MIAMI, FL --South Florida's foreign investor dependent condo market - already bracing for the impact from the weakening European currencies - is now faced with the prospect of a sliding currency - and less buying power - in South America's largest country, Brazil, according to a new report from CondoVultures.com.
Brazil's currency - the Real - is down 23 percent on a year-over-year basis to $0.48869 as of June 6, 2012 compared to $0.63480 on the same date in 2011. In the last month alone, the Brazilian Real has slipped nearly six percent from $0.51971 on May 4, 2012, according to the currency exchange website OandA.com.
The value of the Brazilian Real has not been this low on the date of June 6 in any year since 2006 when the currency had a U.S. Dollar conversion rate of $0.43680, according to OandA.com.
The weakening of the currency in Brazil - a key source of foreign investors for South Florida real estate - comes as the economy of South America's most populous country shows signs of slowing after a decade of strong growth, according to international press reports.
"Brazil's economy grew less than analysts expected in the first quarter [of 2012], reinforcing signs that its consumer-led growth model, a magnet for investment over the past decade, is running out of steam," according to Bloomberg.
The Reuters news agency reported "Brazilian stocks fell to an eight-month low on Tuesday [June 5, 2012], breaking key support that could augur for a deeper slump on worries about ... stalling growth in Latin America's top economy."
The Dow Jones Newswires noted "financial market analysts and economists reduced their forecast for Brazil's economic expansion this year [2012] for the fourth consecutive week, following poor first-quarter economic performance."
The bearish economic news from Brazil comes as Western Europe's two major currencies - the Euro and the British Pound - have weakened noticeably against the U.S. Dollar in recent weeks as the debt crisis in Greece has reignited fears of a financial meltdown that could unravel the Euro and trigger a global contagion at a time when the South Florida condo market is showing signs of stabilizing.
Unlike with the investors from Brazil, some industry watchers contend the weakening European currencies - combined with a push for higher taxes by the new government in France - could prompt foreign buyers to step up their investments in the United States - and South Florida - as many think this nation's economy is improving.
The Euro - a currency used by 17 European countries - is valued at $1.24727 (U.S. Dollars) as of June 6, 2012, down from $1.25245 (U.S. Dollars) a week earlier on May 30, 2012. A month prior on May 4, 2012, the Euro was valued at $1.31463 (U.S. Dollars), according to OandA.com.
The United Kingdom's British Pound is valued at $1.53714 (U.S. Dollars) as of June 6, 2012, down from $1.56659 (U.S. Dollars) a week earlier on May 30, 2012. A month prior on May 4, 2012, the British Pound was valued at $1.61837 (U.S. Dollars).
International buyers have played a major role in acquiring the excess South Florida condo inventory that flooded the market beginning in 2007 at the start of real estate crash.
Estimates are that foreign buyers acquire an estimated $3.8 billion annually in condo, townhouse, and single-family house resales in the Miami - Fort Lauderdale - Miami Beach market, according to a report from the Florida Realtors association in conjunction with the National Association of Realtors.
In Florida, investors from Brazil account for eight percent of all transactions in the state, according to the Realtors report.
Compare this to Western Europe - including the countries of France, Germany, and Spain - which accounts for a combined 23 percent of all foreign transactions in Florida, according to the report.
The median resale price paid in Florida is $215,000 by investors from Brazil; $232,500 by investors from Western Europe; and $169,200 by investors from the United Kingdom.
In addition to resales, foreign buyers are also purchasing new condo units directly from South Florida developers – or lenders that have repossessed troubled properties - with unsold inventory from the boom that began in 2003.
At the end of the first quarter of 2012, buyers have acquired about 92 percent of the nearly 49,000 new condos created during the boom in the seven largest coastal condo markets of Greater Downtown Miami, South Beach, Sunny Isles Beach, Hollywood / Hallandale Beach, Downtown Fort Lauderdale and the Beach, Boca Raton / Deerfield Beach, and Downtown West Palm Beach and Palm Beach Island.
Foreign buyers are not only purchasing distressed properties but also playing a key role in the latest South Florida new condo boom where at least 32 towers with nearly 6,300 units are proposed as of June 6, 2012, according to the Preconstruction Condo Projects list from the licensed Florida real estate brokerage CVR Realty™.
Below is a chart that tracks the Brazilian Real, Euro, and the British Pound against the U.S. dollar as of June 6 of each respective year:
Condo Vultures® LLC is a real estate consultancy and marketing company based in the 225 Midtown Building at 225 NE 34th St., Suite 209B, Downtown Miami, Florida, 33137. Condo Vultures® LLC can be reached at 800-750-0517.
The borrower developed Carriage Parc Apartments in 1998 and has since owned and managed the complex. Facing an upcoming maturity date on the existing loan, the borrower turned to the Beech Street team for financing.
