The investing market can be a very personal thing, especially when it comes to real estate. In the New York City market, buyers and prospective investors have very different tastes, needs, and desires for use of properties. Even within residential property, there are often many different directions buyers lean toward when investing.
A few seasoned real estate agents and experts on the market weigh in on what their buyers are looking for. Fredrik Eklund states that “it’s very amenity driven. It’s living in five star hotels, with swimming pools, automated parking. There’s one building – Madison Sqaure Park Tower — where we have a tower room with 360-degree views on the 54th floor with an extra large kitchen where you can have your friends over for dinner parties. You’re buying an apartment, but also in buildings where there are tens of thousands of beautiful amenities” (1). Antonia Watson states that “We have been seeing a trend where local buyers are seeking properties that combine pre-war character and charming facades with contemporary interiors. For this reason many of the new condo conversion projects in areas like the Upper East Side, Soho, or the West Village are appealing to the end user. We are seeing interestingly a similar trend with our international buyers and investors from Europe and South America. Generally, the international pied-a-terre buyers and investors from Asia and Russia tend to be mainly intrigued by newly constructed tall glass towers, central locations, and novel in architectural design. For this reason many of the new developments along 57th Street, also known as “Billionaire’s Row” have become a target area for these buyers, in addition to other midtown locations. Investors from around the globe also seek to keep their monthly costs low, especially when their purpose for purchasing NYC real estate is strictly or primarily investment. In these cases, the Financial District, Williamsburg, Long Island City, and nearby areas are in high demand where 421A or J51 tax abatements can still be found, providing more favorable cap rates for the overseas investor.”
Some buyers are looking for a one of a kind apartment that sets it apart from others in its area. Steve Gold weighs in to say that his buyers look for “uniqueness.” That is, “If there is something different about the apartment that you can’t replicate, especially in this market where you have a lot of new inventory, you can command a better price for it because you know the buyer can’t be like, well then I’ll just buy the neighbor. Unique features include protected use, outdoor space, protected views” (1). In order to appeal to the current investor, the agent has to focus on tailoring the neighborhood, space, and amenities to fit the buyer’s current needs.
Curbed NY reports that “….there are already a plethora of buildings offering ostentatious, attention-grabbing perks—IMAX theaters, private jet rentals, your own “jam room,” and the like—so what’s the next phase of the residential amenity? Put simply, experiences: a slew of developers have begun offering residents of their buildings access to a host of events and ventures that are more experiential—and, in some cases, more tied to the communities in which they’re building” (2). Jeanette Dobrowski, the Marketing Director of Node Living states that “Understanding the full scope of this next phase of residential amenities can be seen clearly in how experience driven perks are disrupting markets even in [the neighborhoods of] outer boroughs like Bushwick, Brooklyn. Node living, for example, with there first of a series of boutique, furnished buildings in Bushwick almost at capacity, bases their model around community living within luxury design that reflects local style. Demonstratively, node living offers tenants full access to Community Curators that provide monthly events and volunteering opportunities for tenants, as well as neighborhood insights and updates on current local happenings. This, combined with over the top perks for the local market, like free wifi and laundry, a multitude of communal spaces for residents like roof tops with city views and fully loaded backyard spaces with grills, fire pits and activities, and smart devices like Nest thermostats, Sonos speakers, and smartphone intercom systems, are taking resident experiences to the next level.”
More or less, when buildings have amenities that are over the top, the property managers are incentivizing future residents and attracting buyers that are accustomed to that lifestyle. Instead of each resident to go out of their way, the building is essentially providing them an in-house “staff.” Some buildings even have in house chefs: Amy Plitt of NY Curbed writes “chefs will teach gardening classes for those who’ve ponied up for the privilege of living there. The wine shop, meanwhile, will have an on-demand sommelier who can work with residents on private parties and other events” (2).
New York City real estate will always be on the cusp of anticipating investor and consumer needs. It will be interesting to see how these luxury amenities affect the demand in the buyer’s market.
