As grim images of lifeguards sifting through the rubble of Champlain’s South Tower circulate around the world, Miami’s main condominium industry is gearing up for a slide.
“In the short term, the impact of the collapse will be dramatic,” said real estate lawyer Jesse-Dean Kluger, who said he spent the weekend answering calls from clients on contracts for apartments in older buildings.
“You will have some pushback from buyers on closing dates because why would you close before you have a check and a satisfactory report?” he said. “This can be a hindrance for some clients.”
The 1981 Champlain Towers South seaside condominium, located at 8777 Collins Ave., partially collapsed on the morning of June 24, shortly after 1:30. The building went through a 40-year recertification process. Search and rescue work continues.
While the exact cause of the collapse will likely not be known for at least a year, the two alleged culprits – salty air and ocean water – are of concern to potential waterfront apartment buyers in older buildings.
In the short term, at least some pundits say they expect the brakes to hit what has been a county sales windfall.
“At the very least,“ people are more sensitive to the association’s contributions and check its financial health, ”said Ron Schaffield, president and CEO of Berkshire Hathaway HomeServices EWM Realty. “These 40 years of recertification are now known to everyone, not just the industry. Buyers are also monitoring the construction of the building more closely. ”
The increased attention to detail like this is a positive development, Schaffield said. But it will likely drive up prices as well and scare off some buyers, experts say.
“Every condominium, especially older ones, will want to hire an expert and check the integrity of their buildings,” said Alex Bartet, managing member of the law firm Barthet Construction and publisher thelienzone.com Web site.
“These items are probably not fully budgeted, so this will lead to higher ratings,” Bartet said. “This will put buyers off because they only have a certain amount of dollars to spend, so why spend on an older building?”
According to the Miami Association of Realtors, sales of existing apartments grew by as much as 286% in May compared to last year, 563 to 2176, mostly driven by US buyers from tax-burdened states.
The average selling price of existing condominiums rose to $ 325,000, up 25% year-on-year, while sales of existing condos, ranging from $ 400,000 to $ 600,000 – this range includes many older waterfront buildings – increased by 475.4% to 328 trades. …
Champlain Towers South, where a total of 14 apartments have been sold in the past three years according to property records, were part of a sales boom. Ana Bozovic, founder of brokerage and consulting firm Analytics Miami, said surfside condominiums will be hit particularly hard next year, especially in older buildings.
Buildings located near the site of the collapse will be most affected. Bozovic said resale prices could drop on the ultra-luxurious Eighty Seven Park, which sits near the collapse site and currently has seven apartments for sale at prices ranging from $ 2 million to $ 11 million.
“Who wants to buy something regardless of this collapse? People died there, ”she said. “People don’t want to look at the site.”
“When 9/11 happened, it affected lower Manhattan,” she said. “It will be the same here.”
Experts believe that hesitation in buyers can also affect new builds.
This was the case with a lawyer whose clients had to close an apartment in Bal Harbor the day after the Surfside collapse. “They went cold, even though the building where they bought is only three years old,” said the lawyer, who declined to give a name. “They just needed a minute to learn more about what happened at the Champlain Tower. Many people with active contracts can delay closing, but they cannot exit because they will lose their contributions. They are stuck. ”
Miami Dade County and Miami Beach City began to conduct visual inspections and audits of buildings adjacent to or in their 40-year recertification process as required by county law. The city of Miami went even further, demanding an inspection of all six-story and higher buildings 40 and older. The city has provided condominiums 45 days deadline for sending emails a detailed description of the condition of their buildings, signed by licensed civil engineers.
But increased enforcement hasn’t damped buyers’ fears.
“The question is, is walking on sand superior to safety?” said real estate analyst Jack McCabe. “What I thought would be paradise could now be dangerous.
“This collapse is the tip of the iceberg,” McCabe said. There are many other buildings affected by sea level rise and hurricanes that are 40-50 years old, which have not been well maintained and which have postponed special assessments, ”which could number in the millions.
Favorable prices were the main attraction of the old buildings.
“It all comes down to accessibility,” said Dan Codsey, CEO of Miami-based Royal Palms Companies, which developed the Paramount Worldcenter. “A lot of people live in these old buildings because they can afford it, but they still live by the water.”
But repairs can reduce the differential.
“Getting a huge pricing bill will become a more important factor in the minds of buyers,” McCabe said. “It could have been a lot more costly than buying an existing unit than it has been in the past.”
The numbers tell a story.
According to the real estate agency Condovulturesrealty.com, About 1,660 units in buildings on the Barrier Islands built before 2000 – or before Florida building codes were strengthened to current standards – are currently listed for sale at an average price of $ 589,692 per unit. In the first three months of 2021, 779 sales were closed at an average price of $ 487,384. There are currently 491 units under contract at an average price of $ 484,821.
By comparison, there are currently 1,241 active condominium properties in Barrier Island buildings built after 2000 with an average asking price of $ 3,141,845 – a price beyond the reach of anyone but the wealthy.
The gap is likely to widen.
“You will see that everything built before 2000 will suffer and [drop] their prices, ”said Peter Zalewski, co-founder of Condo Vultures. “We have always told our clients not to look at anything built before. At the moment, the system is not subject to any verification by the buyer. These associations are very private and they do not intend to share any information that could affect pricing. They provide documents for the apartment, and after three days your offer is blocked by default in accordance with state law. “
As of November 2019, Miami-Dade County had 139 towers overlooking the Atlantic Ocean, Zalewski said. Of these, only 60 were built between 2000 and 2019. The remaining 79 towers were built between 1930 and 1999.
While the waterfront has long been considered the main area, the hinterland is gaining popularity as waterfront prices skyrocket and climate change is an increasingly serious issue. BUT recent study on “climate gentrification” in Miami-Dade showed that buyers and tenants are increasingly opting for high-rise properties, most of which are located primarily in black and Hispanic neighborhoods.
Collapse can speed up internal migration. Cordelia Anderson, founder of Miami-based brokerage firm I Heart Real Estate LLC, said one of her potential New York condominium buyers is now considering moving her exploration inland, expressing concerns about the structural integrity of coastal buildings and rising levels. seas.
The seemingly inevitable drop in prices for older coastal condominiums is not just a problem for owners and brokers. Miami-Dade County Real Estate Appraiser Says The County Is Ready To Collect over $ 94 billion in taxes in 2020 from condominium owners – money that goes into everything from schools, police and fire services to infrastructure repair and maintenance.
If the prices of older condos plummet, all residents of Miami-Dade will feel in a quandary as taxes are calculated based on the value of the property.
But if the prices of older buildings fall so much that the sale becomes too much of a loss for the owner, there is another possible scenario that could completely eliminate the problem, said Alicia Server, chairman and director of Cervera Real Estate: Termination of condo construction, in which the owners decide to sell the entire building a developer interested in building something new on this site.
“When you sell an entire building in a three-A area to a developer, you get a much better price for your apartment,” she said. “It may happen that some associations do not make repairs because they simply cannot afford it. Selling to a developer can be a solution for the owners and will lead to the demolition of buildings before they become uninhabitable. This is a good exit strategy for many condominium owners. “