Prices Shattering Records
The selling prices for Miami’s most exclusive homes seem to be setting new records every day. Recently a condo went for a cool $25 million, the highest price ever paid for a condo in the Miami–Dade County region. A mansion sited on Indian Dr. is reportedly closing escrow at $52 million topping anything sold in the prerecessionary days. At the top of the range, the mansion formerly known as Versace and currently called Casa Causarina has just been listed for $125 million.
The market frenzy surrounding such top end offers calls to mind to some the sort of expectations commonly seen in 2006, just before the boom went bust. The belief then was that prices could only move one direction, up. That sadly turned out not to be the case as real estate prices began falling in 2007 and continued to do so for years.
While prices have stabilized recently and even showed gains, some are warning that market conditions at the high end point to another bubble forming that could burst at any time. Prices are currently being driven upward by a relative handful of wealthy investors who could choose to pull out without warning. With such a small pool of speculators controlling prices, it is anyone’s guess how long prices will continue to rise for luxury estates.
Foreign Money Moves In
Helping to drive prices upward is an infusion of foreign buyers into the high end market. Florida attracted more than a quarter of the $82 billion that foreigners put into U.S. real estate in 2010. The average price that foreigners paid was $400,000. This compares to an average price of only $212,000 for homes sold that year. The percentage of all cash sales by foreigners has been rising since 2007 and reached 62 per cent in 2010.
Floridais seen as an attractive place for investment by foreigners due to the relative safety ofU.S.investments in general and the state’s tropical climate. The Miami area is considered especially enticing because of the vibrant culture the city has to offer.
The high end foreign buyers are not seeking a primary home to live in. They can not even be classified as looking for a second home. It is suggested that these types of buyers are actually doing the equivalent of making stock purchases, but of the sort that comes with a view of the ocean.
Right now, there is a flight to safety that is propelling the outlook of foreign investors. With financial markets in turmoil, property is seen as a tangible asset with intrinsic worth. The price may lower, but the asset will not disappear the way investments in stocks possibly can.
These sorts of investors have proven fickle in the past. Another region of the globe or the country may catch their interest causing an abrupt turn in market conditions for high end Miami real estate. For now, forecasters are expecting prices will continue to rise, but the end to that could come very quickly.