Summer has always been a hot time on the market for New York City real
estate. Home and condo sales are remaining strong through value and price increases. NBC writes “The total monetary value of completed transactions in the first quarter actually rose 15 percent, to $12.3 billion. The number of sales rose 2 percent to just over 12,000.
Condo sales drove the market, with record prices in Manhattan, Brooklyn and Queens. The average price of a condo in Manhattan topped $3 million in the first quarter, up 27 percent from a year earlier” (1).
AM New York writer Heather Senison interviews different real estate experts in the field to weigh in on the advantages of purchasing real estate in New York. Senior Economist at Street Easy Grant Long says “If the [value of the home] increases, that is increasing your wealth,” he said. “Similarly, every time you pay down your mortgage that’s effectively increasing your assets” (2). Long continues to say that the market still remains competitive in the boroughs of Manhattan and Brooklyn). More specifically, in areas where the subway is being expanded and neighborhoods are becoming increasingly populated (Upper Manhattan as well as parts of Eastern Brooklyn).
NY Curbed provides some insight into the stats for the pricing after the first quarter. Emily Nonko writes “sales prices ended up high for the quarter —mostly because “legacy” contracts from up to two years ago caused record closing prices. Compared to last year, the price per square foot for all Manhattan sales increased 7 percent to $1,760 (a record), while the average sales price rose 7.7 percent to $2,098,459 (also a record). In the luxury market, the median price was was $6,567,712, up 9.5 percent. For a new development unit, the median sales price surged 44 percent to $2.965 million” (4). The numbers clearly show that new developments in New York City are by far the most sought out after properties, especially when in comes to the luxury market sector. The Manhattan market has continued to show strength, making it a great time to invest in property.
AM New York reports the rise of new developments and boom in certain areas of the market. “New developments include residences in the massive Hudson Yards project on the far West Side and One Riverside Park in Lincoln Square. They’re booming in Brooklyn too, with buildings like the Oosten at 429 Kent Ave. in Williamsburg and the Pierhouse at 90 Furman St. in Brooklyn Heights. Queens is also experiencing growth, with new offerings including The Harrison at 27-21 44th Drive and the Grand at Sky View Parc complex in Flushing” (3). Seeing as new development continues to make for a competitive market, there will be much activity in the real estate industry in the near future as demand continues to rise.
Prices in New York will still be on the rise (i.e. the market value and property value of anything purchased to this day will increase). Johnathan Miller says in NY Curbed that “With a slow rise in resale inventory, and fewer bidding wars, we could see a little more sales volume in 2017 despite rising interest rates” (4). Those seeking real estate investment should act now to take advantage of rising prices.
Investors have always had their eye on New York real estate. Strategically speaking, they are waiting for commercial and residential prices to drop before they make their move. This requires much foresight and analytics in order to make the best investment decision given the market conditions.
In an interview with the New York Times, Harry Mackelowe comments about the state of the New York real estate market and how it will affect the demand for condos. Mackelowe is a real estate developer and expert that has been in the business for over sixty years. “The upper end of the market is justifiably slow,” Mackelowe says (1). This means that prices are starting to cool because of the large supply of condos (specifically in the luxury market sector). Investors should take advantage of the market now, before the demand drives up condo prices again.
In an article titled “The biggest price cuts on luxury pads this week,” Miriam Hall of The Real Deal magazine discusses the price cuts as seen in the luxury condo market sector. For example, one Penthouse in the Nomad neighborhood has been reduced by 20 percent, making the price tag $15 million. The seller has also added amenities to the property, to further entice buyers and attract reasonable offers for the condo. With the Trump administration in full place and the stock markets doing well, the value of real estate could soon rise as well, making for a wise investment decision today. Ari Harkov, a New York City broker writes regarding the effects of the election so far that “many affluent New Yorkers will benefit in the short term from looser regulations and high stock prices, and others will psychologically seek a sense of normalcy through buying and selling real estate” (3). It is in the luxury market specifically, that buying real estate is a rather safe investment, because of the regulations put into place. This will encourage buyers looking into ultra-luxury condos, commercial spaces and real estate developments to begin purchasing real estate once again. Overall, this will stimulate the economy and encourage buyers on price points to invest in real estate. And we can see that it has already begun.
