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Florida Property Trends for 2006
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The record breaking increases in property prices during 2005 was excellent news for existing owners of second homes in the Sunshine State, but if you are considering buying a property in Florida this year what is happening? Has the scorching market continued, or are there storm clouds overhead? Is property in Florida still a good buy? To a large extent the answer to these conundrums may well depend upon where, when and for what reason you are considering buying, a second/holiday home, seasonal retirement, relocation or investment.
Tempting Offers
Property price increases in some of the more popular areas of Florida have been amongst the highest in the world, during the past two years, accelerating from an average year on year growth rate of 10% for a number of years and then in certain cases exceeding 40% in 2005, catching even the experts on the hop. This led to a significant further influx of funds into property.
However sums have not always been done and there are unfortunately examples of a lemming mentality where some investors have been badly or unwisely advised to pour their funds into some developments where the sales spiel is worthy of an Oscar nomination in the best acting category and very impressive glossy brochures and DVD presentations have been the motivators rather than hard fact and substance.
When examining the facts rather than the hype, it is interesting to note the view of a number of experts that property prices in certain parts of America could follow trends in Australia and Britain, where after similar periods of high property inflation and increases in interest rates there has been a slowing down to single figure property rises.
Top Locations
On the positive side there are sound demographic reasons for investing in specific locations in Florida. The population of North America is approaching 300 million people. Many Americans, particularly those in the northern states have enjoyed holidays and look forward to eventual retirement in Florida. Many Europeans similarly enjoy an annual holiday in Florida and have in recent years considered a second home. A major factor over the next 15 years will be the unprecedented number of post war baby boom generation who will be retiring and again many will be attracted to Florida, already over 1000 people a day relocate to Florida, however Orlando is often not the preferred destination of these new residents.
Apart from year round sunshine, Florida is one of the few states with no state income tax and properties have been traditionally very good value. The state is creating jobs at a prodigious rate. Good weather, low costs, a growing population, a strong tourism industry all add to the appeal, along with a proven track record.
In Demand
Residential and commercial development in the next quarter-century will need to eclipse anything seen in previous generations in order to serve America’s growing population, according to a Brookings Institution report. Almost 60 million new housing units will need to be built by 2030 to accommodate the growth. The U.S. population is expected to increase 33% to 376 million by 2030. That’s 94 million more people than in 2000. To serve that population, almost 60 million housing units will have to be built. Consumers continue to be optimistic about the economy in Florida.
It is estimated that over 500,000 Brits live in Florida permanently or temporarily and over I.2 million British tourists visited Florida last year. British visitors were initially attracted to Florida over thirty years ago to see the newly built Disney World and have been coming in ever greater numbers since. Delighted by what they found, thousands settled, started businesses, bought homes and spread throughout the State. Orlando, Ft Lauderdale and Sarasota have become the areas where most Britons took up permanent residence. The British are the top foreign employers in Florida, employing over 50,000 people directly and are the USA's largest investor
Risky Business
Within this favourable background picture however there are specific locations where I would flag up areas of concern, or indeed opportunity depending upon your investment perspective or lifestyle requirements.
Higher end. off plan condo developments on some of the Atlantic coast areas such as Miami, with fairly long build times and where there is a high proportion of investors intent on selling (flipping) as soon as their homes become available should set alarms ringing – what happens if investors flip at the same time? As the market demand begins to soften who will buy? In a situation where investor properties are released simultaneously there is often strong buyer resistance to paying the investors profits. A combination of huge inventory levels and overtly optimistic sales claims serve to emphasise the need for guidance based on fact, not motivated by the size of the sales agent’s commission cheque!
Buyer Beware
Another area of concern is Orlando / Kissimmee, at least on home developments and condo hotels where there are an ever increasing proportion of overseas investors. Some of these owners who bought at the peak of the recent boom, spurred on by the urgency of the limited availability at the time, on the basis of expectations of increasing visitor numbers and guaranteed rentals are often dependant upon rental payments to cover their mortgages and therefore may be vulnerable. Although jobs are flowing into Orlando which provides opportunity for long term rentals and commercial property the much hyped off plan options targeted at British buyers need much more careful consideration and independent guidance than has been the case in the past – very much a case of buyer beware.
Areas of this market now have an over-supply of new properties with attractive commission and bonus rates being offered to real estate agents and investment advisers to get property sold, as high as 11% on certain developments. These developments featured heavily in some glossy adverts and slick salesmanship raise several questions on the impartially of the advice given.
British clients are unfortunately sometimes seen by some as easily impressed, lacking background research and subsequently an easy touch. Buying a dream without doing the homework and obtaining impartial independent advice, or walking straight in and swallowing the sales spiel can leave you out of pocket. I was particularly concerned when listening to some of the advice being given to would be buyers of Florida properties, particularly by a couple of the companies promoting their apparently independent property investment advice at the largest property exhibition in London; it sounded so convincing but was completely inaccurate, and that’s a polite way of putting it!
When property is bought on the basis of frothy sales messages with the buyers unaware of the implications of the huge commission payments or the limitations of guaranteed rental payments, at the very least you are leaving yourself vulnerable to changes in the market.
Florida Hotspots
The general consensus from the research experts would seem to be that property prices in Florida will continue to rise, albeit at a slower rate than last years unsustainable 40% and in some locations price falls are possible to correct an imbalance between supply and demand in the market. In other areas given the property shortage and the continued demand from North American baby boomers and the limited land availability, ongoing gains nearer to the historic norm of 10% are likely. Due to zoning restrictions rental properties remain hard to find in these desirable locations, and thus limit the competition from other villa owners. Resale properties can offer a better opportunity than off plan at the present time.
Thus 2006 is turning out to be a buyers market; there are genuine bargains to be identified, particularly in areas that have slowed down following recent gains but which will always be keenly sought by baby boomers looking for that retirement paradise or investors seeking property at the right price. There are particularly good resale properties away from the traditional Central Florida area, however many UK companies overlook these opportunities as they pay lower commission rates.
Areas to look out for in 2006 include Bradenton, Venice, Mount Dora, Bonita Springs, St Petes and Fort Myers. In summary the time to act is now in the present market, before it’s too late. Many people are kicking themselves that they did not buy that dream condo in areas like Siesta Key a few years ago, which are now way beyond their price range, instead they were seduced by the Orlando hype and missed better opportunities for consistent growth elsewhere – the key is to take advice on where the next growth areas will be.
For information on how to obtain specialist advice on relocating or buying property in Florida, the advantages and disadvantages of different properties locations, and importantly how to obtain details of specialised fully licensed Real Estate Agents, experienced in explaining options from a British perspective please click here.
For information on a detailed briefing session covering key areas that should be examined in depth before buying property in Florida please click here.
Andrew Bartlett an acknowledged expert on property trends and relocation in Florida, writes articles and answers readers’ questions for several British publications including Florida Magazine, Escape Magazine, Place in the Sun, Homes Worldwide, Sunday Times, America, and The Red guide to buying Property in America and is regularly consulted by journalists and broadcasters. His consumer web guides have received numerous accolades.
www.MyFloridaUpdate.com
www.AndrewBartlettFlorida.co.uk
Andrew was a Senior British Government Official for 20 years before relocating to Florida several years ago, where he was headhunted to set up specialist British property and relocation teams for America’s largest estate agents Coldwell Banker and Remax.
He then established a uniquely impartial and independent relocation and property-briefing company working between Britain and Florida. He has written a number of watchdog style articles on overseas property and emigration selling techniques, and advises City investment companies on the Florida property market.
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