South Florida’s wealthiest buyers have plenty of money. The problem is finding something to spend it on.
The luxury residential market is being squeezed by a shortage of homes, with affluent buyers increasingly willing to pay premium prices, assemble adjacent properties and go off-market to find what they want.
Meanwhile, South Florida’s broader market struggles with older inventory, top brokers said Thursday at The Real Deal’s “Staged to Sell, Welcome to the New Miami” event hosted by Artefacto.
Four of South Florida’s top-producing brokers — Julian Johnston of ONE Sotheby’s International Realty, Nelson Gonzalez of Berkshire Hathaway HomeServices EWM Realty, Dora Puig of Luxe Living Realty and David Siddons of David Siddons Group — sat down with TRD’s Hannah Kramer in Artefacto’s Coral Gables showroom to discuss what’s driving the luxury market and where it’s headed next.
Ask South Florida’s top brokers what the biggest challenge in the residential market is, and they’ll tell you the same thing: inventory.
Much of the region’s prime real estate has been gobbled up, driving up the value of the land that’s left. Buyers who expect to get an ultra-luxury turnkey home for $30 million face sticker shock when they see the reality.
“You get something cute for $30 million that you will probably knock down,” Puig said. “At $10 million you’re buying land. Once you pass $50 million, you go off-market and start finding opportunities.”
But the inventory crunch presents challenges even when buyers go off-market. Sellers keep backing out of deals because they have nowhere to move to, Siddons said.
The answer is often raising the budget.
“It’s an affluent buyer. If you can afford 30, you can probably buy 40 or 50,” Puig said.
For the uber-rich, one property isn’t enough. Buyers are snapping up adjacent properties to form sprawling private compounds in a landmaxxing frenzy that’s been a defining characteristic of Florida’s ultra-luxury market this year.
Jeff Bezos, Citadel CEO Ken Griffin, WeatherTech CEO David MacNeil and Oracle chairman Larry Ellison have all taken part in the trend, buying out their neighbors for additional waterfrontage and more amenities.
Other buyers snag properties across the street, a trend that Gonzalez said “makes total sense.” Instead of dropping eight digits on another waterfront property, they can get the much-cheaper house across the street for a padel court and guest house.
“It helps them expand their property without going crazy with the neighbor on the water,” Gonzalez said.
Johnston said the trend took off last year, when the market started to move following a slow period. As inventory disappeared, buyers began to act, sometimes buying up multiple properties at a time.
The big deals hitting the market aren’t necessarily vanity purchases, Johnston said.
Buyers are making strategic moves as wealthy newcomers flock to South Florida from places like California and New York, where a proposed billionaire tax and a pied-à-terre tax have run them off. Florida’s lifestyle and business-friendly climate have attracted those buyers, Johntson said.
Miami’s ultra-luxury boom is masking weakness elsewhere in the market.
Home sales continued to shrink last month, marking 10 consecutive months of year-over-year declines, according to Homes.com. Miami has 138 percent more sellers than buyers, the second highest in the nation, Redfin said.
Puig said condos below $10 million are responsible for the drop. Rising insurance, certification costs and special assessments are weighing on investor demand, while the strongest activity is concentrated in small pockets at the top of the market.
Law changes have made buildings harder to finance, meaning the product that’s staying on the market is undesirable, Siddons said.
“It’s like a car park, and half the cars are so old that they’re just ready for the scrapyard, and nobody wants to drive them,” he said.
Middle-tier products that still have some life left are targeted at the investor class, which hasn’t been as prolific a buyer as it was a decade ago, he said. Those properties, along with older buildings, are being replaced as owners are pressured to sell, particularly when they’re sitting on prime land. The developers who buy that land are left with little choice but to build ultra-luxury, where the profit margin is much greater.
The stars behind some of South Florida’s biggest residential sales said they’re confident the luxury market will continue to thrive.
“I think there’s going to be a further flight of capital out of London and California,” Johnston said. “The inventory problem is not going to change. Prices are going to continue to rise. It’s supply and demand.”
As wealthy executives move their families and their companies to the region, products across the market will continue to be absorbed, the brokers said. The demand for condos is there, especially as the single-family-home shortage persists and shifting demographics within the city produce varied demands.
The only thing missing is transportation, Johnston said. But the rise of helipads could fix the traffic problem for some.
“We are hashtag-blessed to all be brokers in this town,” Puig said. “I’m so bullish on the city. Miami, on a macro level, has finally grown up from this little beach town.”
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