Headlines – Week of June 3, 2012
June 13, 2012
Condo-hotels Reshaping Luxury Market in Miami
During the Great Recession, South Florida was the poster boy for what goes wrong when you overdevelop; particularly as it relates to luxury real estate. In the hotel industry, the development of condo-hotels was all the rage prior to the financial collapse.
However, The Miami Herald is reporting that the “times they are a changing”, writing, “From Brickell to Miami Beach, Hollywood to Palm Beach, condominium hotels are reshaping the luxury, waterfront landscape. In the process, they’re changing the way developers, investors, hoteliers and even residents and prospective buyers view residential product offerings.”
The Herald points to the success at ONE Bal Harbour Resort Hotel & Spa, where some 40 condo-hotel units have been sold in excess of $23 million. Others also are reporting brisk new-unit sales, including The Ritz-Carlton Key Biscayne and Palm Beach, the Four Seasons, W Fort Lauderdale Beach and The Fontainebleau Towers, which built some 800 condo-hotel units. Before the recession, developers saw the condo-hotel as a new source of revenue, a chance to recoup initial investments with the sale of units even before the actual hotel opened. However, in recent times, hotels such as The Setai in New York and Trump SoHo, had and are having a tough time selling their units. In South Florida,
The Herald reports that condo-hotel sales have rebounded with the market, with purchase prices ranging from an average $450 per square foot to upward of $1,600 per square foot at high-profile branded properties. Developers still see condo-hotels as a strong business model and a win-win for many of those involved – including the local communities that enjoy new tax revenues and consumer spending.
With the sale of furnished hotel suites, the hotelier or developer ends up managing a hotel, with ongoing income generated from management of the units, food and beverage, events, and the resort and spa facilities. Hoteliers benefit from the creation of a popular new product or the planting of a national brand and sought-after offerings in a desirable market. This helps bolster room rates and occupancies.
International Sales Continue to Climb in U.S. Market
Due to low prices and the relative weakness of the dollar, international buyers continue to identify the U.S. as a desirable place to own property and make a profitable investment.
According to the National Association of Realtors® 2012 Profile of International Home Buying Activity, total residential international sales in the U.S. for the past year ending March 2012 equaled $82.5 billion, up from $66.4 billion in 2011. Total international sales were evenly split between non-resident foreigners and recent immigrants.
International buyers bought homes throughout the country, but four states accounted for 51 percent of the purchases – Florida, California, Texas and Arizona. Florida has been the fastest growing destination of choice, accounting for 26 percent of foreign purchases. California was second with 11 percent and Texas and Arizona accounted for seven percent.
Proximity to the home country, the presence of relatives and friends, the convenience of air transportation, and climate and location are all important considerations to prospective foreign buyers. Locations on the East Coast generally attract European buyers, while Asian buyers tend to purchase on the West Coast, particularly California.
Florida attracts a diverse set of international buyers including South Americans, Europeans and Canadians.
International buyers came from all over the globe, but Canada, China (The People’s Republic of China including Hong Kong), Mexico, India and the United Kingdom accounted for 55 percent of all international transactions, according to the survey. Canada and China remain the fastest-growing home countries. Canada accounted for 24 percent of international sales while China accounted for 11 percent, up from nine percent in 2011. Mexico was third with eight percent of sales and India and the U.K. both accounted for six percent.
Forty-five percent of international purchases were under $250,000. In addition, there appears to be a gradual increasing trend toward purchases in the $250,000 to $500,000 price range. In 2012, this range accounted for 30 percent of purchases, up from 28 percent in 2011. The average price paid by an international buyer was $400,000 compared to the overall U.S. average of $212,000.
Several reasons account for why the average international home price is higher than the average overall price. The international client is typically wealthier than the domestic buyer and is looking for a property in a specialized niche, for example, a larger property suitable for multi-generational living or a property that establishes the individual’s presence and standing in the community.
Many homes purchased by foreign buyers are used as a primary residence. Vacation and rental use are also major reasons for a purchase. More than half – 66 percent – of survey respondents reported international buyers purchased detached single-family homes. About half of international buyers, 52 percent, preferred to buy in a suburban area and about a quarter, 23 percent, bought in a central city/urban area.
Sixty-two percent of international purchases were all cash, which has increased since 2007. International buyers still experience many financing challenges when purchasing a home in the U.S.
Posted by Scott R. Lodde