Swire Properties and Property Markets Group are making changes to some of their deposit requirements in South Florida. While some believe this is an indication that the luxury condo boom may be hitting its peak after a four-year cycle, others insist this just isn’t true.
Swire Properties, the developer of the Reach and Rise residential towers in Brickell City Centre has announced that their down payment requirement for the condos is dropping from the average 50% down to 35%. While some insist that this change to presale terms is a sign that the condo boom is finally slowing, the president of ONE Sotheby’s International Realty, which is the exclusive broker for the Swire Properties, explained that Swire’s decision was based on the fact that closings for remaining units in the towers are coming up quickly at year end.
Property Markets Group
Another developer that is making changes is Property Markets Group (PMG). They are not lowering their down payments on units in Sage Beach in Hollywood, Echo Aventura, Echo Brickell, and Muse in Sunny Isles, but they are making deals with some foreign buyers that allow for payments on the required 50% deposits.
A spokesperson of International Sales Group, which markets the PMG properties, explained that the move is mainly for Argentinian and Venezuelan buyers, who are having more difficulty with moving money out their accounts. For these buyers, the deposit is broken down into 40% being required down, with the additional 10% being sent as installment payments that have to be paid before closing.
Are Condo Sales Waning?
While the number of condos was down by 15% in January, they did increase by 1.4% in February over last year’s sales in the same month. The cycle of condo sales started in 2011, and since that time, 20,000 units have been announced. The reason PMG and Swire’s lowering their down payment requirements is making waves is because only four months prior to these decisions, the Crimson condominium developer began allowing 15 to 35% for some local buyers, using a Fannie Mae program.
The important thing to understand about both Swire’s and PMG is that neither developer relies on the deposits in order to carry out construction on their projects. Instead, they rely on equity that is already available. For these companies, that means there is essentially no risk for them in lowering the deposit requirements.
These down payment requirement changes do raise some questions about the future. The first is whether these lower requirements will carry over to other of the developers’ future properties, and second, whether other companies will follow suit.
The International Sales Group spokesperson, Craig Studnicky, believes that other developers may choose to lower their requirements as well, but that it will only be others like Property Markets Group and Swire’s that can depend on their current equity that will do so.
It will remain to be seen whether these decisions actually mark a downturn in the condo boom, or whether it is just two companies making a move that won’t risk their bottom lines.