Global Property - Inside View, New York
Despite the uncertainty and volatility that defined 2016, the real estate market in New York has been strong and even broke several record highs, thanks, in large part to new development sales.
For the first time ever, the average price in Manhattan exceeded US$2 million.
Demand & Supply
Low interest rates and a steady jobs picture have kept demand robust throughout 2016.
Demand has been particularly strong for new developments in the sub-US$3m price segment, while supply at this price point has been particularly tight.
New York Market Overview
New York and London have long battled it out for the coveted position of leading global city in the minds and portfolios of high net worth individuals.
To date, London has been able to hold the number one spot, but the confidence in the US economy, its strengthening currency and ever present political power, has meant New York is experiencing a shift in attitude among the world's UHNWIs, particularly from Asia. By 2024, we predict New York will take the top spot for the first time.
This is not to detract from the appeal of London, but to illustrate how the gap continues to close between the two global cities. As the world's UHNWIs rise in number, there will simply be more investors to share between them.
The real sea change for New York began five years ago. Before that,approximately 10% of buyers were from overseas. Since then, the influx of investors from overseas has redrawn the picture, making up 15% of the overall market, and approximately 35% of new development purchases.
It is clear the current preference is for new-build property, but not just for the trophy apartments in the new towers that are changing Manhattan's skyline. Buyers have a keen eye for value and for opportunities to profit from capital uplift and high rental yields by buying into the best buildings in regenerating downtown areas.
A prime example is the South Street Seaport; a previously quiet and historic part of the financial district that is now tangibly on the up with new cultural and leisure attractions including Pier 17, many celebrated restaurants and landmark new developments such as the iconic waterfront glass tower, 1 Seaport. For first time buyers and foreign investors, the area offers an attractive price point which is helping to fuel a hot sub-US$3m sales market in Manhattan. Good news for investors, too, is the strength of the rental market in New York, which is buoyed up by high demand for luxury condos.
International investors are also attracted to New York for its superlative schools. Many families are choosing to educate their children first in the UK and then the US and their natural choice of location is downtown Manhattan, in secure, portered developments in young, vibrant areas within easy reach of their chosen university or school.
The importance of domestic buyers in new schemes should not be overlooked, however. 432 Park Avenue, the tallest residential tower in the western hemisphere, has seen a high number of sales from New Yorkers who want to upsize to a new building with five-star facilities. With 432 now complete, investors can truly understand the lifestyle on offer and the reality of its spectacular Park and City views seen through 100 sq.ft windows. Overseas and domestic buyers alike are willing to pay the premium to call such an iconic address, home.
The choice of high quality new listings in New York is on the rise. As such, developers are engaged in a battle of amenities to differentiate their product while aiming to win the affections of buyers. Gyms, concierge and valet parking now come as standard in most highend buildings and new forms of lifestyle luxury are required, from Michelin-starred restaurants to lifts that operate at lightning speed or, in the case of 1 Seaport; a seasonal luxury boat service for residents.
Increased international demand for New York property is driving more overseas developers to enter the market and that, in turn, is leading to a shift in the design of new product on offer. A fashionably neutral Scandinavian look suits new developments designed to appeal to multiple nationalities and offers the kind of easily adaptable and low-maintenance apartment they can lock up and leave.
Buyers looking for a new lifestyle rather than a more hands-off investment are seeing growing potential in Long Island, which is close in proximity to the city and more affordable than The Hamptons. Long Island remains a popular choice with Asian buyers and families alike because of its excellent schools. The area suits those seeking to make the shift from city to the easily-commutable suburbs where houses may come with pools and expansive gardens.
Whether purchasing for investment or lifestyle, New York is, and always will be, a premier destination for the global elite.
Areas to watch
Lower East Side/East Village: The opening of the Ludlow Hotel and Dirty French has sparked the interest of the highly fashionable jet-set crowd. New developments like Essex Crossing are changing the landscape.
Lower Manhattan: The recently opened World Trade Center Transportation Hub, called the Oculus, has increased access and connectivity to the area.
Brooklyn: Williamsburg led the way for many hip Brooklyn neighbourhoods and helped drive prices in the borough for over a decade.
Long Island City (LIC): LIC has evolved from an industrial neighbourhood known for its large warehouses, parking lots and film studios into a premier residential neighbourhood filled with galleries, museums and a thriving arts community.
New York, the premier financial capital of the world, is largely regarded as a safe-haven for foreign buyers who often have to contend with taxation issues and/or instability in other cities around the world. In many cases, these buyers are shaking off weaker currency exchanges for the strength of New York real estate.
Low interest rates and a healthy job market have spurred many long-term renters into first-time buyers meaning properties priced below US$3 million move fast.
The strong underpinnings of the U.S. economy and historically low interest rates are likely to be maintained for some time contributing to a stable real estate market for the foreseeable future.
Courtesy: Knight Frank
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