The condo market in Miami is even more complicated after the tragic surf break

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MIAMI – The catastrophic collapse of an apartment tower has spooked South Florida homebuyers and real estate investors alike, prompting them to reassess the risks of buying in the Miami-area apartment market.

The market was booming before Covid. Then it rose to the top as the culture of working from nowhere took hold. But then in late June, dozens of people were killed in the collapse of the South Champlain Towers in Surfside.

Now, the market is focusing on engineering inspection reports from older towers, which the state requires for re-certification every 40 years. Insurance companies are also under scrutiny, as they hold the keys to new purchases in the market.

said Peter Zalowsky, a South Florida condominium expert, consultant and analyst.

The Miami area has always been a tale of two condominium markets: those built before and after 2000, when strict new building codes for Hurricane Andrew damage came into force. Now, after the tower disaster, the split suddenly became wider.

“The zoning was upgraded to the point where the Miami-Dade County zoning is probably one of the toughest in the state or country, and as a result we were able to rebuild again,” Zalowsky said. “The thing is, people weren’t aware of that before Champlain. Now, everyone knows it, so there’s going to be a big split.”

While apartment councils are rushing to send letters of guarantee to owners, Zalowsky said potential buyers can’t see inspection reports.

“I’ve never seen an apartment, and I’ve been here since 1993, never shared this information publicly. There’s a lack of transparency in the apartment market here, by design, it’s a sell-side market,” he said. “The apartment association may release the information at this time. How did they find these engineers and why didn’t they see it before?”

Condominiums along the Miami coast.

Jeffrey Greenberg | global photo collection | Getty Images

This left potential buyers somewhat fluctuating, even though Miami was probably the hottest housing market in the country over the past year.

Miami-Dade County’s pending condo sales, which account for signed contracts, rose 86% in June year-on-year, according to data from Jonathan Miller of real estate firm Douglas Elleman. The median apartment price is up 25% from the previous year, according to the Miami Association of Realtors.

complex market

Figures provided by Zalewski, who runs a local apartment data and analytics site called Condo Vultures, show older apartments were seeing more action in the early part of this year, with an average of 259 sales per month. Apartments built after 2000 averaged 154 sales per month during this period.

I offer the cheapest ones, with an average selling price of just under $485,000. The average build after 2000 is just over $2 million.

Miami has had a huge apartment building boom, in the 1970s and in the last 15 years. Miami Beach alone has 79 apartment buildings built before the year 2000. Sixty of them have been built in the past twenty years. On mainland Miami, east of I-95 near the bay, 166 new towers have been built since 2000, with more continuing to rise.

The Surfside collapse may now shift the demand dynamic towards new construction.

“Developers are not lowering prices on new build, and they likely have more people coming into their sales center than they expected,” said Paul Sussville, Compass agent in Miami.

Sussville said the demand should hold up for some older apartments, as long as he can provide engineering reports.

“Most of the well-managed master condominiums have already sent a letter from an engineer to all owners asking all brokers now. What have they done in the last two years, what have they done in the last five years and what the reserves are like.”

More caution

But it remains to be seen if potential buyers can see these reports. Buyers will now have to factor in the possibility of a much higher condo fee for repairs that may have been overlooked before.

“I think it would have a frightening effect on older apartment buildings. If it wasn’t a very frightening effect, people would be more careful and ask more questions about building maintenance before making purchasing decisions,” he said. Sepehr Niakan, agent with Blackbook Properties in Miami.

In the past, Nyakan said, agents would simply ask if a building had been certified for 40 years, but it was always a financial question regarding potential future repair expenses.

“Now, I think what will change is that they are really demanding their health and safety as well as money,” he added.

In this aerial view, search and rescue personnel work after the partial collapse of the 12-story South Apartment building at Champlain Towers on June 24, 2021 in Surfside, Florida.

Joe Riddell | Getty Images

Buying in Miami usually slows down in the summer, mostly due to the heat and less urgency from buyers in colder climates. As of now, agents say the interest is still there, but it’s definitely different.

“People are still looking at them but they are being careful,” Nyakan said. “They want to see the work done. So the red flag is if you see condominiums with half the monthly HOA [homeowners association] Fee for every other building. If it sounds too good to be true, it’s too good to be true.”

Miami has always been a market filled with international investors. China’s largest home listing website, Juwai, just issued an alert: “For at least 12 months, we advise buyers to refrain from purchasing units in South Florida buildings that are more than 10 stories tall and 30 years old without first obtaining independent assessments and estimates of future maintenance and remediation costs.” potential”.

The question now is, are there deals to be found? Zalewski said he’s already getting calls from owners asking if they should sell and investors looking to buy.

“You will notice a big gap. Investors looking for a return, they will focus on these older buildings with the plan to finish the condominiums, and new towers will rise on them, probably about two to three times higher per square foot.”

Sussville said he barely got calls a day after the breakup.

“People called to see if it was a buying opportunity. We definitely got calls saying, ‘Hey, I’m confident this is a well-managed condominium building. I love building A, B and C, please let me see if you can get a really good price. who is this “.

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