With a new building safety law set to bring big changes to Florida's condominium market, an analysis shows unit prices are vastly overvalued in the densely populated southern portion of the state.
During the May through October buying season, units in Miami-Dade County sold for 181% more than they should have, according to statistics compiled by Peter Zalewski, principal of the CondoVultures consulting firm in Miami. Palm Beach County units were overinflated by 116%, while Broward County was the relative bargain — at 56% overvalued.
South Florida condo sales and values have slowed considerably over the past 18 months and the market is expected to fall even further in the new year, especially for older units affected by the building safety law, according to Zalewski.
The law likely will serve as "an accelerant on a fire that's already burning," he said in an interview.
In 2025, the state legislature has required aging condo buildings at least three stories tall to have engineering safety inspections completed, as well as studies that estimate what funding reserves are needed for maintenance and repairs. Condo boards must start collecting the necessary reserves and get the inspections every 10 years.
To increase reserves to help pay for needed repairs, some condo boards in the state are increasing their operating budgets and levying special assessments, moves expected to lead to much higher dues for unit owners. Some owners who can't afford the added fees will have to move, but they could have trouble selling because fewer buyers will be interested in taking on the costly maintenance expenses, even if the unit prices are deeply discounted, market observers say.
Rents below expectations
The law is in response to the 2021 collapse of the 12-story Champlain Towers South in Surfside, north of Miami.
With a population of about 6.2 million, the region containing Miami-Dade, Broward and Palm Beach counties is the biggest metropolitan area in Florida, the nation's third-most-populous state at 22.6 million, according to the most recent figures from the U.S. census.
To determine how overvalued the South Florida condo markets are, Zalewski said he applied the "1% rule," an estimate that investors often use to determine how much rental income a unit can generate. The rule says a property generally should rent for at least 1 percent of the purchase price.
From the Homes.com blog: Buying a Condo: A Comprehensive Guide
Zalewski's figures show that 5,085 Miami-Dade condo units sold for an average price of about $774,000 during the 2024 buying season, meaning they should generate $7,740 in monthly rent. But Multiple Listing Service data indicates Miami-Dade units are leasing for only about $2,750 a month, or 181% less than they should.
With an average price of $497,170, the 3,707 condos that sold in Palm Beach County during the period should have generated about $4,972 a month in rent. However, MLS data shows they are renting for only about $2,300. In Broward, 4,973 condos sold for an average of $327,285, or $3,273 a month in rent, during the period. MLS indicates units are renting for about $2,100.
"You're probably going to have landlords subsidizing tenants to live in the units," Zalewski said. "It is much cheaper to rent than to own in South Florida right now. The only case you maybe can make for owning is in Broward County."