Shanghai’s Real Estate Exuberance mimicks Miami’s Boom

Miami’s incredible real estate boom and subsequent bust during the past decade has many similarities with China’s current hyper-development.

Developers are touting the same old “lifestyle” story and a buying frenzy has taken over Shanghai. Just as buyers camped out for days to purchase condos at the Mirador in South Beach, so to are long waiting lists the norm in Shanghai’s new developments.

According to a recent article published in the New York Times “prices in Shanghai have risen more than 150 percent since 2003, pushing the price of a typical 1,100 square foot apartment up to $200,000.” This is painfully similar to Miami’s boom to bust in the past decade.

Real estate prices in Miami have been artificially inflated several times in our history. It was not that long ago that we experienced a massive boom during the years of that the “Cocaine Cowboys” in the 1980’s. As black market cash needed to be washed, new buildings sprouted up on Brickell Avenue and Miami Beach like mushrooms. The end result was that we had a glut of condominiums in the late eighties that would take several years to be absorbed and prices subsequently tanked.

The next wave that began just a few years ago labeled Miami as “Crane City.” Our skyline was literally dotted with construction cranes, and at one point, there were over fifty of them in downtown Miami alone. Developers touted living the “downtown Miami lifestyle.” Domestic and international buyers rushed in and bankers offered easy money to just about anyone. Developers hosted several introductory and opening parties to the public, champagne flowed, models danced on tables, real estate agents were dizzy with commissions, and everyone bought into the illusion of getting rich while living the new Miami lifestyle.

The problem was that no-one was paying attention to the local demographics and facts. Our “developer friendly” local government, which is the understatement of the decade, allowed developers to take over the city. The average annual income of a family in Miami is ridiculously low compared to the cost of living. For the average resident, annual incomes barely cover maintenance fees and real estate taxes to live in a one bedroom condo. Just as speculators bought into the illusion that real estate prices in five to seven years would be even higher in Miami, they are now repeating the same pattern in Shanghai.

The average income of a Shanghai resident is less than $5,000 per year. The average income of a Miami resident is less than $30,000 per year. You do the math.

Are you looking for a Miami or Miami Beach investment property at a deep discount? Are you looking for a discounted short sale or bank owned property? Ross Milroy of Miami Angel Properties, LLC may be reached at 305-673-5300 or info@miamiangelproperties.com.

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