Foreign cash buyers were continuing to fuel Miami's condo market. International investor's demand pushed price increases that were excluding local buyers, who were still dealing with a recovering economy.
About 90 percent of buyers in Miami were from abroad, said a study that has not been released by a consulting firm working for the Miami Downtown Development Authority and reported Tuesday by the Wall Street Journal.
Some were investors from Argentina, who don't trust their banks, and Venezuelans, who mistrust their government. Others were investors benefiting from the growing economies in Brazil and Colombia. In the past five years, their cash has become the foundation for new developments.
"Foreign Buyers Heat Up Miami's Condo Market," said a Bloomberg headline March 2012.
The trend continues with the help of strong currencies in Asia and Europe. Real estates purchases by international clients in the U.S. went up 39 percent from last year, according to a report from the National Association of Realtors.
Miami remains one of the top five cities international investors prefer, the report said. And since foreign investors were more likely to make all cash purchases, they created Miami's current model.
"Buyers now finance construction, not the banks that did it last time and certainly not developers, who for years have operated on OPM – other people’s money," Michael Lewis said in Miami Today. "So if condo values should ever fall – and it’s a safe bet that they will by some percentage someday – it’s the buyers who’ll be losers, nobody else."
Canada, China, Mexico, India and the United Kingdom were the major sources of buyers in the U.S. They accounted for 54 percent of reported transactions.
With the appreciation of the Chinese yuan, buyers from China had the largest dollar volume. According to the report they purchased an estimated $22 billion with an average per-purchase cost of $590,826.
Their investment has also reached the commercial real estate market. Hong Kong-based Swire Properties paid about $64 million for the land where it is building Brickell City Center with an expected 2019 completion.
Multiple Listing System data showed the most affordable neighborhoods in Miami were the crime-ridden Overtown and Little Haiti. West Flagler, Little Havana and the Upper Eastside followed. The least affordable were the Coral Way area and downtown Miami. Coconut Grove and Wynwood followed.
The glassy penthouses with infinite blue views of Biscayne Bay and private elevators were in a bubble of their own. Colombian NASCAR star Juan Pablo Montoya recently listed his Miami penthouse for $14 million. And artist Pharrell Williams was also selling his glassy condo for nearly $11 million.
Locals were dealing with some of the highest prices in the country.
The average price of a downtown Miami condo unit rose to $404,927 mid 2012. Prices have continued to increase since. New condos were pricing bove $1,000 per foot. At Marquis Residences in Brickell apartments were $680,000 to $2.2 million.
The Miami Association of Realtors reported in May that about 58 percent of residential properties in Miami-Dade-County were selling for less than $250,000.
But amid a national rental affordability crisis, some feared the price distortion brought on by foreign investors was hurting the rental market in Miami.
It remains one of the most expensive in the nation.According to a Harvard study tenants in Miami consume on average about 43 percent of their income on rent.
As of June 2014, the average monthly rent for a one bed room in Miami was $1,561 and nearly $2,000 for a two bedroom, the Rent Jungle reports based on MLS listing data.