Foreign investors are snatching up homes across South Florida

Lured by strong currencies and a booming real estate market, foreign investors are snatching up homes across South Florida.

Over the last three years, foreigners have invested $4.5 billion in residential real estate in Miami-Dade, Broward and Palm Beach counties, according to real estate consultant David Dabby of Dabby Group Advisors. More than half of that investment is Miami-Dade County, 25 percent in Broward and 15 percent in Palm Beach.

Traditionally, the area's foreign investors hailed primarily from Latin America, where political unrest spurred those residents to look overseas for safe havens. But as mortgage rates remain low and currencies such as the British pound and the euro continue their strength against the dollar, more Europeans are buying properties. Even concerns over a possible real estate bubble aren't deterring these investors, say realty agents.

Condominiums near the beach are the most popular units. For investors who spend most of their time away from the property, condos are more convenient because maintenance is taken care of while the owners are gone.

"All they have to do is lock the door and go back home," said Ana Solorzano, a Realtor with M International Realty in Miami. "That and the high returns they're seeing on their investment make sense for them."

Mexico-based M International Realty opened its Miami office four years ago, catering to high-end Mexican investors. Solorzano said even more investors have been coming to the office as property values, especially in the condo market, have risen. Through its deals with South Florida developers, M International gets a block of pre-construction units before they even go on the market. Pre-construction prices are traditionally the least expensive.

Clients can reserve a unit for between $25,000 and $50,000. Most try to resell the unit at a profit before the closing, said Solorzano. Even if they get to the closing, for a $1 million condo, an investor's out-of-pocket expense would be only a 20 percent down payment on the property's price.

Solorzano says her clients see South Florida real estate as a safe investment. Last month, the Florida Association of Realtors reported existing home prices rose 35 percent in Palm Beach County over last year, and 32 percent in Broward.

"It's much better than the 2 percent you get at a bank," said Solorzano.

Fear of oversupply

But not everyone is confident that demand for South Florida real estate can keep up with the burgeoning supply. In the city of Miami alone, an estimated 69,000 residential condominiums are at some phase of development, according to the city's large-scale development report issued in March. In contrast, about 7,000 condos have been built in Miami in the past 10 years.

Michael Y. Cannon, managing director at Integra Realty Resources, a national valuation, consulting and marketing analyst, says investors should be wary.

"Both domestically and internationally, it appears there's more capital chasing too few deals," said Cannon. "From an economic point of view, certain balances are out of whack."

Isaac Feldman owns All Nations Realty in Sunny Isles, where he has been selling real estate to mostly Russian investors for the last decade. He also worries that too many investors are looking for a quick profit.

"All the Russian newspapers have ads for Florida real estate," said Feldman. "People used to just buy a vacation home, but now they buy one for themselves and one or two for investment."

In Latin America, several Realtors conduct seminars to pitch new projects to prospective investors. But M International's Solorzano says her clients, like many Latin American investors, are already familiar with South Florida because so many of them already travel to the area for vacation or to visit friends and family.

Altmina International Inc., a Palm Beach firm that handles sales and marketing for developers, also has hosted seminars for foreign investors in Florida and in Europe. Next month, the company will attend real estate showcases in France and Spain, said Maribel Alvarez, the company's president.

"People in Europe compare South Florida to what they know in Europe," said Alvarez. "They see Miami as being equivalent to St. Tropez and Palm Beach as Monte Carlo."

Looking for bargains

The Internet contributes to the success of marketing U.S. properties to foreigners. Online photos and details at realty agent Web sites make it easier for investors to look for properties and market them to potential renters.

And favorable mortgage rates make selling prices more attractive. While 30-year fixed-rate mortgages hit an eight-month high of 6.04 percent at the end of March, they have retreated since then and are near historic lows.

Add to that the power of foreign currencies. After its 1999 debut, the value of the euro, or the European currency used by 12 countries, slumped to a record low of 82 cents in October 2000. Since then, the euro has been steadily gaining against the dollar. Last week, one euro was worth about $1.31. That has enticed investors who are taking advantage of what they see as bargain prices.

"The escalation of the euro has drastically changed the perspective on investing in real estate," said Pio Ieraci, president of International Property Investments Corp., based in Fort Lauderdale. "They view our marketplace as a discounted marketplace of many opportunities."

When Anouk Ayache and her family considered moving their furniture business to the United States from Paris, New York and Los Angeles came to mind. But high real estate prices in those cities made her consider a more affordable city like Miami. She chose to move to Miami because of the port and South Florida's more affordable commercial real estate market.

But the favorable exchange rate was the deciding factor when it came to making a purchase.

"It made me decide to buy a home instead of rent," Ayache said. "It's really convenient to buy because you only need 20 percent down and the strong euro makes that easy."

Mike Pappas, president of the Keyes Co., says all of his branch offices have received more inquiries from foreign investors in the last year. While South Florida has always attracted South American investors, their interest was often tied to the political or financial fortunes of their home countries. For investors in the relatively more stable countries of Europe, the currency exchange is the driving force behind investing.

"Although the distance makes it a little harder than for Latin America, Europeans don't have other factors like instability at play," said Pappas. "So we're seeing an increase in Britons, which have always been big investors in Florida, but also Spanish, German, French and Italians.