Miami’s vice is a microcosm of America’s property bubble

[Property Week]

By Steve Cuozzo

The enormity of the US property meltdown strikes you in Miami as it does nowhere else. There might be more unsold homes in southern California and Las Vegas, but the debacle looks worse in south Florida for a simple reason: the tens of thousands of new units concentrated in clusters of dark, hovering, 40- to 50-storey towers

This week, the Miami Herald drew snickers with a story headlined, ‘Downtown Miami condos filling up fast.’ Citing an analysis by the city’s Downtown Development Authority, it touted the fact that 63% of the 21,616 condo apartments completed since 2003 are now occupied by buyers or renters, and 62% have been sold.

To the relief of many, the overall south Florida inventory has declined slightly. But only in Miami would it be considered good news that 38% of flats in new skyscrapers are vacant.

More tellingly, the crisis is most acute in the newest properties. Of the 21,616 apartments included in the survey, 11,800 came on to the market in 2008 or earlier this year — of which a mere 36% have sold, many at drastically reduced prices. And by the end of 2009, 1,300 more units that are under construction will join the party.

Beach ball

The Miami glut is not to be confused with the situation in Miami Beach, on the eastern side of Biscayne Bay and a 10-minute causeway drive away. Despite the tendency of many who dwell in colder climes to perceive all of south Florida as a homogeneous blur of palm trees, they are distinct cities with separate municipal governments and dissimilar property outlooks.

The Miami Beach market, which includes celebrity-studded South Beach with its famed art deco architecture, is holding up better than Miami. The Florida Association of Realtors found that while the median sale price of existing condos in the greater Miami area was a mere $151,000 (£92,190), those in Miami Beach typically command between $500,000 (£305,135) and $5m (£3m).

Miami Beach is not immune to slashed prices and stalled developments. An empty lot across from the spectacular, thriving new Gansevoort South resort hotel on the ocean front is one of numerous sites where craters and windowless and roofless facades testify to the bursting of the bubble.

There are foreclosures, too. Condo Vultures, a real estate consultant and brokerage founded to exploit the battered market, says that last month nearly three dozen homes in South Beach alone were foreclosed for nonpayment on a total of $14m (£8.5m) of mortgage financing.

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