Florida is still a good bet for the British property buyer
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There are several very good reasons why more than 250,000 people buy property for sale in Florida each year. A fabulous year-round climate boasts more than 300 days of sunshine. Then there are Florida's magnificent palm-scattered beaches, mangrove forests and sparkling waters. World-class golf courses, dive sites and theme parks offer an incomparable choice of affordable leisure pursuits. That this is all superb value for money is the icing on the cake.
Dubbed the Sunshine State on account of its 52-week golden skies, Florida is the third most popular destination with UK second-homers abroad, after Spain and France. Britons also represent the single largest group of foreign tourists in Florida's 84.6 million visitors. Since the 1980s more than 50,000 so-called 'Sunshine Brits' have snapped up homes in the Sunshine State, buoyed by availability of direct flights from all major UK airports and cut-price fares. In its embryonic phase, Florida's real estate sector offered these early property buyers very little choice other than standalone single-storey villas. These came with optional pools but very little else and were built in regular residential neighbourhoods. Today, the market in Florida is much evolved. Property buyers have a sophisticated array of property options tailored to the specific needs of second-homers. What's more, they're on dedicated developments blessed with every conceivable amenity that have also been designed to generate cash.
"As the property sector in Florida has matured so have the tastes of its buyers" explains World of Florida's Suzanne Morrill. "Modern resort communities with golf courses, spas, man-made beaches, shops, bars and restaurants appeal to second-home owners as it potentially offers them the option of letting out their property for rental. Developers have been keen to capitalise on this factor as Florida remains a highly popular holiday destination with British families."
This focus on marketing the rental appeal has become the crux of the Florida's holiday home market, a fast-paced micro-economy of the state's real estate scene. In February 2007 the average house price was $235,500. A decade earlier it was $91,200 - a staggering $143,800 rise that represents a 70.6 per cent gain over a five-year period. Indeed, buying a home in Florida has paid dividends for many early investors in it for the long term. The Sunshine State's property sector was virtually untouched by the 1990s recession while capital appreciation has outpaced inflation year-on-year. Property values more than trebled in Sarasota, West Palm Beach and Miami between 1996 and 2006; Naples saw prices rise by 40 per cent in just six months, while double-digit increases were reported in Orlando in 12 successive months. A fragile dollar added to the fervour by effectively slashing prices for British buyers. Florida's construction boom soon took hold with agents reporting record sales state-wide; such was demand that builders struggled to keep pace, as cranes, concrete and labour became seriously stretched. Low interest rates only added fuel to the fire.
"European buyers have been significantly influencing the property market in Florida over the past decade. MRI Overseas Property research found a third of prospective overseas buyers would consider investing in the United States," explains Jayson De Leon, sales director for the US for MRI Overseas Property. "Overall, overseas buyers accounted for 15 per cent of the houses sold in Florida in 2005 according to a study commissioned by the National Association of Realtors. It ranks second only to California as the best place to live in the America."
However, after every rise there's a fall and Florida's unsustainable escalating prices have slowed to halt in recent months. Yet despite talk of the bubble bursting state-wide, prices have remained steadier than the pundits predicted - down just three per cent year-on-year in February 2007. Although a glut of new homes could potentially threaten future growth, the current rate of sales is symptomatic of a more stable market, according to the Florida Association of Realtors. In March 2007, Wayne Archer, director of the Bergstrom Centre for Real Estate Studies, said he thought it unlikely that 'prices are going to fall anymore,' describing the market as reaching equilibrium and stabilising in a natural readjustment after a dizzy high. Jim LaCrosse, an analyst with the legislature's Office of Economic and Demographic Research, was equally upbeat. `We're coming off a very hot housing market," he explained to reporters in March 2007. "We're seeing the state go back to more normal levels of activity."
