Buying a house in Orlando: the capital growth prospects

14th October, 2015
  • Central Florida has long been a magnet for homebuyers and investors from across the globe. Orlando, the region's second largest metropolitan area with a population of 250,000, is certainly no exception and the city is steadily earning a reputation as one of the best locations in the USA in which to buy an investment property.

    Currently valued at around 60% of its pre-recession peak, Orlando's residential real estate sector has lagged some way behind the wider US housing market recovery. As of late 2015, the average American property has recouped more than 90% of its 2007 value. In some cities, such as San Francisco, they are around 50% higher. 

    Recent increases in Orlando home values

    Property prices in Orlando have been rising steadily over recent months, mirroring a robust recovery in the local economy and employment market. Median list prices in the city rose by 8.7% during 2014, growing from $126,000 to $137,000. This is almost twice the rate of the wider US property market where prices rose by 4.7% over the same period.

    Going back further, an average investor buying a house in Orlando at the bottom of the housing market crash in September 2011, would have paid $94,000. The same investor would have since seen their property appreciate by $47,000 in value, representing a compound annual growth rate of 10.7% – an extremely impressive return by any standard.

    While investors buying in Orlando today find themselves further along the curve, there is still considerable capacity for future appreciation. Online property market portal Zillow.com forecasts property prices in the city to rise by 3.4% on average during 2016. With the market still to recoup some 40% of its historical value, there is likely to be further to go.

    Capital growth prospects in cheaper Orlando neighbourhoods

    Generally speaking, Orlando's cheaper neighbourhoods offer higher capital growth potential than more affluent parts of the city. Given the collapse of Florida's construction market as well as the loss in tourism-based services jobs, blue collar workers in Orlando were more impacted by the US economic downturn than they were in other parts of the country.

    With employment spiking at 10% across the wider Orlando metropolitan area, low-income communities bore the brunt of the recession and foreclosures were an everyday occurrence in the city's poorer neighbourhoods. 

    The knock-on effect of multiple repossessions has left house prices in many of these communities significantly undervalued, though prices have been growing at a faster rate on average over recent months. The bottom tier of Orlando's housing market (homes in the $0-80,000 range) saw an average 5.2% price increase the 12 months to July 2015; this compares with an average growth of 2.1% among properties in the highest price tier. 

    Capital growth prospects in lower-prices areas should continue to outperform those in more affluent areas over the coming months as job creation continues to intensify across the lower end of the employment market. 2016 should bring further good news for Florida homeowners and investors alike. 



    by: Prime Asset Investments

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