What does this mean for the market and developers targeting that specific segment?
Renters, by choice, are demanding superior quality homes. Studies have shown they highly value interior finishes, better amenities, and connectivity. As a result of these new demands in the shifting market, firms that meet the new standard can attain higher cash flows. And it has been seen on most of the projects with a crystalline lagoon with Crystal Lagoons technology on it, where sales have improved over a year (Sunterra sold nearly 800 units last year, being among the highest-selling communities in the country) and occupancy rates are at their highest.
Higher rates have affected the whole real estate market in terms of financing and development; this is because total existing home sales fell 2.4% from February to March and are also down 22% compared to last year, scaring investors off. If we compare the first two months of home purchases in the SFR firms segment between 2022 and 2023, purchases have fallen by 90% in 2023.
Despite this, larger-single family rental (SFR) firms are better off due to the positive impact on their balance sheets with increasing rent, and we must consider that single-family housing inventory is at its lowest point in the last 40 years. Larger investors are closely eyeballing these firms and can help projects with broader financing options for their specific needs.
Due to the current market condition, many analysts say that this will be the year of operational efficiency, not just efficiency when it comes to maintaining the property but specifically in the project as a whole, highlighting the use of technology in common spaces such as lagoons, concierge/reception, events, golf courses, and underutilized land. Incorporating technology that makes these projects more cost-efficient will be highly valued by investors because they are the same points set aside by developers and can improve earnings and drive sustainable growth in the long run.¯
The Way South
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