Miami’s condo market more complicated after tragic Surfside collapse

MIAMI – The tragic collapse of a residential tower has prompted South Florida homebuyers and real estate investors to reassess the risk of buying in the Miami area condominium market.

The market was booming before Covid. Then it climbed even higher as the culture of working from anywhere took hold. But in late June, dozens of people were crushed to death in the collapse of the South Champlain Towers at Surfside.

Now the market is focused on technical inspection reports for old towers, which must be recertified by the state every 40 years. Insurers are also under scrutiny, as they hold the keys to new purchases on the market.

“No one in their right mind will buy a condo built before 2000 unless they have a safety certificate for the building structure, and it doesn’t exist today,” said Peter Zalewski, Southern Condominium Expert from Florida, consultant and analyst.

The Miami area has long been a story of two condominium markets: those built before and after 2000, when strict new building codes born out of damage from Hurricane Andrew came into effect. Now, after the tower disaster, the ditch is suddenly even wider.

“Zoning has been improved to the point where Miami Dade County’s zoning is probably one of the toughest in the state or country, and because of that we’ve been able to rebuild,” Zalewski said. “The point is, people weren’t aware of it before Champlain. Now everyone knows that, so there will be a big rift.”

As condominium boards rush to send insurance letters to homeowners, Zalewski said potential buyers can’t see inspection reports.

“No condo that I’ve ever seen, and I’ve been here since 1993, has ever openly shared this information. There is a lack of transparency in the condo market here, by design, it’s a sell market. “, did he declare. mentionned. “The association of co-owners could disseminate the information immediately. How did they find these engineers and why haven’t they shared them before? “

This makes potential buyers slightly nervous, even though Miami has been arguably the hottest real estate market in the country for the past year or so.

Miami-Dade County pending condo sales, representing signed contracts, rose 86% in June year-over-year, according to data from Jonathan Miller for real estate firm Douglas Elliman. The median price of a condo increased 25% from the previous year, according to the Miami Association of Realtors.

Figures provided by Zalewski, which runs a local condo data and analytics website called Condo Vultures, show that older condos saw a lot more action in the first part of this year, with an average 259 sales per month. Condos built after 2000 recorded an average of 154 sales per month during the period.

The older ones are cheaper, with an average selling price of just under $ 485,000. The average for construction after 2000 is just over $ 2 million.

Miami has essentially seen two big condo building booms, in the 1970s and in the last 15 years. Miami Beach alone has 79 condominium buildings built before the year 2000. Sixty have been built in the past 20 years. On mainland Miami, east of I-95 by the bay, 166 new towers have been built since 2000, with even more climbs.

The Surfside collapse can now shift demand dynamics toward new construction.

“Developers aren’t lowering the prices for new construction, and they’re likely going to have more people walking into their sales center than they expected,” said Paul Sasseville, a Compass agent in Miami.

Sasseville said demand is expected to hold for some older condos, as long as he can provide engineering reports.

“Most large, well-run condos have already sent a letter from an engineer to every homeowner that all real estate agents are asking for now. What have they been doing in the past two years, what have they been doing in the past the last five years, and what the reserves look like, ”he said.

But it remains to be seen if potential buyers can see these reports. Buyers will now also have to consider the potential for much higher condominium fees for repairs that might have been overlooked before.

“I think it will be a deterrent to older condominiums. If it isn’t quite a deterrent, people will be a lot more careful and ask a lot more questions about building maintenance before they take buying decisions, ”said Sepehr Niakan, an agent for Blackbook Properties in Miami.

Niakan said that in the past, officers would simply ask if the building had its 40-year recertification, but it was always a financial issue related to possible future repair expenses.

“Now I think what’s going to change is that they are actually asking for their health and safety in addition to the money,” he added.

Shopping in Miami usually slows down in the summer, mainly due to the heat and the lesser urgency of shoppers in cold climates. For now, agents say the interest is still there, but it’s definitely different.

“People are still looking at them but paying attention,” Niakan said. “They want to see that the job has been done. So a red flag is if you see a condominium with half the monthly HOA [homeowners association] costs of any other building. If it sounds too good to be true, it is too good to be true. “

Miami has long been a market filled with international investors. The largest real estate listing site in China, Juwai, has just issued an alert: “For at least 12 months, we advise buyers to refrain from purchasing units in buildings in South Florida over. 10 stories and 30 years without obtaining an independent assessment and estimates of potential future maintenance and remediation costs. “

The question now is, are there any bargains to be found? Zalewski said he’s already getting calls from homeowners asking if they should sell and from investors looking to buy.

“You will see a big divide happening. Investors looking for a return, they will focus on these older buildings with the plan that the condominiums will be destroyed, and new towers will rise on them, probably about two to three times. more per square foot, ”he said.

Sasseville said he received calls barely a day after the collapse.

“People called to see if this was a buying opportunity. We absolutely had calls saying, ‘Hey, I’m confident in building well-managed condominiums. I like buildings A, B and C, please let me see if I can get a really good price for them, ”he said.