Why is it such a big opportunity? We can put this down to two words – inflation and location.
Now despite some people taking a negative view of the Florida real estate revival, there is plenty to feel optimistic about, certainly when you start to take inflation into account.
Depending on your circumstances, inflation can either be your best friend or your worst enemy.
On a personal level it can be hard to put inflation into words. The way I like to think about inflation is at the barbers.
I don’t like to change my barber a lot, I have been using the same one for the last 20 years. He has seen me with long hair and gradually witnessed it start to disappear over the years.
So what does all this have to do with inflation?
Well 20 years ago when I my hair was long and thick, my hairdresser would charge me £5 for a haircut. 10 years later I had smartened up my image and wanted my thinning hair cut short, so he would charge me £15 to do the job back then.
Now with hardly any hair at all, all he needs to use are his clippers and that same hairdresser is now charging me £25.
So the less hair I have, the more I need to pay for a haircut, now where’s the logic in that? If my income stayed the same or increased by 1 or 2% percent as it has done for many people since the financial crisis, I would be forced to find a new barber eventually.
Inflation then is bad when it comes to haircuts but it can be good in other ways.
For example, property investors can rely on making an income that is inflation proof in the long term. House prices tend to rise with inflation, so the higher the inflation rate, the more valuable an investment in property will become over time.
Governments, however don’t like it because the majority of their populations will feel it in the goods they purchase. This puts pressure on wages and stokes up inflation even further.
With the Fed constantly pushing for quantitative easing (QE), the risk of inflation becoming a factor in the US in the near future is very real and this can only start to push up the price of US housing too.
The potential long term ROI on a luxury condo in Florida was highlighted this month in a piece in the New York Times.
The article looked at one Florida beachfront development built back in 2001 where units were sold for less than $400 a square foot. Those same units according to the article are now worth $1,100 per square foot.
Now of course there is very little development land close to the beach and this will underpin the price of Florida apartments with a sea view as will inflation, which we expect to see rising in the US in the long term.
So with property prices 45% lower in Florida than they were at the peak of the market in 2007, now is potentially a once in a lifetime opportunity to ride the next wave of growth Florida. The sunshine state is already showing signs that property prices will rise more steeply than any we have seen following the recessions of the 70s and 80s.
What are your thoughts on investing in property in Florida? Please leave your comments below: