MIAMI (AP) – Facing a teetering economy at home, wealthy Brazilians have been pouring money into what they increasingly see as the safest place to invest: South Florida real estate.
So are Argentinians, Colombians, Mexicans, Venezuelans, French and Turks — almost anyone with money to shelter, a direct flight to Miami and a shaky economy to flee.
Their cash has helped drive the latest twist in Miami's ever-evolving transformation — from a 19th century rail stop to a tourist-and-retiree hub to a haven for Cuban refugees to now a harbor for global investors. No American skyline has undergone a more drastic face-lift from foreign cash in the past decade: Luxury condo towers and swanky retailers crowd a downtown once marred by empty lots.
And almost no developer expects the demand to stop.
Yet Miamians as a whole have scarcely benefited from the glitz. By catering to wealthy foreigners able to jet around the world, the area boasts a showcase of highly visible investments but not the broad income gains that would serve the bulk of its residents.
Wages have actually dropped for Miami workers in the past year. Area unemployment tops the national average. Miami contains the largest share of renters in the country who devote over 30 percent of their pay to housing — the level the government deems burdensome. Census Bureau data show that high rents burden 66 percent of Miami tenants, compared with 52 percent nationwide.
Workers have few affordable housing options in neighborhoods sandwiched between luxe coastal development and the marshy Everglades.
"We're not seeing the benefits of that income being disposed of in the local economy," said Ned Murray, associate director of Florida International University's Metropolitan Center. "That impacts local businesses, and we're losing opportunities to create year-round housing for our workers. They're moving out."
With its glamorous locale and easy access, Miami real estate offers an asset that's appreciating at a time when other investments have shrunk or turned frighteningly volatile. It's a testament to investor concern about stocks, bonds, commodities and economic growth that a stretch of land prone to natural disasters and the ravages of climate change can be coveted for its real estate potential — less than a decade after the bursting of a U.S. housing bubble.
"All of the insecurity around the rest of the world only reminds people how important it is to have assets in the United States," said Alicia Cervera Lamadrid, a developer who is leading sales efforts for the planned 57-story Elysee, with condo units starting at $1.65 million and personal wine storage available for residents.
No fewer than 126 residential towers are planned for construction in South Florida. One sign of the scale of wealth from abroad is that the majority of foreign purchases are being funded with cash, not debt.
Last year, foreigners spent $6.1 billion on Miami-area real estate — 36 percent of all such investment, according to the Miami Association of Realtors. Nationally, foreigners account for just 8 percent of sales. Brazilians are the predominant searchers for Miami homes online, trailed by Venezuelans and Argentinians, according to the association.
The influx has been sudden enough that the federal government has announced plans to monitor home purchases exceeding $3 million in Miami and New York City. Starting in March, the government will temporarily require title companies to identify buyers of property. Authorities have grown concerned that money launderers may be using anonymous holding companies to stash money in high-end real estate.
Purchases by Brazilians paused briefly last year, when the nation's currency, the real, tumbled against the dollar. But as Brazil's economy has worsened, developers say sales have picked up again even though the weaker currency means Miami homes cost them nearly 50 percent more in dollars than in late 2014.
The average luxury condo price in Miami Beach has surged 35 percent from a year ago to $3.7 million, according to the real estate brokerage Douglas Elliman.
Anthony Graziano, executive director at Integra Realty Resources, who has analyzed the Miami market, expects sales to remain strong for properties worth more than $1 million, outpacing those in the $400,000-to-$800,000 range. Graziano describes a wave of wealthy buyers who seem intent on investing in properties that can protect their money from volatile markets.
"There really is no other place to put your money," he said. "Stocks are getting hammered. Bonds are getting high. What is your equity play if you're an ultra-high-net-worth investor? Buy one-of-a-kind luxury real estate."
Downtown Miami is "beginning to shift, but the question is, to whose benefit?" said Arden Shank, executive director of Neighborhood Housing Services of South Florida. "It doesn't benefit the people who have been there for a long time."
The metro area's unemployment rate is 5.5 percent, compared with 5 percent nationally. Average hourly earnings have dipped 0.4 percent to $22.57 from a year ago. By contrast, the national average wage has risen more than 2 percent in that time.