When comparing 2016 to the start of the new year 2017, there have been a few similarities in regards to the luxury market sector. Ari Harkov of the New York Daily News writes, “One of the dominant real estate stories of 2016, the $10 million and up market in New York City continued to remain oversupplied, with extensive price cuts and substantial negotiations. Overall, that market has fared better than many anticipated” (3). It is a great time Harkov later adds that “we will begin to see more public price cuts in this market in 2017. Some developers and sellers will have to sell, others will do so for fear of future softening, and these reductions will create some liquidity in this market as buyers will embrace new pricing when there are significant reductions” (3).
Overall, this will be a great way to stimulate the economy as well as boost the real estate industry in New York. The future of real estate specifically is very promising with President Trump in the White House. Steve Cuozzo of the New York Post quotes Cushman and Wakefeild’s President John Santora: “If there’s an easing of regulations, we’ll see growth by financial institutions, especially in New York,” Santora said. “And that will be good for New York” (2). The growth of financial institutions and real estate are often paralleled, especially in times where there is a transition of power. Since the stock markets have been doing well, naturally the real estate industry is following, as always. “Commercial property-related taxes [alone] brought in $20.4 billion last year, according to the Real Estate Board of New York — enough to pay for all the city’s teachers, cops, firefighters and other municipal workers” (2). This evidence clearly shows that the real estate industry has been an economic pillar for New York and the industry will continue to be a buyer’s market as real estate investments in New York flourish.
There is no doubt that the invention of the internet has completely changed the real estate industry, especially in New York City. What is already a fast-paced market and profession has become even quicker. Transactions are now seen across multiple platforms in ways that fifty years ago no one thought possible.
Real Estate agents all over the world are utilizing the advantages that technology has provided. With social media, websites, multiple listing services, online publications and email communication it is a lot easier to keep in touch with a customer base, reach new potential clients, and gain exposure for either yourself or a real estate investment. As an agent, connecting to people and creating a brand has never been more accessible (yet can be challenging if unaware of potential client reach and the optimal consumer).
Social Media can be a huge tool in selling new properties, and it directly affects the real estate industry in New York City. With social platforms, word travels fast, as articles and photos are easily shared within seconds through a couple of clicks, a re-tweet, or a direct message. A recent article by CNBC highlights the importance of having a strong audience base for selling apartments (it also helps to have a technology-saavy client base). “Real estate agents show followers inside apartments for sale or rent across the city. Those looking to rent or buy can send agents messages arranging viewings or challenge them to find apartments to suit their budget, location and size needs” (1). The article also shows just how fast-paced the real estate industry has become since the rise of technology. New Yorker Dolly Meckler tells CNBC that there are people “who [have] lost apartments in minutes just because their applications came in two minutes after somebody else’s. So the beauty of ‘Snaplistings’ is that you can DM agents in real time saying ‘I want to come and see this place, where are you? I will come and meet you’ ” (1). This shows the sense of urgency of both the industry and the generation.
The tech bubble as a whole also has an indirect affect on technology. Konrad Putzier from The Real Deal Magazine writes that most industries now are dependent on technology because it has become an integral part of everyday life and business transactions. Not only that, but the real estate market in New York is also directly affected by the financial services markets. “It’s universally acknowledged that the health of the financial sector is a big factor in the health of the New York real estate market as a whole” (2). According to a study conducted by the Center for an Urban Future and the Department of Labor in New York, “It’s just night and day how much more important the tech sector is to the city’s economy today compared to 10 or 15 years ago. Tech is one of the key drivers of economic growth today,” said CUF’s executive director Jonathan Bowles” (2).
