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Florida experts foresee condo glut; New construction set to flood market with 10,000 units

If you're in the market to buy or sell in a Florida high-rise, be careful. Some experts see another condo collapse on the horizon.

More than two dozen condominium projects, including five in Broward and Palm Beach counties, are being added to the South Florida skyline in the next few years, according to CondoVultures.com, a consulting firm.

By the end of 2012, as many as 10,000 units could be in the planning stages, the firm said. That's nearly a quarter of all the existing condos that sold in South Florida last year, according to the Florida Realtors.

Developers insist the market will be improved, with demand for luxury units strong by the time they're finished building.

But when most of these condos are ready for occupancy in 2014 or later, they'll be competing with the leftover supply from the housing boom, creating a glut that threatens to send the recovering market into another tailspin, analysts say.

"The music is starting again," said Peter Zalewski, principal at CondoVultures. "We think there's going to be disappointment."

Consumers would be better off buying existing condos rather than waiting for the new wave of construction and the uncertainty it brings, Zalewski said.

Livia Periu, a New York resident looking to buy in South Florida, said another housing bubble is possible, but she's not overly worried.

"You'd think the builders would have studied the market so we don't fall into the same situation that we had before," she said.

From 2003 to 2011, developers built roughly 49,000 condos in Palm Beach, Broward and Miami-Dade counties east of Interstate 95, CondoVultures said. By the end of last year, less than 10 percent of those units were still in developer hands, according to the firm.

But all those buyers aren't living in the condos. Many were sold at deep discounts to foreign investors paying cash. They're renting the units with plans to sell when prices pick up.

Still wary from losses during the housing meltdown, many lenders aren't offering construction financing. So The Related Group of Miama and other developers are requiring buyers to pay up to 80 percent of the cost of the condos before closing. That means a buyer would pay $640,000 up front on an $800,000 condo.

During the boom, buyers typically put only 20 percent down.

With the buyers' money in hand, developers don't need loans to finance construction of the projects.

The investors who scooped up bargains from the bust will be ready to sell during the next couple of years -- right around the time the new wave of construction hits the market.

That could soften rental rates, prompting nervous investor-owners to unload the units.

"Is the market as deep as (developers) believe it to be?" said Lewis Goodkin, a longtime Miami-based housing consultant. "I think the answer is: No, it isn't."