Dive Brief:
- The Related Group announced it is delaying construction on its Auberge Residences & Spa Miami project due to disappointing presales in a luxury market that has been slowed by a lack of foreign buyers, according to the Miami Herald.
- Although groundbreaking was slated for 2017, Related executives are not sure when presales will hit two-thirds, the benchmark at which the company typically starts the construction process. Currently, only 15% of the project's 298 units have been sold.
- Other Miami developers have also put their luxury projects on hold in a "glut" environment that has driven existing condo prices down for the first time in five years.
Dive Insight:
Related executive Carlos Rosso said that a little break in the market "might be good for all of us," as Miami has recently seen skyrocketing land prices as developers continue to make grabs for prime real estate. Bank financing for large developments has also cooled, as the foreign buyer market has become harder to predict, according to the Herald.
According to Redfin, the health of the U.S. luxury housing market is volatile, depending on the location. Markets that have a high number of full-time residents are better off than those counting on foreign buyers or those looking for a second or third home. Another turnoff for buyers could also be new government requirements that require more detailed reporting around all-cash purchases.
Even in the rental market, developers have been focusing their attention on the luxury market, a trend that has resulted in a fight for the affordable, lower-tier rentals. In high-priced California, for example, rents in the overall rental market have increased 7%, while rates for the bottom one-third of the market have increased 33%. Rental markets all over the country have benefited from the lowest homeownership rate in more than 50 years, spurred along by ever-increasing home prices. The more expensive homes get, the more out of reach homeownership will be for many Americans, possibly creating a permanent renter class in some segments of the population.
Related Group, however, is not just a player in the luxury market. In July, the company beat out several other developers to win the $307 million redevelopment contract for Miami-Dade's 1,500-unit Liberty Square housing project. The company will develop a mixed-use community with more than 1,500 affordable and public housing units at Liberty Square and nearby development, Lincoln Gardens, as well as a 40,000-square-foot grocery store, 15,000 square feet of retail space, a YMCA, community and youth centers and various medical facilities.