Even though technology is a major player, the New York City real estate industry is as independent and stronger than ever. The first quarter of 2017 looks to be a strong one in both the real estate and finance industry as technology continues to be one of the driving forces for sales and transactions.
As 2016 has officially been put behind us, there is no doubt that there has been a dramatic shift in pace and demand for New York City real estate. Between the after-effects of the Brexit vote and the outcome of the 2016 Presidential Election, investors have seen a surprising positive turn in the real state industry.
This past year has seen much demand for both development and investment in New York City real estate. NBC New York highlights that “a total of 1,102 properties had contracts signed for $4 million or more this year, down sharply from 2013-2015 but still higher than 2012, before the condo boom started” (1). This proves that even in wavering economic times, real estate continues to prove itself to be a strong and wise investment for the future. In addition, it seems that economic speculation shows 2017 to be another prosperous year in real estate investments.
One of the predictions for the real estate industry in 2017 concerns the subject of foreign real estate investment. Steve Couzzo of the New York Post writes “The Trump Effect: Residential developers are praying, and we’re certainly hoping, that Donald Trump’s rise to the presidency will encourage, rather than scare off, continued foreign investment in high-end condo apartments” (2). That way, the current surplus of condos that are for sale will equal the demand the investors have. This will allow developers to continue developing luxury condos to keep up with the market’s demand. This will further stimulate the economy and create jobs both in and out of the real estate industry.
Another prediction is that the interest rates will continue to rise – which we have already seen implemented by Obama in the fourth quarter. Amy Zimmer quotes Mdrn. Residential’s Zach Ehrlich: “More sellers will adjust pricing to ensure they don’t get caught in receding sales market,” he [Ehrlich] said. “More buyers will lock-in and pull the trigger given upward trend of rates” (3). This will create a more competitive market among prospective investors, which will increase the return on investment in New York City real estate.
Looking back on 2016, the outer boroughs saw a surge in condo prices, as developers focused on areas in both Brooklyn and Queens. Comparatively speaking, investing in a condo in Manhattan is becoming more attainable to investors who were looking elsewhere. In 2017, the Manhattan real estate market could attract more investors than last year. Zimmer writes “as pricey new developments floods the market in Long Island City and parts of Brooklyn, Manhattan might not look too bad anymore, brokers said…migration will go in all directions, said Eric Benaim, CEO of Modern Spaces” (3).
Olshan Realty states that “there is enough demand to sell apartment sight unseen. Olshan [also] said 58 percent of all condo sales were new construction sold off just a floorplan” (1). This further confirms that there is a strong demand for real estate as a solid investment and that the industry is once again stable after the 2006 housing crisis. Overall, despite market fluctuations, real estate remains a stable and wise investment: especially in New York City.
Often, the price of the dollar and the exchange rate against other currencies has a big impact on real estate in major markets like New York. A strong dollar means that relative prices have become more expensive than price in other countries, and a weaker dollar means that relative prices have dropped. A recent article in the Real Deal Magazine’s latest article speculates “Since election night, the dollar’s exchange rate against a basket of currencies has been on a tear. This has made designer jeans and jewelry in Manhattan’s retail boutiques more expensive for those earning their incomes in Euros, Yuan, or Yen. Could it also have an impact on New York’s real estate market?” (1).
Upon further investigation, it is obvious that there has been a recent shift in the value of the dollar, making it stronger against other currencies. Konrad Putzier of The Real Deal magazine writes that “the dollar is rising in large part because investors are betting that Trump’s planned fiscal stimulus will add inflationary pressure and boost the economy, making it more likely the Federal Reserve will raise interest rates. Higher interest rates in the U.S. should cause more money to flood into the country, which pushes the dollar up” (1). There is no doubt that an economic stimulation will greatly improve the state of the U.S. economy. Often when a fiscal stimulus is planned, it causes inflation. To prevent this inflation from weakening the value of the dollar, the Federal Reserve will likely raise interest rates so that the dollar remains strong relative to other currencies.