Art Baumer, an economist with Orlando-based IPR, agrees: "People are forgetting that the median is only the midpoint - so half the homes in Florida still sold for more than $235,500 last year. A robust resale also looks set to experience gradual growth into 2008, according to the National Association of Realtors. Condo prices have also stayed flat at $212,200 - just $1,000 down on average last year."
Jill Diamond, managing director at Clearsky Properties Ltd, concurs that talk of meltdown is excessive. She cites the market's first quarter of 2007 upward trend as a promising sign for purchasers. A weak dollar also continues to make Florida's property appealing to British purchasers keen to get more for their pound.
"After peaking in November 2005, Florida's Property market downturned over 16 months, but this has definitely levelled out," she explains. "In the first few months of 2007 there were no signs of price drops. The forecast is for prices to begin to climb again over the next 12 to 18 months."
That Florida's economy is the fastest growing among America's ten largest states has undoubtedly bolstered the property market. Tourism has also played a leading role in shoring up the sector. Construction remains a key employer, creating 100,000 jobs per annum, so state Governor Charlie Crist has every incentive not to let the torrid market catch a chill. He is, however, keen to allow residential real estate prices simmer down to a manageable level, believing that this will attract speculators to Florida like an alligator to an easy meal.
"The pound continues to enjoy a new-found strength against the dollar British investors may find they get more bricks and mortar for their money in the United States," Jayson De Leon. "Developers have introduced incentives wouldn't otherwise be available in a buoyant market, such as contributions to closing costs and rental guarantees - all very appealing to investors."
With a land area the size of a small European country, Florida offers buyers incredible diversity, from the fruit farms and lakes of the central province and the islands of the southern tip to the white sand beaches on the panhandle and warm waters of the western coast. Tampa and Orlando have long been a favourite with British holidaymakers as it is home to almost all of Florida's theme parks and big attractions; Disney World, Universal Studios, Busch Gardens and Sea World are blessed with the warm year-round high temperatures that characterise the central regions. This prolonged holiday season means that properties in the area benefit from a healthy rental market offering some of the best returns from short-term lets found in Florida. Orlando in particular has attracted the lion's share of British interest from second-home purchasers and buy-to-let investors. Prices reflect this, but generally still represent good value. Purchasers seeking maximum rental rates tend to buy a four-bedroom, four-bathroom pool home within 20 minutes' drive of Disney. Fierce competition makes having the right home in the right location paramount in generating around 28 to 30 weeks rental income at around £500 per week.
"Kissimmee remains a highly popular area with British purchasers looking for a holiday in the sun," explains Graham Pyle at Florida Countryside. "It's still possible to find luxury town homes with good access to the Disney resort area from around £195,000"
Away from the steamy rolling plains of central Florida lies the pretty Gulf Coast region, a two-hour drive away. Pristine flower-filled streets and soft white sand beaches typify the Gulf Coast. Gleaming million-dollar yachts and swish, exclusive neighbourhoods are testament to the region's appeal with some of Florida's most affluent residents. Property prices reflect this with strict zoning laws also often restricting rental to long-term lets only. However, the Gulf Coast is popular with American and Canadian snowbirds - retirees who flee North America's cold during the winter months. Around 60 per cent of the US's wealthiest citizens winter at Naples, an exclusive resort renowned for its fine restaurants and boutiques. Houses on the waterfront on the Gulf Coast can command prices treble that of similar-sized properties for sale in the Orlando area, especially in Naples, Venice and Sarasota. Many of the resort towns here are consistently high-ranking in CNN 'Best Places to Live in America' polls due to the high standard of living they offer and low crime rate; Sarasota is also now the second-most-popular place in the US to retire.
"The Gulf Coast attracts a very different type of property buyer than that in Orlando," admits Suzanne Morrill at World of Florida. "The purchase doesn't tend to hinge on the rental potential of the property - people are buying there for the lifestyle it offers. Interest has been high in a beautiful resale in Englewood we're marketing at $625,000 because it's just two minutes' walk from the beach."
