Market Predictions: Navigating Risks and Opportunities in the Key Biscayne Real Estate Market

Jacqueline Gallardo Group May 20, 2024

Market Predictions: Navigating Risks and Opportunities in the Key Biscayne Real Estate Market

Ten minutes southeast of Miami, across Biscayne Bay, the island community of  Key Biscayne has long been celebrated as an enclave of sophisticated seclusion. With all the charm of a quaint small town and the luxury trappings of a cosmopolitan urban center, Key Biscayne has much to offer homeowners, vacationers, and investors.

The area's stunning waterfront lifestyle serves as the backdrop to a unique luxury housing market. Though Key Biscayne's waterfront estates garner much of the market's real estate headlines—rightfully so, of course, considering the majority are valued north of $25 million—the community also features a diverse collection of residential options, including modern mansions, mid-century bungalows, and a broad array of condos.

Given Key Biscayne's relatively small size—roughly 1.25 square miles—the real estate market is incredibly dynamic — not unlike Downtown Miami, Brickell, or Miami Beach. As with those larger markets, this island paradise presents buyers and sellers with several risks and opportunities. Successfully navigating those high and low points requires understanding the dynamics and broader economic factors impacting Key Biscayne's real estate market.

Risks and Opportunities in the Key Biscayne Real Estate Market in 2024

Ever-evolving, Key Biscayne's luxury real estate market— as well as the broader Miami and South Florida marketplaces — is where risks and opportunities coexist daily. Near the midway point of 2024, four areas look to define the risk/reward nature of high-end housing for at least the next six months, if not longer.

Luxury Demand

Miami's remarkable transformation has bolstered its image from a mere vacation destination to a vibrant, sophisticated city to call home. Key Biscayne, just a stone's throw from Downtown Miami, has directly benefited from this shift. With the island's exclusive luxury condos and prestigious estates, buyers see Key Biscayne as a sanctuary offering serene coastal living while maintaining proximity to Miami's dynamic urban life.

The condo market is desirable to older buyers seeking a hassle-free lifestyle after downsizing. Key Biscayne's condos have emerged as a primary choice with pristine amenities and lower maintenance compared to single-family homes. Florida's tax-friendly policies continue to attract high-income professionals, with significant migration from states like New York and California. This has led to steady market demand and healthy appreciation.

In addition, FIFA's choice of Coral Gables, 20 minutes away, as its U.S. headquarters ahead of the 2026 World Cup will place an even brighter international spotlight on the region, ensuring steady demand for Key Biscayne's luxury properties.

However, while steady demand is a positive sign, the market faces potential headwinds due to market saturation and economic volatility.  Rapidly increasing demand has led to competition among buyers, which could push prices higher, potentially sidelining some market segments in an era where interest rates are considerably higher than they were a few years ago. Economic uncertainties could also slow international demand, particularly from Latin America and Canada, South Florida's two largest international real estate investment groups.

Rental Market

Investment is a critical aspect of Key Biscayne's condo market, and the town's rentals often stand far apart from other South Florida upscale rental markets. Rental rates here far outpace the rest of the region, with the exception of Fisher Island, which is its own unique island oasis.

Despite cooling trends in the broader rental market, opportunity exists across Key Biscayne's premium rentals, including houses and condos, with waterfront views or luxury amenities still in demand. Short-term rental options especially remain appealing due to consistent tourist demand and the international allure of Key Biscayne.

Of course, new multifamily developments offering attractive incentives could draw away potential renters, increasing price pressure on older condo rentals. The Brickell neighborhood just south of Downtown Miami offers renters a glossy urban-core alternative, with its own namesake key filled with residential highrises. Any increase in multifamily apartment units across Miami could saturate the rental market, reducing rental yields.

The good news is that the Key Biscayne area remains a highly desirable lifestyle outlier that keeps Miami close but not too close to imposing on the secluded island vibe.

Inventory

Key Biscayne's luxury real estate market is in a balanced phase. While still low by historical standards, inventory for both houses and condos remains steady, with both boasting around a five-month supply. That could change over the next six to 12 months, especially for the condo market.

To satisfy growing buyer demand for turnkey properties that require little to no additional work upon purchase, developers are strategizing bulk buyouts for older condo buildings to revitalize them into high-end luxury developments. Another source of sudden inventory could stem from new condo maintenance laws requiring condo associations to carry enough reserves to fund necessary structural repairs. The law, set to go into effect at the start of 2025, could compel some investors to sell due to rising fees, potentially leading to an influx of inventory.

Don't also be surprised to see sell-offs by investors who, after making purchases in the midst of the pandemic, finally make good on their impressive appreciation. More units could put pressure on prices, pushing them downward. Still, unique properties with amenities buyers want — sustainability, wellness amenities, high-end tech, and privacy features will continue to command broad interest and premium prices.

Mortgage Rates

Since late 2023, there's been a consensus in the real estate industry that mortgage rates, having reached a 23-year high in October 2023, would begin a gradual decline at some point in 2024, with mortgage rates ending the year anywhere from 6% to 6.5% for a 30-year fixed rate loan. After falling to an eight-month low in January, rates have done nothing but climb. Now sitting at a six-month high, the predicted drop remains just that, a prediction.

Should the rates decline, which remains a real possibility, more attractive financing will likely bring more buyers into the market, providing sellers with a highly agreeable sales market. Also, existing homeowners who purchased when rates were parked above 7% between August 2023 and January 2024 could leverage the lower rates to refinance and reinvest in their properties.

Though Key Biscayne transactions rely more heavily on cash purchases, particularly for houses, an influx of new buyers could increase condo prices faster than expected.

Navigate Key Biscayne Real Estate with a Trusted Partner

Are you a buyer interested in learning more about Key Biscayne's unparalleled island lifestyle? Or a seller seeking insight on how to best position a property to sell amidst shifting market dynamics? Contact the Jacquie Gallardo Group today to explore your Key Biscayne real estate investment options.

*Header photo courtesy of the Jacquie Gallardo Group’s website




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