In virtually all industries, January is the time to look into the future and make a prediction regarding what the next 12 months has in store. This allows businesses and industry leaders to take the right steps so they can capitalize on the trends that are anticipated.
If you are interested in the South Florida real estate market (view website here), then the trends to watch for in 2016 that are highlighted here.
The Rental Market will Start to Stall
After the 2007 crash of the condo market in South Florida, one of the main benefits that residents saw was cheap rental rates. This was the result of easy financing and overbuilding. At that point in time, owners of new construction were converting condos and slashing lease prices to help and attract tenants, which would generate more revenue. When the units were inhabited, the economy began to stabilize.
This also resulted in landlords increasing prices at an aggressive pace to get back some of the money that was lost. The higher rental rates that are now seen in South Florida have resulted in quite a bit of new construction in 2015 and this is a trend that is going to continue for, at least, the next three years. With more rental units available, it will likely mean lower costs for rent in the near future unless the economy in South Florida adds an industry that will result in higher paying jobs.
Increase in Real Estate Commissions
Due to the supply of resale and preconstruction condos in Miami being high, developers are at a point where they need and want to sell the planned and existing units. The last element that most are willing to revise is the price. Watch for commissions in the real estate market to increase in 2016 thanks to an early attempt to sell the units prior to having to reduce prices.
Cancellation of Proposed Projects
Since the current real estate cycle started in 2011, the plans for almost 20 new condo towers in South Florida, which hold over 2,800 units have been changed. These are projects that were revised for a number of different reasons, which range from the changing market conditions to the developers being able to flip the land to get a big return.
Chances are there are going to be more proposed projects that will pivot if they do not meet the pre-sale requirements.
Financing for Mortgages is Increasing
The current real estate cycle in South Florida has mainly benefited because of the cash investors that are coming in from out of town and buying up the property with the intention of renting them out to the local residents who are unable to purchase due to financial limitations.
The main question that needs to be answered is whether or not 2016 is going to be a time of transition to a period of slower growth for the real estate market in South Florida.