Miami, the so-called epicenter of real estate, is booming with real-estate construction.
There is the Port of Miami Tunnel project and Sky Rise Miami with its monumental 1000 ft. high, observation and entertainment tower. Downtown, you’ll see the up-and-coming one billion Brickell City Centre with its 5.4 million square feet of office, residential, hotel, retail and entertainment space and its two-level underground parking garage that spans seven acres below the property. Miami Worldcenter features 1 million square feet of shopping center, hotel, convention center and luxury residences. And the 1000 Museum, designed by Zaha Hadid, has its own helipad and a futuristic aura that makes it one more wonder in a city of wonders.
The New Miami Design District plans to revitalize the neighborhood and stud its streets with more than 100 brands. Storefronts will house mega masters such as Hermes, Louis Vuitton, Poltrona Frau, Hermès, Cartier, and Tom Ford to name a few. This is an ambitious project! The once-abandoned cluster of furniture warehouses aims to blend commerce with culture. Newcomers have been and are continuing to include: restaurants – fifteen to twenty from now to 2018 – upscale condos, twelve art museums and many, many more types of stores, offices, and for-profit or non-profit spaces.
Bal Harbor Shops, notably ranked the No. 1 mall in the world, submitted plans earlier this year for a further 250,000 square feet. It wants to enlarge its space and to squeeze in, at least, twenty more stores some of which have already moved in. Occupants include the Perez Art Museum, the Frost Museum of Science, and American Airlines Arena.
All of this real estate razzle and dazzle is helped by the All Aboard Florida passenger train which intends to connect Miami to Orlando by 2018. Doing so will relieve downtown congestion and improve traffic making downtown Miami even more attractive than it already is.
Miami: One of the Most Luxurious Cities In The World
City leaders and developers are exerting themselves to cultivate a global, cosmopolitan environment. No wonder that the Knight Frank Wealth Report recently called Miami the 6th most attractive city for real-estate investors in the world. Paris, city of wonders, comes seven! Predictably enough, so-called high net worth individuals from all over the world (especially from Latin America) fork out billions to drive a stake into this region. Some even cover entire purchase costs with cash! (Real estate research firm CoreLogic reported that as much as 70% of total home purchases in the Miami area were cash sales in March 2012. That was down to 58% in December, but still well above the national average of 35.5%).
Foreigners love the region. They see it as relatively cheap for buying prime property. And certainly inexpensive compared to places such as Buenos Aires, Bogota, Paris, Germany, or Russia.
Foreigners also love the region because of its global, cosmopolitan aura.
“You go to the most attractive cities,” said Geoffrey Garrett, the Australian-born dean of the Wharton School of business at the University of Pennsylvania, during a recent visit to Miami. “Globally-mobile people want to go to the most cosmopolitan places, and Miami is certainly up there.”
So wealthy foreigners come from all over: From Argentina, Brazil, Russia, Europe, and, recently, Asia (particularly China). Notes USA Today, whenever the Argentine or Brazilian economy falls, its wealthy citizens flock to Miami to look for a safer place to invest their money. When global oil prices dip, Russians and Venezuelans show up. And vacationers from Europe buy properties for winter retreats.
In short, foreigners spend inordinate amounts of money to call Miami their home or away from home or business away from home. But for people who live in Miami, it’s a different matter.
Miami’s Haves and Have-Nots
Miami is one of the wealthiest cities in the world. It is cosmopolitan and merges culture with commerce. Christie’s International Real Estate (2014) listed Miami among its top 10 luxury markets, and USA Today recently noted that Miami had become one of the most expensive cities in all of America to buy or rent a home. So, ninety percent of new construction underway in Miami is unaffordable for 90% of the population that lives there.
The focus on luxury projects has left renters with few options. According to the online real estate database Zillow, Miami-area renters spent 44.2% of their income on rent in the last three months of 2014, the second-highest figure in the country, after Los Angeles.
In short, it is the high-net individuals and the very rich who are able to afford the mostly high-priced condos and luxurious homes. But if you live in Miami, or its environs, and want to buy for private or commercial use, reports show that you’re likely to run into difficulties. Banks are reluctant to lend because of the recent recession, and prices are nauseatingly high anyway.
Many a working-class couple is turned away from getting their loan, or even when they do manage to get one find that the home that they had set their eyes on has already been plucked up by some foreigner who plunked down a full cash payment.
Says Jack McCabe, a real estate analyst with McCabe Research & Consulting, “When people talk about this great divide between the rich and the poor, it’s very evident in Miami.”
Miami is beautiful. It is booming. And the distance between haves and have-nots is growing.
Miami is great for billionaire foreigners, but if you live in that city and wish to invest, you may well find yourself with fewer options.