The glut of pricey condominiums built during the housing boom is starting to clear in parts of South Florida, leading some observers to wonder whether a wave of new construction isn’t far behind.
Of the 5,100 condos in downtown Fort Lauderdale and along the beach, fewer than 70 are still for sale by the original developers, according to CondoVultures, a Bal Harbour-based real estate consulting firm. In Hallandale Beach and Hollywood, developers have just a handful of nearly 5,000 units remaining.
Individual investors and bulk buyers in recent years have scooped up many of the units and are renting or reselling them now at drastically lower prices.
With the shrinking supply of coastal condos, Miami developer Jorge Perez is scheduled to break ground early next year on Apogee Beach, a luxury waterfront project in Hollywood. No other condo developments are that far along in Broward County, though activity could pick up soon.
“I honestly believe there will be demand for it,” said Lewis Goodkin, a longtime housing consultant in Miami. “But I wouldn’t do anything that wasn’t an oceanfront project.”
Arguably the biggest obstacle for developers in Broward is the perception that there’s so much oversupply, said Peter Zalewski, principal at CondoVultures.
“But when you delve into and look at the numbers, you see that Broward is basically cleaned out,” he said.
Palm Beach County still has roughly 1,000 unsold developer units from the housing boom, according to CondoVultures, so it may take years before a developer breaks ground on a project there.
Elsewhere, as the inventory for existing condos declines more quickly, there are fewer good deals available and buyers say they want new units, said Mathy Garcia Chesnick, an executive with Cervera Real Estate, a luxury condo sales firm with offices across South Florida.
“It might be a very good time for developers to start launching projects,” she said.
But so far, developers and lenders remain leery of new condos because of big losses during the condo crash.
For instance, developer Kurupao 701 Ltd. paid $3.2 million in April 2006 for Victoria Breezes in Fort Lauderdale and later converted the apartment complex to condos, according to Broward property records reviewed by CondoVultures. North Lauderdale-based Security Bank provided a $2.5 million loan.
But the lender filed for foreclosure last year and Kurupao handed the project back two months ago, when bulk buyer Victoria TDH LLC bought the final 13 units at a 71 percent discount off the original sales price.
Perez’s project will be a good test of condo demand, said Craig Studnicky, principal at International Sales Group, an Aventura firm working with Perez to market and sell new projects.
“A lot of eyes will be on Apogee Beach,” he said.
Despite taking a beating in the crash, Perez has plans to build the 49-unit condo a mile south of Trump Hollywood, the luxury development that Perez handed back to lenders last fall. He worked out similar deals on other projects in Florida.
Apogee Beach already is fully reserved, according to a spokeswoman, though some of those deals likely will fall through.
Prices started at $600,000 to $2 million but have been bumped up to $680,000 to $3 million. All the units will have ocean views, European-style cabinets and granite countertops, while the 22-story building features a movie theater, valet parking and a clubhouse overlooking the pool deck.
Demand from international buyers is strong, with Brazilians accounting for a third of the reservations. Perez also has seen an increase in Italian prospects within the past few weeks.
Perez also has announced additional condo projects in Hollywood, Pompano Beach and Miami during the next few years. The Miami condo market also has improved dramatically in the past year.
At Apogee Beach and the other developments, Perez will ask buyers to pay up to 80 percent of the cost of the condos before closing, and he insists that means he won’t need construction financing from a lender. Getting a loan now could be a problem, given his struggles and the strict lending standards that exist.
Perez says “people are used to buying like this in Latin America.” Still, some analysts question whether enough buyers will be willing to pay so much money before closing.
“That’s not a good formula unless you have a tremendous amount of confidence that you have a market,” Goodkin said.
Confidence isn’t something that Perez lacks, despite his recent troubles.
“Jorge is a visionary … a trendsetter,” said Philip J. Spiegelman of International Sales Group. “He wants to be out there testing the waters.”
South Florida Sun-Sentinel
By Paul Owers, Sun Sentinel
4:22 p.m. EDT, August 27, 2011