Over the past two years, many companies and residents from other US states have been migrating to South Florida, which caused a sharp surge of rentals. Developers did not fail to take this opportunity, ramping up the volumes of new construction, primarily multi-family houses.
The demand for apartments reached unprecedented heights, and the rent surged accordingly. From February 2020 through March 2022, it increased by 58% in South Florida – the highest nationwide.
However, it is multi-family housing projects that are now put on hold. Experts estimate the amount of suspended construction as approximately 5,000 apartments. Gus Cabrera, President of Latin Builders Association, does not notice any strong decline yet but concedes that members of the Association continue the construction of projects they already managed to finance before the interest rates skyrocketed. Meanwhile, market actors seem to be preparing for a slowdown, which will concern primarily multi-family homes and low-rise garden apartments with green lawns around them.
The rental growth has now slowed down in the south of Florida. According to the Waller, Weeks and Johnson Rental Index, the rates rose by 9.6% year-on-year in January 2023, but reduced by 0.12% month-on-month.
Under these circumstances, it makes no financial sense for developers to begin new construction, as residential properties will cost investors much more than the rental income they will receive from future tenants.