Do the Panama Papers Affect Miami Real Estate?

The newspapers of Panama, the real estate market of Miami and the news that has an impact in all countries. When the story of the Panama Papers broke out, the whole planet was shocked by the tricks of rich people around the world to cover their wealth and avoid taxes. The story emerged after a group of investigative journalists from influential newspapers went to great lengths to unearth the scandal.

When they finally got their story, many were in awe. The story of the Panama Papers involved the discovery of data related to the secret deals of a Panamanian company known as Mossack Fonseca. The company was a favorite of the world’s billionaire and millionaire clients who wanted to set up shell companies and offshore accounts to hide money from their governments.

There is a famous saying that wealthy people all over the world speak the same language. The publication of the data of the Panamanian firm proved it. The client list included top businessmen, politicians, celebrities and heads of criminal networks. When the full scope of the deals was absorbed, a European leader was forced to leave office; governments initiated investigations and others chose to initiate damage control measures.

Closer to home, the US Treasury Department jumped into action and began writing rules for banks to reveal the identities of the people behind shell companies. The department also established standards to stop the opening of accounts abroad.

Miami’s real estate industry was one of the hardest hit. The reports detailed that some of the money used to buy overpriced condos came from people named on the list. It is notable that even before the mention in the Panamanian newspapers, the Miami real estate industry was under scrutiny from the United States government for money laundering claims. Authorities weren’t comfortable with people buying a substantial amount of Miami condos and luxury properties for cash without a trace. Considering that some of the listings cost millions, it was curious how buyers could afford cash transactions without legal documentation.

Miami Florida at sunset, colorful illuminated buildings skyline

The United States government raised a red flag on the type of investments in Miami-Dade County and established measures to trace the origin of the money of the buyer who pays more than $ 1 million in cash. The main concern of the authorities was that since the money did not pass through the formal banking sector, it was considered suspicious. In 2015, about 53% of the properties in the area were recorded as cash sales.

When foreigners bought $ 6.1 billion worth of properties in Palm Beach, Broward and Miami-Dade, there were many suspicions about the source of the funds. Most of the money was thought to represent capital flight from Latin American companies. When the real identity of the property owners emerged, it came as a shock to the industry players. Paulo Alves Pereira, a Brazilian politician and real estate developer was one of the names. It was discovered that he was the true owner of Mateus 5. Paulo resigned as governor of Brasilia some years ago after being accused of corruption. When the Miami Herald decided to investigate the report further, it found that at least nineteen foreign nationals who own property in Miami were featured in Panama newspapers. These nineteen people are suspected of being involved in fraud, bribery and tax evasion in their country. The investigation also found that many clients from Brazil who used the services of a particular local real estate attorney had questionable backgrounds. Most were politicians, people with political connections, and judges. The newspaper found that the Miami Association of Realtors organized an event to advise their investors on how to get around the new tax rules introduced by the government.

It is easy for foreigners to buy property in Miami using shadow legal entities. Secret trusts, limited liability corporations, and offshore companies can buy any property in Miami without any hassle. There is nothing illegal in the agreement as long as the companies pay taxes and declare their assets. The fact that foreign nationals who invest between $ 500 and $ 1 million in a US project have the ability to become US citizens through the EB-5 visa program has also been of great interest to Latin American citizens.

Although many factors have contributed to the recent slowdown in the Miami condo market, one of the reasons must be the publication of the Panama newspapers. Foreign buyers can no longer do business as usual. They find that many more questions are being asked compared to last year’s offers. At the same time, many Latin American companies are going through an economic and political slump.

Panama Papers can affect Miami condo prices that can drop to affordable levels. At some point, the massive entries pushed property prices so high that they were not accessible to the locals. Rental prices can also drop to affordable levels when vacant condo owners choose to lower their rates to attract renters. 2016 has seen the completion of many new developments and the market is about to reach saturation point.

Investors in new developments now choose to convert them into rental properties until the market readjusts. At the moment, it appears that the impact of the Panamanian newspapers has dented the image of Miami and its luxurious condominiums. It remains to be seen whether the disclosures will have a significant effect on the industry. Authorities will certainly take a closer look at property deals completed in Miami involving foreigners and cash. The effect of the Panama Papers has left its mark for the next few years.