florida International University.
Source: The Financial Times