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March 21, 2013 7:43 pm
This spring, as Cyprus writhes, Miami estate agents are licking their lips. Back in 2008 Miami prime property prices in the city crashed by about 40 per cent. But these days they are estimated to be a third up from their lows – and rising.
In part that is down to the wider American economic recovery, and capital flight from places such as Latin America and China. But there is another factor: the buzz is that wealthy European families are increasingly purchasing properties around Miami. For while these families once headed to places such as Spain, Portugal, Greece (and Cyprus), the eurozone turmoil is pushing them to Florida for reasons of “stability and predictability”, one realtor told me this month.
It is tough to judge how much money this trend represents. But as a symbol of the eurozone woes, it is striking for at least two reasons. First, places such as Cyprus, Greece and Spain need all the consumer spending they can get. If eurozone (or Russian) wealth is moving further west, that is bad news for those bruised Mediterranean property markets, empty restaurants and so on.
But the second reason the Miami tale is notable is that in an ideal world Florida should not be a competitive threat for Europe – but a source of great inspiration, if not hope. For if you want to imagine how eurozone leaders might create a vibrant future for places such as Cyprus or Greece, within a common European economic system, the tale of Florida is heartening.
Think about it. A few decades back, Florida was a laggard in economic terms, in the US. But Miami successful rebranded itself as a global hub, partly thanks to the Cuban influence, and Florida as a whole built an $80bn-a-year tourism business that now directly hires a seventh of all state employees. Strikingly, more than nine-tenths of this tourist trade comes from elsewhere in the US, particularly the American north. Florida, especially, benefits from the so-called “snowbird” migration, the millions who flee northern US regions and Canada each winter to visit or live in Florida.
To some degree, the snowbird phenomenon has emerged because there is a shared currency system and cultural platform across the US; in economic terms, Florida is trading its beaches for, say, Midwestern cars or New York services. However, another draw for those snowbirds is a welcoming infrastructure; consumers like to go to Florida not merely because of the sun, but for the sense of legal predictability.
Now, this pattern is present in Europe as well. Spain gets more than 50m tourists each year, of whom 12m come from the UK and 8m from Germany. Greece, Portugal and Italy are also tourist destinations for sun-starved northern Europeans, albeit on a smaller scale. But though Germans, British and Dutch households have started buying southern properties in recent decades, Europe’s snowbird phenomenon lags its American counterpart, partly because of cultural and logistical divides.
And – sadly – the political and economic uncertainty does not help (even though the south needs that snowbird trade). Never mind the tales about Miami real estate, what is more striking is that German tourist visits to Greece tumbled 6 per cent last year, and their spending declined 10 per cent, apparently because of concern about anti-German backlash.
Spending in places such as Spain has stalled too. And though US real estate developers such as Donald Trump have declared there are extraordinary property bargains in Spain and Greece, with prices 30 per cent lower than the peak on average, there is little evidence that cash-rich Germans or Dutch are rushing in.
Is there anything that could change that? Some eurozone observers jest, with desperation-fuelled black humour, that radical state action might help. One joke doing the rounds of eurozone policy circles is that the German government should start using its vast public coffers to purchase vouchers for its pensioners that could only be spent in Greek Spanish or Portuguese holiday camps.
After all, if hordes of German, Dutch or Finnish pensioners could be forced to spend money in Greece or Cyprus, that might rectify those pesky current account balances and boost activity down south. Better still, the scheme might even be applauded by German voters; or, at least, the sight of sun-tanned happy pensioners would inspire less anger than the thought of German money vanishing into the black hole of Cypriot banks. “It could be a win, win,” quips one eurozone figure, who calls it a “Club Med holiday bailout”.
For the moment, this option is just a late-night joke. It is those private sector snowbirds – or property developers – that investors need to watch. If those birds flock south, it could be a sign that Europe is finally healing; if they do not, it will be ominous indeed. Either way, better hope that Europe can learn the right lessons from Florida. Failing that, those Miami estate agents will be celebrating for some time.
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