Why Florida? Among the 50 US states, Florida ranks first in the amount of real estate purchased by foreigners. It accounts for 26% of all real estate purchases made in the US by non-residents. In second place is California with 16%, third is Texas (10%), fourth is Arizona (6%). The share of the remaining states does not rise above one percent.
According to the president of Florida Dream Realty & Mortgage, Vladimir Davydov, the British predominate among buyers of Florida real estate – they make up a third of all foreigners. In second place are Germans, third are Canadians, fourth are Venezuelans. By the way, among foreigners who have made Florida their permanent residence, the British are not in first but third place. The first position belongs to Germans at 11.8%, and second to the Irish at 10.3%. The share of the British is 9.2%.
Why do far-sighted Britons choose Florida? Of course, they are confident that their investments will pay off. And they explain this by the upcoming demographic boom. Today, in terms of population, Florida ranks fourth in the US, behind California, Texas, and New York. And by 2030, according to demographers' forecasts, it will move into second place.
The population will increase, but the land will not. Consequently, real estate will become more expensive. If demographers had published such forecasts regarding the state of Alaska, then, believe me, the British would immediately switch to it. However, Alaska, with its 1.7 million sq. km and a population of 683,000 people, is naturally not threatened by this.
An important factor is that Florida has virtually no heavy industry. In particular, there is not a single oil refinery. Meanwhile, neighboring Louisiana has 16, and not so distant Texas has 25. Florida also has no nuclear power plants.
But it's not just about the environment. According to the manager of S & B, Robert B. Stevenson, buyers view the absence of refineries and nuclear power plants as a factor that reduces the risk of terrorist attacks, which after September 11, 2001, have frightened not only Americans but also their linguistic brethren - the British. Interestingly, the growth of Florida's population during the Cold War years (and in the post-war decades the number of residents increased 13 times) was facilitated precisely by the absence of refineries, nuclear power plants, and military bases. But in those days, the investor feared the loss of real estate due to its destruction by a Soviet nuclear strike. It was believed, for example, that of about 300 Soviet first-strike missiles, 27 were aimed at Texas cities, 18 at Louisiana cities, 12 at Georgia cities, and none at Florida cities.
What to Buy at the Median Price
Real estate in Florida is not that expensive. According to the executive vice president of the Miami Association of Realtors, Teresa Kinney, a single-family home in Dade County (where Miami is located) costs on average $600 thousand. Although, if you search well, you can find a home for $52 million. As for the median (not to be confused with average) price of single-family housing, it now stands at $275 thousand in Florida. Let us recall that the median price represents the boundary above and below which there is an equal number of homes; that is, it gives a clearer picture of real prices on the market than the average price.
What can you buy for $275 thousand in Dade County? For example, a detached single-family home with an area of 1,411 sq. ft (131 sq. m) and a lot of 5,160 sq. ft (479 sq. m). However, the home we found through advertisements did not make a good impression – in the photo it looks rather neglected.
For the same money, you can purchase a one-bedroom apartment with an area of 1,000 sq. ft (93 sq. m). In addition to the bedroom, it has a bathroom, a kitchen, and... a gym. The apartment is located on the first floor of a 22-story building built back in the Nixon era – in 1972. Despite the fact that Florida is warm all year round, the building has central electric heating. That is, the resident adjusts the temperature independently.
For the same $275 thousand, you can buy a home in a more decent building, for example, in a five-story building built in 1981, the area of a two-bedroom apartment here is 720 sq. ft (66.89 sq. m). Instead of heating, the building has air conditioning.
There is also very cheap housing in Florida. For example, a house built in 1940 and resembling a transformer substation, with an area of 95.5 sq. m, can be purchased for $47.9 thousand. The floor is concrete, there are two bedrooms and a bathroom with a toilet. Around the house there is a plot of five hundred square meters, which, according to local tradition, is not fenced. However, it is unlikely that this purchase will be interesting from an investment point of view. And for obtaining a residence permit, it gives absolutely nothing - in the US, owning real estate does not guarantee any advantages in this regard.
Thus, you need to look for an investment property in a higher price category, which is what 70% of Florida buyers do.
Florida Emerges from the Crisis
What about the mortgage crisis? Is it not risky to invest in Florida real estate now, while the media incessantly says that America is at rock bottom? America really is at rock bottom, confirms Vladimir Davydov (Florida Dream Realty & Mortgage). That is precisely why, in his opinion, you need to buy real estate right now – later it will be more expensive.
Let's see how Florida real estate prices have behaved so far. They, like across America, rose rapidly until mid-2005. They could not help but rise, because over the previous decade the US population increased by 52 million people and the number of jobs grew by 13 million. Throughout the second half of 2005 they stood still, and from the beginning of 2006 they began to fall. By the end of 2006, the median price of a single-family home was $294,000, by the end of 2007 – $263,000. Now it has risen again to $275,000. Meanwhile, for the US as a whole, the median price is currently $246,000. It seems that Florida was one of the first to emerge from the mortgage crisis.
However, the mortgage crisis affected Florida to a much lesser extent than other states. For example, if in Las Vegas over the past 12 months the decline in median price was 25.9%, and the average decline for the US was 14.4%, then in Miami the median price fell only 4.5%. There were also not many foreclosure victims in Florida – hopeless debtors who lost their homes and have no future right to a mortgage. If in the same state of Nevada every 146th homeowner lost their home, then in Florida – only every 242nd.
What's good about Miami
Among foreign buyers, the most popular in Florida is the city of Miami with a population of 400,000. However, if you take into account the nearby towns of Hialeah, Doral and Miami Springs, as well as the villages of Virginia Gardens and Fountainbleau, and add tourists, then these 400,000 grow to 5.5 million.
Miami is the third 'wealthiest' city in the US, that is, by GDP per capita distribution, and 22nd in the world by this indicator. This, according to Robert Stevenson (S & B), attracts investors to it to a large extent.
One of the important conveniences of Miami is that the International Airport - the southern gateway to the US - is located just eight miles (12.8 km) from the city center. Despite the fact that the airport first opened in 1929, today it is the newest in the US because it underwent a major renovation. Stevenson also considers cheap hotels an attractive factor: the average cost of a hotel room is $550.
But we should not forget the negative aspects either. For example, the state's territory is susceptible to hurricanes. In 2005 alone, three occurred. On average, the most destructive hurricanes happen once every 12 years.
Let's sum up
Florida Realtors say that today the decline in prices for American real estate has reached its maximum level, and in the coming years America will see a rise in this price. However, it must be understood that this will not happen quickly. Moreover, some observers argue that the worst is yet to come. The American economy will recover for another couple of years, and only then will reasonable life begin in the real estate market.
As for Florida, it really is not a problematic state. And the favorable demographic situation and limited territory contribute to the fact that during boom times, real estate prices there will grow more intensively than anywhere else.