Despite the high interest rates on loans, construction of new homes in Florida energized due to high rentals and low vacancy rates. Marcus & Millichap, a brokerage firm, reports that the average rent in South Florida reached $2,500 per month in the third quarter of the current year, with less than 5% of accommodation available. The vacancy rate was only 3.6% in Fort Lauderdale and 4% in West Palm Beach. This indicator is expected to drop to 2.6% in Miami by the end of the year.
Developers expect to bring 11,957 apartments into the new housing market by the end of 2022. About half of these homes will be built in Miami, a third, in Fort Lauderdale, and a fifth, in West Palm Beach.
However, the higher borrowing costs affected the developers too. Maintenance of a loan now costs much more and banks are less willing to finance construction projects. This means that fewer multi-family housing projects will be launched in the state, although the population needs it badly, as Peter Mekras, President at Aztec Group (a commercial property lender), remarks.
Some developers believe the growing cost of labor and construction materials to be their key problem. For instance, Matthew Jaycocks, Principal at Lee & Associates South Florida, is planning to take a loan under 6 – 9% and build 245 apartments and 930 sq m of commercial real estate in Lauderhill, a suburb of Fort Lauderdale. The developer is much more concerned with the growing cost. For instance, prices of some types of concrete rose by 19%.
The state with the Atlantic Ocean on one side and the Everglades on the other will face a shortage of available development areas soon. Florida’s population is growing, its economy is expanding, but the capacity for new construction is limited here, so those wanting to purchase a home should make haste.