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The CEO of Related Group, Jon Paul Pérez, has indicated that many contractors are increasing prices by as much as 20% in response to impending tariffs. This price surge could significantly affect the costs associated with new condominiums and homes. The backdrop for these changes stems from President Donald Trump’s recent imposition of 25% tariffs on specific imports from Canada and Mexico, notably impacting steel and aluminum. These tariffs are not expected to end there, as broader tariffs are set to take effect starting April 2. Even before these wider tariffs are implemented, the uncertainty surrounding them, alongside ongoing inflation concerns, is prompting contractors to elevate their project bids significantly.
Pérez noted that contractors involved in seven ongoing projects for Related Group are adjusting their prices in anticipation of increased material costs due to tariffs. In a live discussion with CNBC, he remarked, “We’re seeing [subcontractors] throw an additional cushion into their numbers anticipating tariffs. It could be as much as 20%, depending on what material they’re getting from another country.”
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The rising costs are a projection of expected future expenses rather than solely based on current pricing, creating a degree of uncertainty about how these additional costs will be allocated between contractors and developers. Pérez elaborated, stating, “When you go through their numbers in detail and you start negotiating, you quickly find out they’re just sort of padding to protect themselves.”
This rising apprehension surrounding tariffs could exert further pressure on an already precarious housing market, characterized by high prices and elevated mortgage interest rates. A survey conducted by the National Association of Home Builders revealed that escalating construction material costs could potentially add around $9,200 to the price of a typical home.
As one of the leading real estate developers in the U.S., Related Group operates across a spectrum of projects, from affordable housing to upscale condominiums, predominantly in South Florida. Currently, the company is advancing over 90 development initiatives that encompass various types of housing, including rentals, affordable housing, mixed-use spaces, and luxury properties.
Jorge Pérez, the founder and chair of Related Group, has also pointed out that the Trump administration’s stringent immigration policies could further inflate development costs. The construction sector heavily relies on labor sourced from abroad, leading Pérez to comment on the potential economic impact: “There will absolutely be a cost effect in our industry, in particular the construction industry. Losing these people will have an inflationary effect.”
Presently, the luxury segment of the real estate market continues to demonstrate resilience, particularly in Florida. The company recently recorded sales of two penthouses at their high-end development on Fisher Island, south of Miami Beach, totaling an impressive $150 million.
Additionally, Related is in the process of constructing Rivage Residences Bal Harbour, a luxurious oceanfront condominium tower that aims to offer an extravagant living experience with expansive penthouses potentially exceeding 20,000 square feet in total size, priced at over $150 million.
According to Jorge Pérez, buyers in the luxury bracket—those purchasing properties exceeding $10 million—are less susceptible to fluctuations in the market, as they tend to possess considerable wealth. He noted, “The high-end buyer is a very particular buyer. Those people are buying over $10 million condominiums and typically they’re very, very wealthy. So they’re less affected; we’re not seeing a decline in that market.”
Conversely, the “middle market,” which includes purchasers of condos priced between $1 million and $3 million, is adopting a more cautious stance amid the uncertainty surrounding tariffs and immigration. Many potential condo buyers in Miami and South Florida hail from Canada and Latin America, which makes them particularly sensitive to shifts in immigration policy. “South Americans are coming and saying, ‘What’s going to happen with immigration policies?’ or, ‘Am I going to lose my visa?'” Pérez explained. He added that a recent project lost several prospective buyers from Canada and Mexico—individuals who were prepared to finalize contracts but hesitated due to tariff-related concerns. However, he remains optimistic that these fears will subside over time.
Source
www.cnbc.com