Five-and-a-half years ago I wrote a post on the Miami housing bust, which had seen prices crash on the back of an epic oversupply of apartments.
Well history might not repeat, but it sure does rhyme. As reported in the Wall Street Journal today, Miami is reportedly facing another apartment bust as developers begin “canceling projects, slashing prices and offering incentives such as private-jet access to spur sales, an ominous echo of the housing crash that pounded South Florida especially hard” [my emphasis]:
In the fourth quarter of 2015, the number of Miami Beach condo transactions declined nearly 20% from a year earlier, while inventory jumped by nearly a third…
The south Florida condo market is especially vulnerable to swings in the global economy because developers rely heavily on foreign buying, particularly South Americans, Russians, Europeans and Canadians.
Foreign investors have pulled back as the value of their currencies has dropped versus the dollar…
It’s hard to believe that any bust this time around could be as bad as 2008 given prices are still well below their former peak and construction activity is much more subdued (see next chart).
Still, the heavy reliance on foreign buyers does make the Miami market especially vulnerable to swings in demand.
Where else do we know of that has experienced both a massive ramp-up in apartment construction and heavy foreign buying? Here’s a hint:
