Farouk Gongee is a Realtor with Keller Williams in Miami.
Every week, we ask a Miami real estate professional for their thoughts on the top three stories from the week before. This week, we talked with Farouk Gongee, a Realtor with Keller Williams in Miami and a member of the exclusive Master Brokers Forum. Gongee has sold luxury real estate in South Florida for more than 30 years. His clients include Jason Taylor, Shakira and Cher. Gongee has served as Director of the North Beach Development Corporation and as the Commissioner of the Miami Beach Affordable Housing Committee.
Miami Agent (MA): Foreign demand remains extremely high in Miami; why is this?
Farouk Gongee (FG): There are a number of reasons, really. First of all, it’s the gateway to South America, and is almost like the mecca for all the South American countries. Most South Americans would love to have a residence here. That’s been a market that we’ve had for many, many years.
An emerging market has been Russia; of course Europe has been here all along, but not to the extent that it is now, and certainly the Russian market is enormous in the South Florida area. Demand is here because on the world market – even though our prices are skyrocketing – we’re still a good deal compared to other desirable, international cities. So, the Europeans still look at us as a bargain, and I think the demand will continue to be there for quite some time. However, I don’t know that this kind of price increase can continue.
The European market is hitting us really strong in South Florida; we’ve got a lot of British, Italian and French clients buying up South Beach like it’s going out of style – not only the condo market and the single family homes, but most of the multifamily apartment buildings on South Beach have been sold in recent years to Europeans mainly. And they’re not even looking for any kind of return, because you don’t get a return on the kind of prices they’re paying; they’re just looking to park their money, and they feel like it’s more safe here than what’s happening with the Euro and the uncertainty of a lot of the things in Europe.
MA: Inventory in Miami has been on the rise the last couple months; is that consistent in your market?
FG: Yeah. What I’m also finding is that is that there are a lot of people that are looking at what’s happening in Miami and they’re saying, “With the kind of prices that we’re getting, let me throw it out there and see if I can get a crazy price.”
I spoke with a guy yesterday, and I was under the assumption that he was going to be asking $8 million or $9 million for his house, and as the conversation went on he said to me that he had refused $14 million and he would want $19 million. I thought, “You got to be kidding me!” The Venetian Islands recently had a deal for $14 million, and that was unbelievable. It’s just crazy to me what’s going on with the prices. A lot of people are just throwing out there and saying, “Let’s see what can happen.”
It does concern me, but I don’t know if anyone else will agree with me. I think there’s an adjustment coming down the road. Even though this is much different than what happened in ’06 – ’07, when the market crashed because it was so heavily leveraged. In this case, it’s not heavily leveraged because a good portion of all these sales are cash or contain very little financing, so the possibility of foreclosures is not there. However, I still think there could be a price adjustment because the numbers aren’t making any sense at all.
MA: Finally, what aspects of the industry are you following closest, as 2014 takes shape?
FG: I’m always focused on the luxury market. That’s kind of what I’ve done throughout the years, and that’s opened up a lot of other things for me because people who buy luxury homes are also selling shopping centers and hotels. But my focus still remains on the luxury market and that’s probably going to be the one market that would see an adjustment last.
I think the lending is definitely going to get tougher; it’s already considerably tougher than a couple years ago, but honestly the last few sales that are in excess of $5 million that I’ve made have not had financing, I really haven’t had to deal with financing in quite some time. That’s bad for the market, but it’s good for me. I think the interest rates are going to go up, and financing is going to remain tough for another couple years. Eventually, they’re going to have to loosen up. How much more can we continue with these cash-buyers? We’re going to have to adjust sooner or later.