Climate Change and Rising Sea Levels: Should I Invest in Miami Real Estate?
- Aug 15, 2016
The 2009 Hollywood blockbuster The Day After Tomorrow paints a terrifying scenario where humans are at the mercy of a dramatic climate shift that creates unimaginably strong storms that flood major American cities. Luckily for those in Miami-Dade County it’s not a forecast of an impending doom, but more of a cautionary tale of the damage raging flood waters can do to highly populated area if the city does not take the necessary measures to modernize its existing infrastructure.
Miami’s downtown currently sits 1.8 meters above sea level making the land extremely susceptible to storm surges, which have been increasing in severity due to elevated carbon dioxide emissions warming our oceans. It’s a terrifying development that is effecting all American coastline cities where 23 of the 25 most populated counties in the country are located. However, this has not swayed investors from pouring hundreds of millions of dollars into condo and land development along Florida’s sandy beaches, in fact, Miami is experiencing a real estate boom. The boom is a huge benefit to the city as it provides funds for infrastructure that comes exclusively from property tax, therefore both Miami City Council and investors are finding it much more profitable to essentially ‘bury their heads in the sand’ when it comes to climate change. For example, Miami Beach argued that it would be wise to accelerate investment in storm water drainage improvements from $100 million currently invested to $400 million, something that is possible now in a metro area of 6 million residents, but impossible in the future if investors and residents choose to flee South Florida out of fear of rising sea levels. Ironically, the sustainability of Miami and its real estate market depends on continued urbanization. However, those looking to invest in South Florida real estate are justifiable concerned that their property could be lost to the sea, that’s why it begs the question: “Should I invest in Miami real estate?”
Miami Real Estate Boom and Slowdown
The Miami metro area is expected to reach a population of 9 million within the next decade, which will make it roughly New York’s current size. There is currently numerous developments underway with an estimated 11,000 condominium units under construction in more than 100 buildings in Miami-Dade, Broward and Palm Beach counties. However, according to first quarter data for 2016, condo sales have fallen off significantly since last year. The median price for condos and single-family has also dropped from $437,750 in 2015 to $408,750 now. Despite this data it’s important not to jump to conclusions because this recent slowdown was expected and economists are certain it won’t lead to an economic collapse like the housing market caused in 2007 and 2008. In fact, developers are still announcing new projects while others are delayed or canceled.
The development in 2015 was fueled by Latin American cash investors buying new condo units despite South Florida as the proverbial ‘ground zero’ of climate change. This is because they faced miniscule geographical and environmental challenges compared to what they face in their home country where factors such as overpopulation and unsustainability create the need for quick returns on investment.
In 2016, the combined factors of a slowdown and an influx of developments are favorable conditions to buy that dream beach home you have always wanted. However, It may be wise to wait before you buy because major price adjustments usually take place a little while after the initial signs of a slowdown. Other South Florida markets are not waiting for the luxury home buyers to return and are turning to their traditional market: retirees. This has made the octogenarian paradise of Boca Raton, the best performing market in the tri-county area in terms of sales.
Coastal areas are sensitive to sea level rise, changes in the frequency and intensity of storms, increases in precipitation, and warmer ocean temperatures. In the 20th century, sea levels rose by seven inches and the increased melting of the polar ice caps in Antarctica and in the Arctic Ocean will lead to a further rise of 20 to 39 inches by the end of the 21st century. In fact, southeast Florida’s sea-level rise from 1993 to 2010 was almost twice as much as it was from 1901 to 2010.
According to two dozen university heads and climate change experts, flood waters could submerge several Miami neighborhoods in as little as 15 years if proper infrastructure precautions are not built in time. The economic impact of sea level rise makes Miami either a cautionary tale or an example of preparing for a new reality that will affect other low laying cities such as Venice, Amsterdam and Singapore in the coming decades. It’s predicted that by 2060 there will be a two feet rise in sea level that would put the western half of Miami Beach under water. A 2015 report by the Risky Business Project found that the flood waters of climate change will be on the doorstep of south Florida residents by 2030, when coastal properties worth a combined $69 billion could be underwater at high tide with around half of the at-risk real estate assets in Miami-Dade County. The porous limestone these homes are built on heightens the severity of flooding for at-risk neighborhoods such as Island Terrace and Belle Isle.
Miami has put in place regulations that require sea walls to be raised and are mandatory for neighborhoods that are already experiencing flooding. The onus of flood prevention falls on private property owners to raise existing walls or to replace ones that are deteriorating. However, property owners were given ample time to comply.
The city will also need to build new, bigger sea walls and pumps that can divert rain and flood water back into the ocean and away from the most at-risk areas such as low income neighborhoods built on floodplains.
Preparing for the future is the only way Miami and real estate assets will survive because according to a study by the National Institute of Building Sciences, it found that in 2005 for every dollar spent on pre-disaster mitigation, society as a whole would save $4 on post-disaster spending.
Environmental attorney Albert Slap and former Florida Atlantic University scientist Leonard Berry started Coastal Risk Consulting, a consulting firm that uses the Army Corps of Engineers’ sea-level-rise predictions to assign flood scores to properties across the state.
“We did this to get climate-ready and storm-safe,” Slap said. “We’re not affiliated with construction or insurance or anything. Nobody is selling anything on our site except information and analysis that will help you.”
The city has called for new condo developments to follow strict building codes that are meant to ensure the structures stand for generations. The recently introduced codes call for all new construction and city infrastructure to be elevated as well as height limits for new condos. This also means roads, sewers and power lines must be raised.
Developers are capitalizing on these new codes as a way to calm fears a hurricane would pose to glass-plated towers and private properties by advertising storm-resistant homes and reinforced condos that can withstand 300-mph winds.
The measures that Miami is taking to avert the effects of climate change depends on continued population growth and new developments because it is tax revenue that will ultimately decides whether Miami sinks or survives.
- For retirees, the time to buy is now: The market is going back to the demographic that South Florida real estate was built on.
- Wait to buy luxury real estate: The market is reasonable right now, but prices are expected to be even more favorable in the coming years.
- Buy new builds: New builds must follow the new building code, making them the safest investment.