No one can escape the chill creeping into Miami’s luxury real estate market. The Related Group, South Florida’s biggest condo developer, confirmed Wednesday it would delay construction on a 298-unit project called Auberge Residences & Spa Miami.
“The market is slower,” said Carlos Rosso, president of Related’s condo division. “The dollar has appreciated a lot against Latin American currencies.”
Groundbreaking was originally set for 2017. Rosso said he wasn’t sure yet how long the project at 1440 Biscayne Blvd. would be delayed. “Do you have a crystal ball?” he asked.
A cascade of foreign buyers pushed Miami real estate into overdrive after the recession but has since dried up. Rosso says the slowdown doesn’t worry him and sales will continue at Auberge.
“We have to be a little more patient with this market,” he said. “I think it’s very good for all of us that the market takes a breather.”
Land prices have escalated, leading to fights over prime properties. And a glut of inventory means existing condo prices in downtown Miami fell for the first time in five years.
The Real Deal first reported the delay at Auberge, the first-phase of a three-tower development.
The project has pre-sold 15 percent of its units, according to a second quarter report from brokerage International Sales Group. Developers generally need to sell two-thirds of their units before they start building.
In July, Bloomberg reported that Related CEO and chairman Jorge Pérez was making plans for his sons to take over the company. His eldest, Jon Paul, was put in charge of marketing for Auberge.
Slumping sales across the market should come as no surprise given the lack of foreign buyers, said analyst Tony Graziano, who authors regular reports on the condo market for Miami’s Downtown Development Authority.
Other developers have put projects on hold, including Boulevard 57 in Miami’s Morningside neighborhood.
“Bank financing for development in Miami right now is dicey,” Graziano said. “It’s harder for banks to do their due diligence because there’s no way to accurately forecast how many foreign buyers will come.”
He added that smaller, boutique projects may have a better chance of hitting sales targets.
The federal government has also put pressure on buyers. Over the last year, it handed down new disclosure rules for certain kinds of cash home deals in Miami, along with other luxury markets around the country including New York, Los Angeles and San Francisco. Regulators suspect luxe properties are being used to launder money.