Midway up the Gulf Coast, Port Charlotte retains the small-town charm of Florida past. Sleepy residential communities offer reasonably priced real estate close to beaches, shops, restaurants and golf clubs. Property prices remain up to 30 per cent lower than Sarasota and Naples, although significant increases in property values are forecast for the next five years. This 'undiscovered' slice of Florida is home to the Rotonda development, designed containing 22 miles of waterways and seven golf courses; each home backs onto water, conservation land or the fairways and is set on a quarter-acre plot. Rotonda was unknown even to native Floridians in the early '90s - a situation that is changing fast, according to Jill Diamond of Clearsky Properties, who has been selling property in Rotonda for 15 years.
"It was grossly underpriced when we first discovered the area," she explains. "Even today, our five-bedroom, four-bathroom pool home with Jacuzzi-style bath and heated pool with spa is on the market for just $363,900."
Florida's Atlantic coast has increasingly attracted UK property buyers, stretching from St Augustine through Daytona Beach, to the legendary glamour destination of Palm Beach, and on to Fort Lauderdale and Miami, right down to the Florida Keys. Small pockets of expatriates centre on many of the Atlantic coast's smaller seaside communities, where a three-bedroom pool home can still be found for less than $201,100. In fact condominiums in and around Melbourne and Palm Bay average prices of $168,800 while a family-sized home in Daytona will set you back less than $230,000.
"There are some great value housing opportunities here, especially for coastal properties," says Lance VandeBerg, broker-owner of VandeBerg Real Estate & Investment in Merritt Island. "Right now is a great time to buy."
The salsa city of Miami has been another key focus for investor buyers, especially in and around the up-and-coming Brickell district. More than 40 per cent of all US exports to Latin America pass through Florida, with Miami the hub for both international and Latin American trade. A burgeoning population comprises a mix of city slickers and party-loving beachgoers, many of whom live in rental apartments on long-term rents. Miami's healthy rental market has prompted a steady rise in potential returns, with $2,000 per month the going rate in the Central Business District. Apartments start from around $300,000 - excellent value when you consider the city's beautiful beaches, pulsating nightlife, art deco architecture and year-round sunshine. Amid Florida's stabilising real estate prices, Miami is also one of the few places in the Sunshine State to have notched up another 12-month increase - up three per cent since February 2006.
"We're the only UK agent marketing the Icon Brickell - a landmark waterfront development by YOO by Philippe Starck overlooking Biscayne Bay," explains Jonathan Salsbury at Colliers CRE. "Five-star on-site amenities include a spa, fitness centre, four restaurants, valet parking, concierge, housekeeping and a two-acre pool deck. A range of one- and three-bedroom apartments is set in a landscaped setting. Prices start at £260,000 - with just ten per cent down to secure the deal."
Florida's system of property purchase is quite different from that in the UK, requiring expert professional vice for the uninitiated. A central database of property listings (MLS) is available to almost every agent (realtor), so once a property buyer finds one he likes and trusts the partnership it negates the need to appoint further agents. Realtors are either working for the seller or the buyer. Once a price is agreed, the purchaser makes a goodwill down payment. A formal offer is then made in the form of a purchase contract that is legally binding once signed. A ten per cent deposit is then paid into an escrow account. Once a title insurance company is satisfied that the property is secured against any third-party claims, completion can take place. At this point the transfer of the balance is paid and the buyer picks up the keys. Buyers should budget for about five per cent for all the added extras, such as legal, title insurance and notary fees, premiums, transfer taxes, property taxes and mortgage fees. Another factor to consider is the US taxation system: income derived from rental is subject to tax on a sliding scale. Currency planning is essential to minimising the risk of costly fluctuations when buying property in Florida.
First published in Homes Overseas Magazine June 2007.
Some information contained within this article may have changed since it was first published. Homes Overseas strongly advises you to seek current legal and financial advise from a qualified professional.
