Florida has a number of  the fastest-growing property markets in the US. The Florida Association of Realtors (FAR) has reported house price increases of 36 per cent in Naples, 41 per cent in Sarasota-Bradenton, and 28 per cent in Orlando. These are among the highest capital appreciation rates in the US, making them profitable markets to enter.

As a result of very strong demand, estate agents in certain areas of Florida have recorded property shortages, and builders are resorting to steps which discourage property investors in order to cope with this inventory deficiency.

Why the boom?

The Florida boom is part of a surge in property prices fuelled by low interest rates and the perception that the real estate market is more understandable than stocks and bonds. International investors have been losing confidence in traditional investments such as stock and bond portfolios and pension funds. Instead they are transferring wealth to tangible investments such as vacation and second homes, where there is the additional benefit that they can also entertain the family. For UK buyers, the competitive sterling exchange rate with the dollar remains an attraction, although this requires constant monitoring, as what goes up can always come down again.

Where is it going?

Grant Thrall, a professor at Florida University and author of Business Geography and New Real Estate Market Analysis, thinks that demand for Floridian housing has only just begun, and thinks that Florida may well catch up with Californian housing prices over the next 10 years. Noting that over 1,000 people relocate to Florida daily, Thrall says: “Short of the federal government prohibiting interstate migration, I can’t see anything stopping it. Florida is where California was 30 years ago. Californians said prices couldn’t go up anymore. Now, you have bungalows selling for $1 million, and rising.”

Relocation

There are 76 million baby boomers in the US (ie people born between 1946 and 1964). A recent Harris poll indicated that 59 per cent intended to relocate on retirement and that 21 per cent of those – over nine million people – plan to go to Florida. This is a huge number, and has parallels with the British property invasion of the Mediterranean over the last decade which has been a significant contributing factor to increasing property prices, particularly in Spain.

Another factor behind the investment in Florida is the change in working patterns. Technology such as the Internet and e-mail means that professionals are no longer tied to homes near their offices. Nicholas Retsinas, director of the Joint Center for Housing Studies at Harvard University, notes that the spread of technology is a significant catalyst in housing markets: “A day at the beach house no longer precludes a full day at work.”

Many European buyers are making a permanent move to Florida, the most popular areas being Orlando, the Gulf Coast around Sarasota and Naples, and the Atlantic Coast including Miami. These immigrants give high priority to school districts, crime and lifestyle issues.

Why buy in Florida?

Many American buyers looking for a second home realise that, out of all the US states, only Southern Florida offers almost guaranteed sunshine at relatively affordable prices.
British buyers, however, are motivated by a number of different factors. Firstly there is the value for money of Floridian property which remains significantly lower in price than UK property. Florida also has a better year-round climate than Mediterranean retreats which can be cold in winter. There are also certain inherent advantages such as the use of English, and a property legal system which avoids problems with local officials such as those frequently reported when buying property in Europe.

The largest group of European buyers in Florida are those seeking a second home in the sun. The Gulf Coast areas around Sarasota are very popular.

The winter temperatures there average in the 70s, while the laid-back lifestyle and cultural facilities make for an idyllic winter before spring arrives, prompting a return home.

Many Britons buying a property in Florida benefit from the winter sunshine. It is very theraputic to leave the foggy drizzle of the UK in November for the azure waters of Tampa bay, where rows of pelicans line the bridges. Similarly, leaving Florida at Easter as it begins to get very hot and humid and returning to England’s green and pleasant land can feel utterly delightful.

The other main group of European buyers are those seeking a buy-to-let Floridian property, whilst also hoping to use it for their own holidays. Finding out about the complex zoning restrictions is important, as each municipality has its own rules, with certain areas forbidding rentals altogether. Unfortunately estate agents do not always make this clear, and careful research is needed to ensure that you understand the restrictions in your chosen area.

Where to buy?

Orlando is bound to remain popular, due to its collection of theme parks and flexible zoning areas. Rental returns are generally very good here, although it is possible for areas to become so saturated with rental properties, that they are unable to attract renters. Bear in mind that some new developments pay very high agents’ commissions which can, on rare occasions, lead to slightly misleading property advice being given.

A property investment on a development monopolised by other investors should ring alarm bells: you don’t want to invest in a development in Orlando that is filled with fellow Britons owning properties on 80 per cent mortgages and requiring 40 weeks of rental income. Similarly, buying a condo in certain areas of Miami where ownership is primarily with many other Floridian property investors raises the question, what happens if they all resell their properties at once?

The value for money of the Orlando area compared to Britain remains a temptation; a fully furnished five-bedroom air-conditioned property with a pool near the parks sells for approximately £170,000. However, given the large number of these properties, bear in mind that selling in the short term or at the wrong time in the property cycle could mean you have difficulties recovering the realtor’s commission (as the seller, you would be paying it). There have been instances when mortgage valuations have been below the sales price of some Orlando properties.

Zoning regulations

Zoning restrictions on the Gulf and Atlantic coasts can mean there is a limited supply of properties. Although this is bad news from the perspective of having a wide choice to buy from, it is certainly advantageous in obtaining rental income. The Gulf Coast is an area that has seen a lot of British interest and tends to fall into two categories: areas such as New Port Richey, Englewood and Cape Coral offer more property for your money but lack a range of quality facilities on the doorstep, whereas Sarasota, Naples and Miami offer an excellent and sophisticated choice of style, culture, entertainment and shopping opportunities. Although houses in this second category are pricier, they can also command higher rental rates, up to £700 a week. In the long run, this is well worth the initial investment.

A favourable future

Recent information from the National Association of Realtor’s chief economist has stated that the fundamentals responsible for property growth are continuing – a growing job market and low mortgage rates (by recent historical standards) – which means that the outlook for Florida’s property market remains very favourable.

It also remains apparent that using a properly qualified and licensed realtor is a sound investment, providing they have extensive professional experience of both the UK and US markets.

With Florida’s lower cost of living, and the best steak dinner in town with all the trimmings costing a delectable £6, Florida truly is a paradise where you can expect to enjoy the good life.

PROPERTY MARKET FACTS

• Prices rose by 30 per cent in Orlando during 2005.
• An estimated 50,000 British people own homes in Florida.
• Orlando and its surrounding areas are the most popular with second home buyers, largely due to the proximity to Disney World.
• The statewide median home sale price rose 22 per cent during November 2005 to $192,400, up from $157,400 a year earlier.
• Since 2000, there has been a statewide appreciation of 84.6 per cent.