South Beach Condo Sales Stall in Q1

South Beach Condo Sales Stall in Q1

Residential News » Residential Real Estate Edition | By Michael Gerrity | April 27, 2010 11:00 AM ET

According to a new Condo Vultures report, South Beach developers sold only 17 new condo units in the first quarter of 2010, down from 31 units in the first quarter of 2009 and 136 units in the first quarter of 2008.

The slow South Beach sales in the first quarter of 2010 are a stark contrast to the more than 720 units that transacted across Biscayne Bay in Greater Downtown Miami during the same January through March period, according to recent Condo Vultures report based on Miami-Dade County records.

The few buyers that did purchase new condos in the Miami Beach neighborhood of South Beach paid an average price of $1,364 per square foot in the first quarter of 2010, up from $803 per square foot a year earlier in the first quarter of 2009, according to Condo Vultures.

Many of the buyers had preconstruction contracts dating back a few years to the boom times, and faced losing a substantial portion of their 20 percent deposits if they failed to close on their units.

Some four miles west across the MacArthur Causeway, the average sales price for a new condo in Greater Downtown Miami was $326 per square foot in the first quarter of 2010, according to a recently released Condo Vultures® White Paper™.

"Real estate sales today more than ever are a function of price," said Peter Zalewski, a principal with the Bal Harbour, Fla.-based Condo Vultures LLC. "Many people want to live or invest in the barrier island city of Miami Beach for the sand, glamour, and sex appeal, but an increasing number of investors and second-home buyers are seriously looking to Greater Downtown Miami as an alternative given the $1,000 per square foot pricing difference.

"South Beach will always be South Beach but the rich premium to own on the barrier island is turning out to be a tremendous selling point for developers peddling new condos on the mainland side of Biscayne Bay."

South Beach is the trendy neighborhood on the southern portion of the barrier island that attracts celebrities and athletes, jet setters and working class tourists alike who all come looking for the Miami Beach experience.

South Beach is defined as South Pointe Drive north to 24th Street, the Atlantic Ocean west to Biscayne Bay.

The more attention South Beach receives in the movies, television, newspapers, and magazines, the more visitors that flock to the barrier island neighborhood that is 24 blocks long and 13 blocks wide.

With millions of people coming and a limited land supply, residential pricing spiked a few years ago and continues to command some of the richest premiums in the tricounty South Florida region.

South Florida's condo crash that has been so well documented internationally has for the most part left South Beach unscathed. The strong demand for South Beach real estate has limited the discounts to a unit-by-unit basis.

Since 2003, developers have constructed 37 projects with nearly 5,600 new condominium units within the South Beach area. About 75 percent of the new units have been sold for an average price of $583 per square foot through the end of the first quarter of 2010, according to the report.

Compare that to Greater Downtown Miami where developers constructed 82 projects with about 22,250 units during that same period dating back to 2003. About 70 percent of the new units in Greater Downtown Miami have been sold at an average price of $357 through the end of 2009, according to the report.

In the first quarter of 2010, the average sales price for a new condo in Greater Downtown Miami tumbled $31 per square foot to $326, spurring strong buying activity.

"In the Miami area, the rule of thumb is that new condos costs about $250 per square foot to construct plus the land costs," said Zalewski. "Many investors are comfortable purchasing units at prices at or below $300 per foot square. That is possible in Greater Downtown Miami but not in South Beach, hence, the dramatic difference in sales volume."

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