This damaging Florida property glut has been caused by the frantic speculation and the insatiable greed of developers, resulting in the meltdown of the property sector.

However business is business, and those big companies intimately involved in the unfolding crisis are rallying themselves to try to salvage something from the failure of the American property market.

In the past, a mere 20% deposit was required on proposed property developments with the 80% balance to be paid on completion. During the boom years, speculators and buyers bought on these terms without being concerned with the value of the property, convinced that the market would continue to expand. Banks were financing 70% and even 80% of the purchase price. Today, reality has set in. Prices have collapsed (30 to 50% depending on property location) and the banks no longer pursue potential buyers, partly because Uncle Sam’s credit crunch has kicked in and partly because property prices purchased at the peak of the market no longer reflect market realities. From now on banks are assessing the value of properties before releasing any credit.

For evil news rides post,
while good news baits*

In this harsher climate, buyers are relinquishing their deposits on unwanted property, deposits which the developers are quietly reinvesting. Some are using these deposits to increase their credit and buy back the apartments at cost price to try to prevent a market collapse.

New luxurious serviced apartments are being leased at relatively knockdown prices to revive the market. Today you can easily find a 3-room apartment with 110m2 floor space in a highly desirable location for under $2,000 a month.

Is it the right time to buy? Yes, but proceed with caution. A sound knowledge of the market is required and most importantly, before any purchase, find out about co-ownership charges and Florida’s notoriously high property taxes which can mount up to as much as 10% per year of the purchase price, increasing the cost and risk of your investment.

Some areas are holding up better than others. Property prices in South Beach, Miami have not dropped, nor in Fort Lauderdale. Beachfront property prices have decreased by 10% to 30% and in downtown Miami have even dropped by as much as 50%.

The unique combination of the effects of an unprecedented property price collapse and the soaring strength of the euro (€1 = $1.5 on 21/04/08) means that all things considered, now is the right time to buy in Florida. 

This window of opportunity will last for another few months (probably until the American elections). Act quickly then, or repent at leisure…