The sixteenth year of the new millennium started with unfavorable stock market activity for much of January and February which negatively impacted the buyer behavior in our seasonal town. Buyers typically descend on our shores seeking to purchase property in the first four months of the year. By the time the market returned to a steady rate, seasonal buyers departed empty handed as many adopted a “watch and wait” attitude. The balance sheet of these watchers recovered just as the presidential campaign circus kicked into high gear. Further distractions ensued in June as the result of a referendum vote in England to withdraw from the European Union (Brexit) sent global markets into a tailspin.
Summertime DE Sizzle
Our summer season in Naples is typically enjoyed by South American and European visitors who this year were equally distracted by news of the Zika virus that erupted in the Miami area. Many international travelers utilize Miami airport as a port of entry and hospitality sources cited that prolonged media coverage of the virus affected summer occupancy levels throughout the state. In addition, Canadians have been the primary foreign purchaser of real estate in Naples for over a decade. Declining oil prices and jitters over Brexit related issues sent their currency tumbling midsummer to .76 cents a share and caused many Canadian owners to turn their attention to selling their Naples real estate assets.
While dizzying factors hampered the traditional sales cycle in Naples there is reason for optimism to prevail. The basis of these distractions is diminishing or are all together gone. Time has provided the space for the president elect to formulate his plan, the Zika virus no longer has a geographical stronghold over Miami and domestic and global markets have hit a stride.
The Northern Frontier
Randy Thibaut, owner, and founder of Land Solutions is noted by local industry heavyweights as the best source of land intelligence in Southwest Florida. For the past 20 years he has been involved in all aspects of the construction sector and is focused on establishing new investor avenues to infuse capital resources into Southwest Florida. Randy outlined his views and forecasts at a recent high profile building industry meeting.
The consensus is that the spotlight on Lee County has been blinding over the past two years. Home to Bonita Springs and Fort Myers, this county has seen permits for new housing reach record numbers in 2014 and 2015 spurred on by the lowering of impact fees. These fees greatly determine the developers’ ability to build homes in line with cost projections. Thibaut commented that last year the top five builders in the three-county area (Collier, Lee, and Charlotte) were commercial contractors and the apartment segment emerged as the new front runner. Apartment rents have risen as a vast number of professional firms began operations in Lee County. One alternative response to alleviate the rising rental dilemma has been to offer value priced single-family homes. DR Horton, the area’s top builder, pulled 1200 permits to begin construction on their economical Express Homes product line. Closer to Naples, the Ave Maria development has been the value proposition for many, yet Thibaut is skeptical that this will continue over the next few years. “The Collier family lowered lot prices below cost to get the development going, so expect prices to rise so they can make up costs”. Today Naples has a few new apartment complexes, yet the rental rates are not perceived to be affordable when compared with options in Lee County. Thibault’s predictions are that over the next few years areas thirty miles north of Naples will experience the most growth, citing lot value prices of $ 3,000 where developers can build homes for $ 250,000 such as in Lehigh Acres. He also views North Cape Coral and Charlotte County as the next frontier for large scale development.
The Naples Real Estate Racehorse
In essence the Naples narrative remains the same. Land is at an ultimate premium; impact fees are staggering, as compared to other counties, and the availability of homes is always (comparatively) in short supply. Developers who overcome land and production cost hurdles create offerings to a market that can afford to buy homes at an ultra-premium price point. Yet the core Naples real estate market is rooted in buying and selling existing properties or purchasing lots and rebuilding homes to meet a buyer’s custom specification. By definition the Naples market is insulated, and the up-and-coming value driven buyer has few choices on the outskirts of town. Thibault predicts that in 2017 the bulk of permits will be pulled east of Immokalee Road and around Ave Maria but new homes even there will be at a premium given the developers need to recoup land costs. In North Naples the first luxury condominium tower, Kalea Bay priced from $ 1.3 Million is 75 percent sold out and the developer has four additional towers to build. A sprinkling of available new build residences near downtown and in Olde Naples is a result of private owners or developers tearing down lots to rebuild at an entry point of $3.5 Million.
While 2016 was not a record setting sales year it did allow for prices to stabilize. We enter the New Year with a sense that the Naples real estate market is functioning at a deliberate and calmer pace and with a grander sense of awareness. We know where new land opportunities exist for builders, national political distractions have diminished and as always, the weather is the perfect complement to the ease of living in Naples which is second to none. The presidential election crystalized the role that the media played throughout the campaign. The Naples market has the good fortune of consistently receiving accolades from prominent media outlets such as Kiplinger, Conde Nast and USA Today. The function of positive media attention is imperative to remain at the top of the destination radar, as umpteen baby boomers, who have yet to retire, are the core of the Naples residential market.
We at Naples Meridian look forward to keeping our readers informed on the nuances of this ever-changing market, as living and playing in this blissful environment is a luxury and a privilege.
Till next time…
Fátima Fatima S. Khokhar is the managing principal of Naples Meridian, a group that specializes in providing independent and confidential property consultancy and sales services to property developers, investment groups and individuals. Naples Meridian is the exclusive marketing and sales agent for the Olde Naples Residence project, a mixed-use development project located at 365& 375 5th Avenue South in Naples Florida.