Is buying property in Florida still a safe bet?
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The pound may have hit its highest level against the dollar in 26 years but with the US economy heading deeper into recession is sunny Florida still a safe bet?
Coldwell Banker Feltrim’s Gary Kenny has been offering property for sale in Orlando since 1996 and admits that, for most of this time, homes haven’t exactly been hard to shift. “The people I had working for me didn’t really have to try very hard. Properties would sell anyway.”
Today, his team is trimmed down to 25 rather than the 40 agents he employed at the height of the boom and Kenny confesses that sales now average around 20 properties per month compared with the 40 or 50 when the market was at its peak. Yet despite constant speculation about how bad the US economic slump will turn out to be, Kenny remains buoyant. “Property is still selling and, if anywhere can ride the storm, Orlando can. Where else would you go to for guaranteed sunshine and a great lifestyle?”
And it has to be said, for those still looking for property for sale in Florida, choice is now unparalleled. The increase in owners unable to meet their mortgage payments has resulted in more repossessions – called foreclosures in the US – which Kenny admits is sad but good news for British and Irish buyers whose euros and pounds may net them some attractive bargains. It might be a buyer’s market but, as excess stock is resulting in scores of reductions, Kenny warns vendors: “Don’t sell if you don’t have to.”
One property in Florida, now reduced from $230,000 to $224,900, may tempt anyone still thinking about investing in Florida. The fully furnished, three-bedroom lakefront property is in Davenport, just ten minutes from Disney and near Reunion and Championsgate golf courses. With vaulted ceilings and heated pool, the agent says that projected bookings total 34 weeks for 2008 making it a potentially good rental home.
Resales may be on offer at bargain prices but new build is also tempting, although in the apartment rather than the villa market, says Kenny. “You won’t get such great deals on single family homes as builders have stopped building these while they ride out the storm. Developers selling condos can’t stop during the build, they’ve got to put another floor on.” And, looking around at current offers, one gets the feeling that developers are keen indeed to shift their products. Incentives on legal costs, maintenance fees and financing are all there for the taking and developers are even finding themselves considering offers on sales price. Some buyers are waiting to see if the market falls further and the pound gathers even more strength but Kenny calls this “a dangerous game”. “The only way you’ll know if the market has hit rock bottom is when it starts to go up again and by then it will be too late.”
Bargains are a great incentive to head to the sunshine state but buyers who need financing will now find it harder to get in the US. Lending has been “dramatically tightened”, according to several agents, and banks are requesting larger deposits before lending thanks to the crisis in the sub prime market. Property should always be viewed as a long-term investment and most speculators believe that the US slump won’t see any upturn until the end of next year.
However, there are pockets of the country that have so far escaped the full impact, including Orlando, where unemployment is around three per cent, much lower than the US average. Winkworth’s international manager, Charles Peerless, says that indicators show that Orlando has not been as badly hit as some regions. “The US has been poor for the past 18 months. The exceptions are New York, Las Vegas and Orlando. Prices in Orlando rose by 6.2 per cent in 2006 and a further two per cent in the first six months of 2007.”
Peerless now finds himself increasingly popular with developers. “They want to sell to the UK market more now than ever.” Peerless agrees that an uplift probably won’t arrive until the third quarter of 2008, adding: “Things have been bad but there always comes a point where prices settle and in recent weeks transactions were up by two per cent across the US.”
Peerless calls Orlando “a huge growth city”. “I went there six months ago on short notice and couldn’t find a hotel to stay in. The convention market is so strong. They are aiming to be the number one convention centre in the US, which is making it a success story. Orlando is not just about Disney theme parks; 52 million tourists a year visit compared with the two million who visit New York.”
Winkworth are currently selling “our best project” – Heritage Keys in Kissimmee, Orlando. “I’ve negotiated a $20,000 furniture package, for UK buyers only, and this is a scheme where you’ll get a great yield as they have an affiliation with a national sports network USSSA,” says Peerless. Three- and four-bedroom villas are available, starting at £140,000. The development contains a gym, pool and clubhouse.
But, of course, Florida isn’t just about Orlando. The state also contains upmarket pockets. Peerless likens Property for sale in Miami Beach, property for sale in Fort Lauderdale and property for sale in Naples on the west coast, to property for sale in Knightsbridge. “There’s a stalemate going on in these areas where sellers are reducing but mainly as they were too highly priced anyway. Buyers may be hanging on but this is a fantastic time to cash in now while the dollar is so low.”
Peerless urges buyers to view the current climate as an opportunity to buy into prime sites where new developments are struggling thanks to poor timing. Miami’s South Beach has many interesting new developments at present.“It really is a fantastic area and will only go on getting better.”
And the pound may well get better so why should investors buy now? Assetz’ Stuart Law explains: “The dollar could well reach $2.40 to the pound and, at the rate it is currently going, this could easily happen within the next 12 months. Better moments to purchase will be seen over coming months but if somebody was planning to buy multiple properties, I would recommend starting today.” Law advises investors to “stay close to the market” and keep putting in bids so that they can sense the perfect moment to buy. “US house prices may well fall a bit further but the currency shift could easily provide a further ten per cent discount from current prices.”
Currencies Direct’s Mark O’Sullivan agrees that today’s situation offers “a fantastic opportunity to UK and European buyers”. But he warns anyone considering Florida as an investment still to take the long-term view. “Be realistic. This is not a speculators’ market, you’re not going to flip a property for an extra 15 per cent. But if you want a great holiday or rental home there are some great bargains to be had if you get out there and do your research.”
Many clients are heading to US property auctions where they’re picking up foreclosures from individual vendors and investment companies at substantially below market value. “It depends how stressed they are and how quickly they need to get out,” adds O’Sullivan, who is advising clients to buy their dollars now and keep them until they find the right purchase: “This will give you great bargaining power.”
You might catch a bargain but, in the long term, you should consider how easy the property will be to resell. Florida has an enormous land bank where identical homes have sprung up across the state in their thousands. Buying something special is a partial safeguard, as it only takes one desperate vendor to force a negative impact on an entire development of identikit homes. “You might be trying to sell your property at $300,000 but if your desperate neighbour puts his on for $200,000, you’re in trouble.”
Dream Homes Orlando’s Carol Chant is one Brit who is keen to sell her Florida property but she isn’t desperate enough to reduce it drastically. “We’ve already had a low offer but we didn’t accept it.”
Last year, the stunning five-bedroom villa at Calabay Parc, which has tons of extras such as outdoor shower, spa, deck and pool, was valued at $460,000 but is now on the market for $369,950. Now too large for the Chants, whose children have grown up, the house has a prime position at the end of a road near woodland in Davenport where a new mall is being built. “It will be a great bargain for someone as they can now buy at the same price they would have paid four or five years ago. We might take an offer, but not a silly one,” says Chant.
First published in Homes Overseas Magazine February 2008.
Some information contained within this article may have changed since it was first published. Homes Overseas strongly advises you to seek current legal and financial advise from a qualified professional.