One of the defining characteristics of the current Florida property market is the shortfall in inventory levels. Despite an uptick in construction activity this year, demand continues to outstrip supply of new-build properties in Florida with a particularly high deficit in the Southwest.
In August, the Florida property market registered an inventory level of just 4.2 months, a fall from 4.4 months a year earlier. Demand remains strong on the back of a growing population drawn to the Sunshine State for its job opportunities. However, many new residents face the problem of being unable to buy a home in Florida simply because there aren’t enough properties to go round.
Home construction fails to keep pace with employment
A study released in September by the National Association of Realtors (NAR) found that 80 per cent of metropolitan areas in the US have a shortage of new-build properties. The report looked at the growth in employment and compared it to the number of single-family home starts.
Historically, the annual ratio of job growth and permits for new single family homes averages out at 1.6. However, the recent study found that the vast majority of areas in the US ranked above this ratio and that the national average was nearly triple (3.4). The report clearly shows the huge gap between demand for new homes and the actual supply.
“Single-family home construction is startlingly underperforming in most of the US,” said the NAR in comments about the report. This scenario occurs in a year when new builds have increased throughout the country, although figures released for August show a nationwide drop of 5.8 per cent. The NAR concludes that “the only way to house an expanding workforce and population is through construction”.
Undersupply of new-build properties in Florida
With the exception of one metro area (Pensacola-Ferry Pass-Brent), all metro areas register a shortfall in the number of new builds. The biggest deficit of new-build properties in Florida comes in Miami, a metro area where the NAR ratio soars to 11.4, the seventh highest in the country.
Slightly lower but still with worryingly high shortfalls are other Florida metro areas. Tampa-St Petersburg-Clearwater, North Port-Sarasota-Bradenton and Orlando-Kissimmee-Sanford all register ratios of around 4. In the case of the Tampa metro area, this translates to the need for over 39,000 new-build properties. In Orlando, the deficit runs higher than 47,350.
According to NAR Chief Economist Lawrence Yun, most metro areas in the US “have strong appetites for buying” and he points out that “healthy job markets continue to attract an influx of potential homeowners, fuelling the need for more housing”.
Southwest Florida needs more new properties
One of the areas where this need patently isn’t being met is Southwest Florida. The metro areas of Tampa, Sarasota and Punta Gorda register some of the biggest deficits of new-build properties in Florida.
These areas are also showing some of the highest price hikes in Florida. While the median price for single-home properties in Florida generally rose by 12.6 per cent in the year to August, in Charlotte County the increase reached 16.9 per cent.
Real estate analysts believe this tendency is set to continue as more new residents flock to this part of Florida, drawn to the area’s excellent job opportunities and high standard of living. Charlotte County has the additional advantage of being in easy reach of Punta Gorda and Fort Myers as well as Tampa Bay.
“With the population of Florida set to increase by 15 million over the next 50 years, the current shortfall of new-build properties in Florida is merely the tip of the iceberg,” says Dies Poppeliers, Managing Director of BRIC Group. “This together with the buoyant employment market makes Florida land a better investment than ever before.”
BRIC Group, an investment company specialising in global real estate opportunities, offers US real estate investments including turnkey properties in Florida and Houston, and land plots in Florida. BRIC Group is also developing The Coral resort, in Northeast Brazil, a luxury beachfront resort with land and villa investment opportunities. BRIC Group has been creating wealth for its clients since 1996 and has offices in Brazil, Dubai (consulting office), Hungary, Spain and the US.
(Source: National Association of Realtors, Florida Realtors)