Miami is known as a major area for commerce, culture, entertainment, and trade. It is also a hub of research institutes, medical centers, and biotechnology companies. Most of the city’s industries were hit hard by the COVID-19 pandemic in 2020, but businesses have seen an improvement throughout 2021. Over 68,700 new private-sector jobs were made available by November 2021, and the unemployment rate dropped to 3.8% in October 2021 from 8.5% the previous year.
The Cost of Building a Custom Home in Miami
For the construction industry, the Associated General Contractors of America (AGC) noted a big reversal in 2021 trends compared to 2019. The Miami construction industry had major projects totaling $14.18 billion. Residential construction has been on a steady rise since 2016. It registered $10.4 billion in residential projects despite the effects of the COVID-19 pandemic.
Additionally, because the country is undergoing a shortage of home supply, the residential construction industry has the potential to work on more projects. This compounds with the increasing home prices. The median listing home price in Miami was $465.2k for November 2021, which is 16.3% higher than the previous year. Single-family homes in the city are typically priced at $570k as well. Home values have gone up by 18.8% over the past year.
Demand for ready homes will shift to clients now wanting new home construction services. Market experts expect to see the need for affordable housing to continue to fuel the residential construction industry.
New home construction costs $100 to $155 per square foot for the national average. Constructing a value-conscious home in Miami costs about $224 per square foot, however, this starting cost is uncommon. More customized homes will cost between $300 to $350 per square foot, while high-end home construction projects can reach up to $400 per square foot. The total construction costs will vary depending on the other factors of each project.
The total cost of construction is a combination of hard and soft costs. Hard costs involve all the physical aspects of the house itself like framing, foundation, plumbing, roofing, and flooring. Other factors, including land, architecture and design fees, builder fees, permits, and additional features, fall under soft costs. These costs will fluctuate independently.
The cost of construction for a value-conscious home can start at $224 per square foot, although homeowners are cautioned that finding builders to work at this price point will be very difficult. A mid-range home with custom features and finishes would cost between $300 to $350 per square foot, on average. For a more high-end Miami home with expensive finishes and additional features, homeowners can expect to see pricing starting at $400 per square foot.
The overall hard costs also include materials, labor, site, landscaping, and the other physical aspects of home construction on top of the construction cost per square foot. The pricing for these factors will vary between firms, based on both the project details and job specifications.
In terms of material costs, the supply chain issues in Florida have yet to experience relief despite headlines reporting the worst is over. Lead times are not worsening, but the delays from material and labor scarcity still take a while. Delays are further complicated by other factors like port congestion, semiconductor shortfalls, and weather conditions. This is causing costs to rise for the industry.
Market reports have shown that construction costs nationwide grew about 17.5% between the third quarter of 2020 and 2021. The costs for other materials have gone up. Steel mill products went up by 123.1%, diesel fuel by 67.2%, aluminum mill shapes by 35.1%, sheet metal products by 25.7%, and gypsum by 22.9%.
Just as the lack of available labor has led to fewer people working on production or shipment, there are also fewer construction workers. The current pool of labor is not enough for the supply side of the industry to keep up with demand.
The average cost of roofing in Miami is between $5,000 and $14,000 and can go up to $30,000 for some projects. Metal roofing is from $6 to $12 per square foot while asphalt roofing is $1.50 to $4 per square foot.
Home foundation costs for Florida are at an average of $5,926. The typical range is between $4,258 to $8,440 but can go for as low as $3,512 and as high as $9,297.
A HVAC unit will cost homeowners around $4,850 to $9,400 per unit. The average plumbing installation cost is $663. The cost will generally range from $251 to $1,076. Some services cost $125 for low-end and $2,832 for high-end work.
Soft costs cover the aspects of new home construction like land development, the local government permitting process, design, and architecture..
Cost of the Land
Miami is currently seeing an annual growth rate of 1.09%, with a recent 19.73% increase in its population. More people moving into the city will typically result in land value going up. Some areas may also cost more than others, depending on available amenities and infrastructure.
The average cost of Miami lots on Redfin is about $30.26 per square foot in the $215,000 to $910,000 range. Most lots on the website are sized between 3,360 to 217,000 square feet. The most expensive lot is priced at $14,500,000 for 40,946.4 square feet. It is described as a mixed-use development site in Little Havana. The cheapest lot for sale is located right outside Miami-Dade County Urban Boundary Zone and close to a densely populated residential area. It costs $215,000 and is sized at 217,800 square feet.
Lots on Zillow are more cheaply priced. The most expensive lot is $299,500 for 4081.572 square feet. It is located in central Miami a few minutes from Wynwood. Meanwhile, the cheapest lot is $34,500 for 6,969.6 square feet and is located in southwest Kendall close to a residential area.
Landwatch has limited undeveloped lots for sale. The most expensive lot is $99,900 and is sized at 7,405.2 square feet. It is located in Gould’s subdivision just off of Old Cutler Road. The cheapest listing is a 6,600-square-foot lot priced at $24,900, located west of Tamiami.
Permits and Other Fees
Permits for Miami are completed digitally through the city’s ePlan or iBuild platforms. The local government also has a guide to procuring permits available online. The total cost of permits is dependent on each new construction project’s details, including square footage and number of floors. Some of the upfront costs are $0.15 per square foot for a new single-family residence. The minimum fee for all building permits is $130.
