Real estate markets have cycles like the ebb and flow of the tides. We are currently in a cycle characterized by lots of building, major investor activity, and relatively easy money. On the flip side is a cycle where the market slows, investor interest is tepid, and finance rates rise. The last major growth cycle ended in 2008 and from that time until approximately 2012, the real estate market slowed to a crawl, prices declined, foreclosures increased, and fear was pervasive. A new cycle started around 2013 with a burst of new developments, a reduction in inventory, and fewer foreclosures. Once again buyers returned to real estate with more optimism and took advantage of more favorable pricing.
The average life cycle for a new condominium project, from start to finish takes about three years. In 2014 there were 23 new projects that broke ground in South Florida. In 2017 there were 10 new projects coming online, in 2018 there were 5 new projects, and in 2019 there are 3 anticipated projects. As the current building cycle slows down, developers are now focused on selling off current inventory. The final part of the current cycle will be a decline in construction and less inventory which will result in price increases.
As inventory is sold, developers will break ground for new projects. In some cases, these may be smaller boutique buildings at higher prices. The next development cycle is projected to start sometime in 2020-2021. With fewer units per development and Florida’s attraction to buyers from many high tax states, there will be upward pressure on pricing barring any unforeseen circumstances.
Major factors that will affect the next cycle are increased migration to Florida (which is already the third most populous state in the nation), Florida’s favorable tax structure and strong economy which hit the $1 trillion mark in 2018, and strong job growth.