South Beach Condo Prices Plummet in Q1, Down 39% Year-over-Year

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According to Bal Harbour, Florida-based Condo Vultures, new condo units in the trendy South Beach neighborhood of Miami Beach sold for an average of 39 percent less in the first 90 days of 2011 on a year-over-year basis compared to the same time span in 2010.

The drop in the average price per square foot for a new South Beach condo generated a surge in transactions in the first quarter of 2011, according to the report from Condo Vultures.

If a bulk deal in February at the troubled South of Fifth project is excluded from the new condo sales activity for the quarter, the South Beach market registered 34 sales at an average price of more than $1,125 per square foot in the first 90 days of 2011, according to Miami-Dade County records.

The non-bulk deal pricing in the first 90 days of 2011 represents a decrease of 26 percent compared to the average new condo sales price in the first quarter of 2010, according to the report.

"The South Beach new condo market may not be as price insulated as some sellers had originally thought," said Peter Zalewski, a principal with Condo Vultures LLC. "Price cuts are typically introduced quietly in the hot and humid summer months, not in the busy winter tourism season when South Beach is at its peak. The unknown is whether the new condo unit prices were cut to stimulate sales momentum or in response to dwindling patience by the sellers."

Overall in South Beach, buyers purchased 60 new units with about 108,000 square feet for nearly $101 million between January and March of 2011. This works out to an average price of $934 per square foot, according to Miami-Dade County records.

Compare this year's activity to the first quarter of 2010 when buyers purchased 14 new South Beach units with 14,600 square feet for $22.2 million, or nearly $1,520 per square foot.

A year earlier in the first quarter of 2009, buyers purchased 31 new South Beach units with about 40,000 square feet for $32 million, or $805 per square foot, according to the report.

In the early years of the real estate crash in South Florida, buyers purchased 114 units for $49.7 million, or $646 per square foot, in the first quarter of 2007 and 138 units for nearly $315 million, or $1,130 per square foot, in the first quarter of 2008.

South Beach is a 24-block long neighborhood in the barrier island city of Miami Beach that stretches from South Pointe Drive north to 24th Street, the Atlantic Ocean west to the Venetian Islands.

Developers created 37 projects with nearly 5,600 units in the South Beach neighborhood during the South Florida real estate boom beginning in 2003.

Prior to the real estate boom, South Beach - a historical district with a large number of Art Deco, low-rise structures - had 110 condo projects with 10,800 units.

As of March 31, 2011, South Beach has sold 78 percent of the condo units created during the real estate boom.

The new condo inventory total is in addition to the nearly 300 condos - built during the real estate boom - that are currently on the resale market and those units purchased by bulk buyers that are now trying to resell at a premium to individual purchasers, according to Condo Vultures.

Adding to South Beach's increasingly competitive condo market is the first quarter of 2011 sales launch of a pair of new projects.

The developers of two new midrise projects located across the street from each other - and near the ultra-luxury Setai Resort and Residences and W South Beach Residences - both initiated their sales campaigns in attempt to generate transactions before the winter tourism season that ends in late April.

Both projects were originally planned to come to market earlier but experienced delays due to the South Florida housing crash.

In late January, the Boulan South Beach - originally dubbed the Parc Place South Beach Residences - located on Collins Avenue initiated its sales efforts with asking prices starting at $351 per square foot but averaging $790 per square foot, according to information provided by Condo Vultures.

In mid-March, the Artecity complex - which is nearly complete - formally kicked off its sales campaign with opening asking prices of $346 per square foot but averaging $430 per square foot.

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