Nearly 80% of Owners Lost Money Reselling New Miami Condos

These losses grow to nearly 11% when factoring in typical 1.7% buying costs (developer fees, title insurance, etc.
"This year, most owners in Miami lost money reselling new construction units that they acquired when the market was stronger."
When factoring in likely buying and selling costs, we can reasonably conclude that only 22 broke even or made a profit, while 80 resales lost money.
The Miami condo market in 2018 simply wasn't strong enough to absorb resales at newly completed condos, and many owners suffered as a result.

MIAMI, Nov. 8, 2018 /PRNewswire/ -- An analysis by CondoBlackBook.com in association with HB Roswell Realty revealed that during the first three quarters of 2018, sellers of new construction properties suffered an average loss of 3%, not including buying and selling costs. These losses grow to nearly 11% when factoring in typical 1.7% buying costs (developer fees, title insurance, etc.) and 6.8% selling costs (real estate commissions, taxes, doc prep fees, etc.)*. The report looked at condos built from 2016 to 2018 in Miami's urban core and beach areas.

"For those who speculatively invest in preconstruction properties, timing is everything," says Sep Niakan, president of CondoBlackBook.com. "This year, most owners in Miami lost money reselling new construction units that they acquired when the market was stronger."

The Winners & The Losers
Our team analyzed Miami Dade Property Tax Records for 102 new construction resales in Greater Downtown Miami, Coconut Grove, Miami Beaches and the surrounding islands (except Fisher Island and Key Biscayne) that closed in 2018 and found that 38 broke even or made a profit, while 64 resales lost money—nearly 63% of the owners in our study. When factoring in likely buying and selling costs, we can reasonably conclude that only 22 broke even or made a profit, while 80 resales lost money.

That means 78% of sellers were most likely left in the red after closing.

Biggest winner by %: Palau Sunset Harbor at 1201 20th St, Unit #201. Purchased new in 2016 for $1.549M and sold in June 2018 for $2.65M, a gain of 71.1%.
Biggest winner by $: The Surf Club at 9001 Collins Ave, Unit #505-S with a gain of $1.4475M
Biggest loser by %: Centro #1711. Purchased new in 2016 for $376,900 and sold for $230,000 in August 2018, a loss of 39%.
Bigger loser by $: Porsche Design Tower #4405. Purchased new in 2017 for $11.8M and sold for $7.4M in August 2018, a loss of $4.4M.

The Downside of Speculation
Many people buy preconstruction condos to get first choice of inventory, enjoy discounts and buyer incentives, or to realize equity growth while a unit is still under construction. Many of these buyers are end-users who don't mind the ups and downs of Miami real estate, which inevitably yields growth on a long enough time line.

However, our analysis reveals the downside of trying to resell a new construction property in too short a time frame. The Miami condo market in 2018 simply wasn't strong enough to absorb resales at newly completed condos, and many owners suffered as a result.

An Overabundance of Condo Inventory
In a 6-month period ending Nov. 2, our target analysis area saw 138 units sold in buildings built from 2016-2018. However, there are currently 1,840 units listed on the MLS, which doesn't even include unlisted developer inventory.

Whereas normal inventory levels range from 9-12 months, we are currently averaging 81 months of inventory – that's 7-9x normal.

To absorb these units, Miami either needs a major new major demand source, such as Amazon HQ2 opening in Miami (almost certainly impossible at this point) or a major devaluation of the dollar, or else we should expect to see prices come down further on new construction units.

An Opportunity for Buyers
The good news is that those looking to buy now or in the near future have many advantages. They have their pick of new construction resales at excellent price points (often lower than what they first sold for), plus they can see the finished product as opposed to just floor plans and renderings. This means less risk and more clarity about what they are getting for their money. And finally, with inventory at such high levels, buyers who have time and patience will have a lot of negotiating power.

Visit CondoBlackBook.com/market-reports for more on this topic.

About CondoBlackBook.com
CondoBlackBook.com is a leading digital resource for all things condominium in the Miami area. This cutting-edge platform provides the most up-to-date and complete condo sale and rental listings, including photos, videos, prices and floor plans. It also offers news and analysis relevant to South Florida condo-dwellers on topics like the real estate market, current events, local lifestyle and more.

About HB Roswell Realty
Founded in 2009 by broker Sep Niakan, HB Roswell Realty is a leading boutique brokerage serving Greater Downtown Miami and the Beaches, including Edgewater, Midtown Miami, Brickell and South Beach. With a team of 18 agents, they are a recognized leader in the urban condo market. Sep consistently ranks in the top 3 for condo listing volume in Edgewater and Greater Downtown Miami and top 10 in the county for condo resale volume.

*All numbers are best estimates were based on Miami Dade Property Tax Records and knowledge of the average costs and fees associated with Florida real estate transactions. Analysis based on sales data pulled from tax records on Sept 16, 2018. Only sales where both the original sale and resale were listed, and the resale showed up as a qualified sale per county tax records, were included in this report. We did not factor in unknown expenditures such as upgrades and finishes or mortgage-related costs, if any, and treated each sale like an all-cash deals for the sake of simplicity.

Press Contact
Sep Niakan
(305) 725-0566
[email protected]

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SOURCE CondoBlackBook.com