There are many consumers not yet convinced that things are “turning around” in the preconstruction market in the Sunny Isles and Miami Beach area. That perspective is fairly easy to understand if you see that people are basing such an opinion on the older headlines and business news, but if you look a bit closer at what is actually happening in the market…well, you’d change your mind about the issue.
For instance, if you were to check out the newest project from developer Gil Dezer you would see a huge amount of interest and activity, and none of it could be described as a reflection of the so-called “modern market”. That is because Dezer is currently working on the newest luxury oceanfront pre-construction project Porsche Tower in Sunny Isles Beach, and though it is not going to be ready for residents until 2016, more than 15 of the $3.9 million-plus homes have already been reserved.
While the $1,000 per square foot price tag on these homes may not be feasible for all interested buyers, there is much more to find in the Miami and Sunny Isles condo market. For example, the Related Group (which is most often associated with massive condominium structures scattered throughout Miami and its environs) is currently working on the MyBrickell facility in the heart of city, usually called the downtown region. This is a neighborhood that was once believed to be a “no go” in terms of residential properties but which has become a dynamic market with the many “bargain shoppers” of the world.
Thus, the $350 per square foot price tag on the 192 units has led to a near “sell out” of the entire structure long before the project has even broken ground. As of early 2012, it had reservations for 90 percent of the homes in the building.
Is Marketing to Blame?
Many might point to these diverse projects and say that it is probably marketing that is leading to so much interest, but the simple fact of the matter is that many of the top selling projects have almost zero marketing, and few even have viable websites or established sales offices.
What is behind the success? If you explore many of the top selling preconstruction projects it would quickly become clear that measured sales are the real engine behind the incredible numbers. Rather than building in the thousands, most of the projects are doing pre-sales on extremely limited numbers of homes.
When this is partnered with the fact that many international buyers are exploring their chances for a Miami property at a relatively bargain-basement price (when compared to the booming years prior to 2008), you get a wonderful result. For example, Canadian buyers who had long avoided the $500 per square foot price tags on the smallest and least opulent units are now able to dedicate less than $400 per square foot for a much more upscale home. Sellers are not boosting prices in response to these sales, however, and that is what is keeping the market viable and vibrant.
We should also offer a bit of additional detail about the strength of this proof that the preconstruction market is more than just back on track. For instance, the luxury homes offered by Gil Dezer come with a mandatory $100k escrow deposit just to take a meeting with the builders! Twenty-seven interested parties have put down the cash to sit down and discuss the options, and as already mentioned, fifteen of the meetings have resulted in fifteen committed buyers.
Additionally, these buyers are asked to put down ten percent of the purchase price of the home that won’t be available for a few more years, plus another ten percent to enter into the contract AND a further ten percent when the actual construction starts. Do they all agree to these terms? Yes, and none of the escrow deposits have ever had to be returned because the buyers are ready to commit to the properties.
The same applies to the lower priced homes being made available by Related Group. They are actually requiring that eighty percent of the purchase price be put down until the closing on the home, at which time the final twenty percent is required too.
There are other groups, such as the Brickell House group, that requires ten percent for a reservation on one of its newest units (a 374 unit project due to begin in the summer of 2012) and a full seventy percent of the cost to be paid during construction; or the Apogee Beach facility that asks for a 40% deposit for one of its 48 units.
Clearly, there has been a sort of metamorphosis in the preconstruction model. Rather than “monster” projects of thousands of homes at one time, with top tier pricing, the market has adjusted to fit the current global financial conditions.
This means that it is possible to find a great home in the Miami area that is newly built, totally modern in terms of amenities (such as the Porsche Design’s automated parking garages), and yet available at a cost that was once unheard of. The newest facet to this model, however, is that it can be a very measurable preconstruction period involved in the deal.
This measured sales approach is working well for buyers too because it does allow them to get a good price (currently averaging at less than $400 per square foot but going all of the way up to $1000 per square foot too) and to be able to use some payment terms that can work well with almost any budget. Ten percent to reserve a condominium about to break ground is a nice deal, and the opportunity to spread out the payments over the next few years is also beneficial. Many buyers will have to pay from twenty to forty percent of the entire price at closing, and this is why so many are rushing into this market before all of the available homes are gone.