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Kenneth Rapoza, Forbes contributor
Imagine if all of a sudden the spigot of wealthy foreigners and their cash was somehow choked off from South Florida? There is no doubt that the region's real estate market would crumble.
Miami Worldcenter is a modern, glass and steel superstructure being designed and built by Falcone Group's Arthur Falcone and Centurion Partners' Nitin Motwani. The mixed used development project runs several blocks in the Park West neighborhood, not far from downtown. It's 60% sold. Construction is on-going. They're onto the fourth or fifth floor now and have 60 floors to complete. It's supposed to be done by 2019. If you want to buy a piece of property in there, it'll run you a cool $1.2 million today. It has a rooftop garden with six acres and swimming pools and dog paths and playgrounds and a full gym and a bar. According to the exclusive broker, OneWorld Properties, most people are settling in cash. And guess how many are foreigners? Peggy Fucci, One World's CEO tells me 70% are international, coming to downtown from 38 different countries.
"We won't ever lose the majority of foreign buyers here," says Fucci. "But if we did lose some, you have to remember that a thousand people move to Florida every day and south Florida takes in a lot of those people. Hopefully we'd keep those American buyers."
Florida's "thousand a day" migrants has become somewhat of a meme in the real estate world. Those numbers have been around since 2013, and are based on Moodys' analytics of net migration to the state back then. It may be on the high end, but the low end of the estimate, made by fact checkers at Politifact, once put it at 630. According to the most recent U.S. Census Bureau, 325,986 people moved to Florida in the 12 month period ending July 2016. This includes non-U.S. citizens. Dividing that total by 365 days and you get at least 890 people moving to Florida per day. Miami Dade County estimates that 25% of them are heading to their neck of the woods.
Miami is the undisputed crown jewel of south Florida. The properties going to foreigners are worth more than the median home sold in the area. The median listing price for a home in Miami is around $440,000. In Brickell, it's $391,400 as of December, according to the real estate trackers at Zillow. That's the price tag where Americans are living. The foreigners are living in another world. Those buyers are in the half a million to million dollar range, if not more.
Caroline Griffith's mother is one of the buyers at the Paramount, going up now at Worldcenter. Her mom lives in Shanghai and is not a U.S. citizen, like her daughter.
"She is just buying it as an investment," Griffith told me. Her mother, a business owner in Shanghai, did not want to talk about the purchase over the phone. "She'll rent it and maybe use it sometimes for vacation but she is not moving here. It's not her first property either," she says. "She has six homes in Miami."
Griffith's mother is not part of the EB-5 immigration visa program. That program allows people to invest $500,000 in job creating projects and in return they get a green card for themselves, their spouse and children. That program remains in tact under the Trump administration at least until late April, that's when congress will decide what to do with it going forward. There is some talk about upping the ante on minimum investments; increasing it to $800,000. Judging by what foreign buyers are willing to pay without getting the added bonus of American citizenship, a $300,000 increase is unlikely to stop the flow of money coming here.
"Foreign buyers are without a doubt the driver of South Florida real estate," says Craig Studnicky, principal of luxury real estate broker ISG World. The firm partners with leading Chinese real estate brokers in China in order to reach buyers, and bring their money to Florida. ISG World is one of the country's largest luxury real estate brokers. They estimate that at least two thirds of residential real estate in Miami and vicinity is foreign owned, most of it from South America. "It's so easy to sell Miami real estate to them," he says. "It's like selling a Disney ticket to a 12 year old."
He's not being entirely facetious. Countries like Brazil have dominated the Miami market on and off now for at least five years, if not longer. And anyone who has ever stepped foot in Orlando when Brazilians are on summer vacation in February knows that English is practically a second language.
For Brazilians, Argentinians, Colombians, Venezuelans and Mexicans, Miami is a second home. It's bilingual. It's bicultural. They can get around easily. They get the vibe of the place, thanks to the Cubans that made Miami what it is today: the defacto capital of Latin America.
Both One World and ISG doubt that a Trump immigration order will railroad Miami real estate simply because most of the buyers don't live there. Trump would have to stop the flow of money coming to the United States, and that would be unlikely especially coming from a global real estate man.
Most of the high end real estate agents blame the current slowdown on sales to the economic woes in Latin America. "A lot of the wealthy buyers and potential buyers in Latin America are waiting for their currencies to strengthen," Studnicky says. "When that happens, money will move into Miami again. There is tremendous pent up demand for this city and to a wealthy investor in Mexico or Brazil, Miami real estate is just a long term, stable diversified investment they feel they can't get at home."
The Paramount Miami Worldcenter, being built by developer Daniel Kodsi of Royal Palm Properties and designed by Elkus Manfredi Architects, is a $1.2 billion project that's been 20 years in the making. It's the center of the city, in an area long neglected. Foreign capital is building it and helping developers sell it. If and when the Miami International Airport gets a direct flight to China within a year or two, the Chinese will likely surpass the Russians there. Plus Miami is cheaper by nearly half than New York and Los Angeles, two of their favorite cities today. Paramount units are under $1,000 per square foot.
"They're still coming," says Fucci of OneWorld. "I'm even seeing more Europeans now. Lots of buyers from France. They're just people with money who are not happy with the political situation there. They're saying terrorism scares them and some are either looking to move here full time or just invest in Miami for cash flow," she says. "Good for us."