South American Expectations Are Fuelling Miami’s Development

miami_real_estate

 

Before the bubble burst in Miami, Americans were used to mortgaging over 80 percent their apartment’s value. Properties were bought on credit, and flipped even before completion. Sometimes, this left developers in a desperate state to acquire the funding needed to complete their projects. However, Brazilians, Argentines, and other South Americans have different expectations when it comes to buying property. In their counties it is not uncommon to pay as much as 40 percent of their condo’s value as a down payment – before even setting foot inside – and up to 80 percent once it’s built.

This influx of capital kept the developers flush, and projects off the ground. With a steady stream of investment dollars coming from the Latin countries into Miami, US developers are reaping the rewards of a new system of investment, and the economy is better off for it.

Donald Trump has taken advantage of this trend, and is demanding 40 percent upfront for his residential condo development in Punta del Este. Up north this kind of arrangement is unheard of. In Uruguay, this is par the course. And realtors such as Trump are capitalizing on a system that minimizes risk. It is more than just law, it is a mindset, from countries such as Argentina that have seen overnight inflation shred their economy to pieces through massive devaluation of the peso.

This pattern has emerged in Miami as well. For instance, three new Miami luxury properties, Beachwalk, Icon Bay and One Ocean are now demanding the same 40 percent down payment upfront. And they have all almost sold out, mostly to Argentines who see Miami as a safe haven against the looming inflation of a country that has American dollar sniffing dogs at the airport.

Demand for Miami luxury properties are largely unaffected by record low interest rates. The deciding factor, instead, is an influx of foreign investment from Latin American countries determined to secure a stable future for their families regardless of the rates the banks in North America are setting. They want a reliable and safe investment and they are willing to pay for it, in cash. In fact, some Miami realtors have noted that the only reason that mortgages are being sought at all is because of their record-low rates, and it gives millionaire investors a chance to remain liquid.

 

For more reading:

South American Playbook

Wealthy Argentines In Miami

Dollar Sniffing Dogs in Argentina

Posted by ricardo on 12/18/2012 | |

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