What’s Driving Growth in the Miami Real Estate Market?
The Miami real estate market continues to perform strongly due to substantial demand and limited inventory. The city ranks fourth in annual home price appreciation in the United States, according to the US CoreLogic S&P Case-Shiller Index.
So, what’s driving the demand for housing in Miami? For several years, the Sunshine State has been welcoming an influx of homebuyers from densely populated areas where property is expensive, and taxes are high. Florida is famous for forgoing state income tax, amongst other things, which makes it particularly popular with retirees.
Throughout the pandemic, migration to Florida really gained speed. With the rise of remote working, many people suddenly had the opportunity to live and work from anywhere—and where better than sunny Florida?
It comes as no surprise, then, that last year Florida claimed the title of the fastest-growing state for the first time since 1957. According to the U.S. Census, Florida welcomed 1,142 net new residents per day in 2022.
Remote and non-remote workers alike are being drawn to Florida, particularly Miami, by a booming employment market. The city is a hotspot for multinational companies offering attractive job opportunities. Meanwhile, Miami’s unemployment rate is considerably lower than the national figure at just 2%.
This growing number of new residents is driving the demand for housing in Miami. And the city’s popularity goes beyond the U.S.; Florida is also the top market in the country for international real estate buyers looking to either settle in the state or invest in property.
Demand in the Rental Market
With pristine beaches, upscale amenities and a vibrant nightlife, Miami draws millions of tourists from across the U.S. and overseas. Last year, more than 26.5M visitors visited Miami-Dade County, generating over $20.8 billion in tourism revenue. This naturally makes the region a hotspot for investors looking to make a solid income from short-term lets.
At the same time, Miami is experiencing a huge demand for long-term rentals due to its booming business scene and large population of working professionals. In fact, a startling two-thirds of residents are renters.
It’s also worth noting that the average rent in Miami eats up more than half of the average income. A 1-bedroom apartment averaged at $2,700 in September, having increased 8% over the past year. Despite Miami’s soaring rental values, the city boasts lower property prices than other expensive rental markets, such as New York. This means rental yields are attractive, making the city very popular with buy-to-let investors.
Close to downtown Miami, Brickell is a particular haven for those looking to make a solid income from long-term lets. As the city’s financial centre, Brickell is a hub for working professionals looking for high-quality rental accommodation. Rental rates are above average for the Miami-Dade area, yet property is much cheaper than other neighbourhoods, giving way to attractive returns.
A Decade of Consecutive House Price Growth
According to NeighborhoodScout’s data, home prices in Miami have appreciated 188% over the last ten years, making it one of the fastest-growing markets in the country. Miami has an impressive 11 years of consecutive house price growth under its belt—and with more to come.
Cash buyers represent 42.4% of home sales, which is significantly higher than the national average (28%). This is partly due to the city’s high concentration of investors from out of state or overseas with the cash to purchase homes outright.
The large proportion of cash buyers in Miami has helped shelter the real estate market, to some degree, from high mortgage rates which have stalled sales in other parts of the country. Meanwhile, millennials across the country are reaching prime home-buying age. All of these factors are keeping inventory low, and prices up. Zillow predicts a 6.4% increase in home values over the next year.
The MIAMI REALTORS® Chief Economist expects that inflation will lead to a decrease in mortgage rates to 5% – 5.5% by the end of 2023. Under these circumstances, we are likely to see a surge in activity in the market. With inventory already running low, those with the means to purchase now can benefit from less competition and more choice when it comes to securing your ideal Miami property.
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