Foreign buyers, tax refugees, retirees drive surge in S. Florida luxury home sales

A “starter home” for $4 million. Soon-to-be-built Fort Lauderdale condos on the Intracoastal Waterway for $2 million. Or how about those “affordable” luxury condos near Hollywood Beach?

They’re all playing a role in what luxury real estate agents are happily calling one of South Florida’s best price and sales surges in recent memory. Last week, the agents took stock of their condo and single-family home sale numbers for the second quarter of 2018, matched them against the same period from a year ago, and simultaneously flashed a regionwide grin.

For Fort Lauderdale, Douglas Elliman Real Estate recorded sharp price gains in both single-family and condos. The median sales price for luxury condos rose by 9.8 percent to nearly $1.29 million. For single-family homes, sale prices were up 35 percent to $2.265 million.

All the while, the “luxury listing inventory fell sharply across property types,” Elliman said.

The Keyes Co. said Palm Beach, Broward, Miami-Dade and Martin counties combined to post a 45.1 percent year-over-year increase in condo, co-op and townhome deals of $1 million or more — rising from 390 sales in the second quarter of last year to 566 this year.

“The average sale price of these transactions jumped by 12.4 percent to $2.21 million during that span,” the company said in a statement.

“I think Fort Lauderdale, Delray Beach, Boca Raton, Palm Beach and West Palm Beach are going to experience the rebirth that they have been working toward for a long time,” said Jay Parker, the Florida chief executive officer for Doug Elliman. “More people are going to seek out those markets. We have seen strength in the Dade and Miami markets.

“One might say that if there are more transactions happening to the north, it would be detrimental to the south. That’s not what’s happening,” he added. “We’re seeing more transactions across the board.”

Kevin Leonard, vice president of the luxury division at Keyes, cited rising demand from tax refugees who are fed up with higher taxes in Northeast states and the reduced ability to deduct them on their federal returns in the wake of newly passed federal tax reform legislation.

“It is not a stretch to link some of the increased transaction velocity to rising demand from tax-heavy states following the federal tax reform,” he said. “We have worked directly with numerous buyers from these states.”

In an interview, he mentioned an unidentified businessman from Massachusetts who is purchasing “what he would consider an entry-level home for $4.5 million.”

“He runs a big private equity firm, and he’s going to buy a nice house in a great location,” he said. Then, after setting up an office in South Florida, he’ll take stock of how the tax situation shapes up back home, and if it worsens, he’ll move his entire business south, going all in with a bigger luxury home in South Florida, Leonard said.

Many analysts have discussed the tax migration game in recent years. But now, it’s getting serious after Congress passed a tax law that sharply curtailed a taxpayer’s ability to deduct city and state taxes from their federal returns. If Congress and state governments fail to adjust recently imposed federal and local tax laws, high-income individuals with the wherewithal to move to the Sun Belt will start migrating south to Florida and elsewhere in increasing numbers.

“It’s a pretty easy decision for them if it doesn’t have a negative impact on their business,” said David Goldweitz, senior director of tax and accounting services for Fiske & Co. in Miami. “I haven’t seen it as dramatically as the Realtors have, nor would I expect to. But I know it’s out there, and I know it’s happening. A lot of people are waiting to see if there is any correction to the bill. States are trying to get around the limitations. Once people see what they’re facing, then the migration will increase even more.”

Additionally, foreign buyers continue to play a role in the sales surge, particularly in Broward County, said Carlos Rosso, director of condo development at the Related Group. He said buyers are looking north from Miami because prices are more attractive in Hallandale Beach and Hollywood.

“Today you can get deals at probably 60 percent of what it costs in Sunny Isles and 30 percent of what it costs in South Beach,” he said.

According to the Miami Realtors Association’s International Real Estate Report, foreign buyers are now responsible for upwards of 32 percent of all Broward condo purchases. Besides favorable prices, foreign demand is also driven by instability in Argentina, Brazil, Colombia and Venezuela.

In Hollywood, Related Group’s Hyde Beach House is 85 percent sold out, even though it is a year from completion. Many of the buyers are from Argentina. Rosso said he has also seen buyers from Bolivia.

In Fort Lauderdale, Related Group’s Auberge Beach Residences & Spa is attracting tax refugees from New York and New Jersey, he said. Buyers have snapped up 55 of 57 units in the project’s north tower; and contracts have been executed for 90 out of 114 units in the other tower.

Luxury units are also going quickly at projects where builders are just now pouring concrete. 30 Thirty North Ocean, a 24-unit project under construction near East Oakland Park Boulevard, reported three sales in the second quarter, bringing the project to 50 percent sold, a spokeswoman said.

At SobelCo’s 321 Water’s Edge, an 11-story, 23-residence high-rise on the Intracoastal Waterway, 12 units have been sold. The project completion date is the fall of 2019, a spokeswoman said.

Ed Cave, an Atlanta resident who recently sold his commercial design business, said it’s worth the wait. After viewing 11 properties around Florida’s coastlines, he and his wife settled on a fourth floor unit at the 321 for its waterway location, view of Fort Lauderdale and proximity to the beach, restaurants and Las Olas Boulevard.

“This will be our full-time home,” Cave said. “Atlanta was a wonderful place for me to build a business and have a career.” But now, it’s time for a “life change.”

And, he deadpanned, “we are the only new arrivals who didn’t come from the Northeast.”

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