The influx of wealthy real estate investors does mean some benefits for the area, notably a miniboom in the city's creative community. Murray's research shows a growth of 21,568 jobs in the design, film, media, performing arts and museum sectors from 2010 to 2012.
Government figures show that the number of Miami-area jobs in the leisure and hospitality sector has jumped 28 percent since the recession began in late 2007. Even so, seven of the top 12 occupations in Miami-Dade's tourism-driven economy produce less than half the median family income, Murray said. For many families, 65 cents of every dollar earned gets spent on housing and transportation costs — a crushing burden.
"Once you exceed the 50 percent threshold, you begin to lose working families and working households," Murray said. "We already see it: A decline in working families, a decline in Miami-Dade in owner households in certain income categories."
Regardless of income or wealth, everyone with a stake in South Florida faces the potentially dire consequences of climate change. Locals have grown accustomed to the flooding that submerges low-lying intersections and sidewalks on sunny days. Experts warn that as the seas rise further, flooding may become permanent, turning streets into canals, endangering access to drinking water and eroding the man-made beaches that have long drawn people to Miami.
"There is a disconnect — there's a real estate bubble, and then there's where we see sea level rise going," said Henry Briceno, who studies the effects of rising sea levels through the Southeast Environmental Research Center at Florida International University. "That's what really worries me: The rush to make money right away without thinking of the future and who is going to pay."
Yet to many wealthy international buyers, the opportunities appear to outweigh those risks.
Because so many of her clients now own Miami property, Sao Paulo-based interior designer Brunete Fraccaroli recently bought a condo at One Paraiso, a 53-story tower with a beach club slated to be finished next year. She expects her Florida clientele to grow as Brazil's plight intensifies.
Analysts say the South American country may be headed for its longest downturn in more than a century. Operating losses and labor strikes have battered the state oil company, Petrobras. Government spending cuts have failed to curb the deficit. Political corruption has left the country in chaos.
"We think that the Brazilian real is going to drop more and more — it's going to be worse," said Fraccaroli, who also stars in her country's reality TV show "Rich Women."
The influx of rich foreigners has led to changes in sales at foreign-owned businesses with Miami outposts. One is Artefacto, a high-end furniture maker with multiple outlets in Brazil and Miami. CEO Paulo Bacchi said he sees his customers buying furniture for larger homes compared with prior years, which suggests to him that they plan to stay in Florida longer. It's a point echoed by other business people who say tourists are now staying for months instead of weeks.
For some transplants from South America, there's also a welcome lifestyle change. They can flash their wealth in Miami instead of hiding it for fear of criminals, expatriates say. Women can wear their diamonds instead of burying them in their purses. Bulletproof cars are no longer necessary.
"Every single city in South America — there is a basic problem of safety on the streets," Bacchi said. "Here in Miami, you can drive convertibles."
Gentrification, which helped tame Miami's gritty arts and design districts, has been followed by luxury shops including Hermes, Cartier and Christian Louboutin. The storefronts have brought a glossy finish and valet parking to once-empty showrooms — and forced some independent art fairs and pop-up events to relocate during this year's annual Art Basel Miami Beach revelries.
"We're more of a luxury destination than we used to be." said William Talbert, president and CEO of the Greater Miami Convention and Visitors Bureau. "Why they're being built is because of the international customers — this is what they want."
The good times have sparked questions about how long money from abroad can support the area real estate and its economy. In a survey of 42 real estate experts, 69 percent identified Miami as facing risks of a bubble within five years, according to the real estate data firm Zillow.
Developers downplay the risk, noting that cash, rather than debt, is driving most of the purchases. And Miami has one advantage that should help it continue to draw wealthy buyers: No state income taxes. It helps give Miami an affordability edge over California and New York City where international buyers also cluster.
Someone who earns $1 million in Florida pays about $100,000 less in taxes than in New York City, noted Carlos Rosso, an executive with the Related Group, a developer. Those tax savings add up to nearly the equivalent of a yearly mortgage payment on a multimillion dollar home.
"That's why people are moving here — they can get a $3 million house for free," Rosso said.