The following is a table of some of the available permit fees from the building permitting fees section. For the complete list, Miami’s building fee schedule is available for online viewing.
Architecture and Design Fees
Architectural fees in Miami will generally cost around 8% of construction costs. For example, a 25×25 foot room addition that cost $165,000 to $200,000 to build could result in an architectural cost of $8,250 to $30,000. A $750,000 custom built home would then cost $37,500 to $112,500 in architectural fees.
Architects who charge per hour will generally price their services between $50 to $150. Some architects may even charge between $125 to $250. The cost varies based on the type of work request, location, and training, experience, and reputation.
There are also architects that charge by the square foot. Miami architect services will generally cost $2 to $15 per square foot for different services. Concept development and drafts, including consultation, site visit, and initial draft documents, can cost between $2 to $5. Construction documents will cost the same; this includes detailed layer drawings. Project management or administration will depend on the location and firm.
How do the custom home building costs in Miami compare to other nearby cities?
Data from the last five years gathered from online contractor marketplace BuildZoom (BZ) show that the average cost to build a house in nearby areas tends to be higher than in Miami.
To build a home in Weston, which is about 60 kilometers away from Miami, costs an average of $908,058. The highest value of home construction in the city is $2,600,000, while the lowest is valued at $621,612.
Data for Hallandale Beach showed a single permit, which was $472,000.
What Leading Custom Home Builders and Architects that Serve the Miami Area Say
Joseph E. Feinberg, Certified General Contractor (CGC) and vice president of Allied Kitchen and Bath, shared that firms and businesses in the industry are experiencing the effects of the labor shortage. He said, “Everyone from architects to laborers is either in short supply or unavailable.”
In addition to that, it is expected that the next two years will have over seven million unfilled jobs due to an unqualified workforce.
Feinberg also shared that the supply chain for all materials is backed up, from raw materials to finishings to appliances. He suggested that homeowners work with design firms that can provide both design and carpentry services.
Materials and labor now cost between 25% to 70% more than before. An increase in prices affecting short and long-term expenditure is expected. Feinberg said, “The most important thing is to start planning sooner, rather than later.”
Amy Hollub, the Vice President of Sales at high-end firm Hollub Homes, shared that the firm’s price per square foot used to average between $325 to $350. Now, the cost has gone up to $400, a price which includes permits, pools, landscaping, and high-end finishes.
Hollub has noted a 50% increase in prices, with no end in sight. Subcontractors, suppliers, and material prices are all going up. She says, “We are unable to lock in any pricing. On top of this, there are issues with lack of inventory, labor shortages, and supply chain.” Additionally, Hollub Homes used to order a month in advance for supplies but now needs to order eight months in advance.
Escalating costs have resulted in larger home construction scales to justify land costs. Homeowners have bigger expectations for their homes, including a home office, flexible spaces, guest suites, gyms, and guest houses.
Hollub advised homeowners to research the contractors they will be working with. She suggested looking into how long a builder has been in the area, as well as their reputation. It is also important to check if the builder has a system in place to track jobs with full transparency.
Michael Newman, LEED AP, owner of Newman Bros. Construction & Development Inc., shared that the cost to build a home is around $300 to $500 per square foot for a high-end but not luxury project. The design fees on top of construction range between $30,000 to $40,000 with an additional $25,000 to $45,000 being dedicated to the interior designer.
According to Newman, building departments are feeling the impact of high demand for construction. The building departments are getting more applications for permits than what is the norm. He said, “Usually, these departments are understaffed, so getting the permits you need through the city and/or county is a longer process now than it used to be.”
The high demand for construction has also resulted in needing ample pre-construction planning and fulltime on-site management. Subcontractors are facing more work than their number can handle; Newman stated it is important to have someone pushing and monitoring the project on-site. Homeowners are advised to ask if the builder they are partnering with will have a dedicated supervisor on site to manage the project.
“One thing that we offer is an Owner’s representative service. This is where the owner or investor hires us to represent them prior to and during construction to manage their general contractor,” said Newman. The representative service Newman’s firm provides helps streamline the process, avoid costly delays, and change orders. Newman and his firm sees growing demand for the service given how frustrated homeowners are with the ongoing construction issues.
Sebastian “CB” Eilert, LEED AP, owner of Sebastian Eilert Architecture, Inc., shared that the architecture cost tends to be about 8% of total construction costs. His firm used to charge $15,000 for a single-family house under 2,000 square feet, but doing that now has become unsustainable. The firm’s fees start at $40,000, which is at the lower end of the market for architectural services.
The cost of mechanical, electrical, and plumbing (MEP) starts at $2,500, while structural engineering costs at least $4,000. These figures take into account the calculations for permitting.
The Future of Miami’s Residential Construction Industry
Following the national trend, Miami is seeing a shortage in its housing supply. The shortage has also played a part in raising housing prices, which may continue to persist well into 2022.
Experts perceive the shortage as an opportunity for the construction industry to work on more projects moving forward. Florida in general has a positive outlook for residential construction. The steadily increasing demand for housing has high chances to fuel the residential construction industry beyond 2021.
Miami’s recent growth and projected industry outlook for residential construction provide contractors with more project opportunities. Contractors in the city have experienced an increase in their salary, reaching more than double at $119,929.
Considering building a home in Miami?
Contact us for a free consultation