“If a rising dollar makes investing in New York more attractive for foreigners looking to benefit from currency appreciation, but also means they have less spending power in real terms, that should make assets at lower price points more attractive” (1). Real Estate for sale will once again become a hot commodity for investors all over the world and it is a great time to buy property before foreign investors and demand drive up prices.
Putzier writes, “even if Manhattan real estate is now more expensive, foreigners may still be inclined to invest if they believe the dollar will continue to strengthen.” Therefore, it is wise to invest in property now while the dollar continues to appreciate in value. That way, your investment will be worth more while the dollar stays strong. Time Magazine states that “The dollar surged to a more than 13-year peak on Wednesday, bolstered by upbeat U.S. economic data that showed the economy on track for steady growth and reinforced expectations of interest rate increases by the Federal Reserve next month and in 2017″ (2). Great economic change and growth is evident for the next season and well into the New Year as Trump takes his seat as the President of the United States. Lukman Otunuga, a research analyst at Forex Time Ltd says that “this could ensure dollar strength remains a key theme moving forward” (2).
It is no secret that the next four years of having Donald Trump as the President of the United States will see many changes, especially in how the political sector within the Unites States will impact worldwide markets, especially the real estate industry.
For some, it is difficult to see Trump taking the seat at the White House, given his lack of political experience. However, this is not taking into consideration his years of experience as a man of business and how that has impacted the economy in and of itself. Damian Ghigliotty of The Real Deal quotes Trump in his latest article, Welcome to Trump Land: ‘ “I’ve spent my entire life in business, looking at the untapped potential in projects and in people all over the world,” Trump told supporters during a speech at the New York Hilton Midtown on the morning of his stunning win. “That is now what I want to do for our country” ‘ (1). He aims to look and see undervalued areas in America and begin to create value within those underserviced areas.
Of course, the goal of most great politicians is to better America and all of its citizens for the great good: so they can live a fulfilling and promising life (the epitome of The American Dream). Clearly, this is the goal that Donald Trump does have in mind as he moves forward as the President – elect. Ghigliotty continues to write, “so far, the billionaire Republican has made some key gains — such as winning over larger chunks of the real estate industry since he was elected” (1). Those in the real estate industry have realized the potential that this presidency has on the market and how it can be a powerful influence on the fronts of development, sales, and leasing. Moreover, having a President that approaches issues from the perspective of a businessman will provide a fresh perspective on both leadership and policy. More people have come to realize that having a leading influencer as the President of the United States will guide not only the real estate industry, but the country, into potential economic success in the coming years.
Since the election, the industry is beginning a shift and starting to balance out. In an article by Biz Journals, Anthony Noto writes that “both prices and the number of sales recorded were down, with 89 new development sales tallied, compared to 110 in the prior month” (2). The general industry consensus that upcoming doom was around the corner for the real estate market due to recently imposed laws and regulations under Democratic leadership seems to be no longer on the horizon, and rather industry analysts predict that there may be a real estate market turnaround similar to the stellar stock market Trump Rally that has been occurring since election day. It seems so far, that if nothing else, industry professionals are claiming that the New York City housing market is reaching “real estate” market equilibrium. Market equilibrium is a healthy state for the market where both buyers and sellers are essentially happy and the market is being “stimulated.”
Even as the President elect, Donald Trump has already made a significant impact on both real estate and financial market speculations. His announcements and plans prior to November 8th aimed to stimulate the economy by creating jobs, appreciating the value in real estate, reducing banking regulations, and reducing tax rates for those who buy and sell assets.
Real estate finance is affected by two major factors: inflation and interest rates. Konrad Putzier of the Real Deal magazine writes, “[Trump’s] planned debt-financed fiscal spending spree – assuming it makes it past budget hawks in Congress – could well push up inflation and interest rates…rising rates are good and bad news for real estate: on the one hand, they make debt financing more expensive, push cap rates up and property prices down. On the other hand, rising rates are usually a sign of economic growth, and improving fundamentals tend to push up income from real estate.” (1). The rising rate could potentially slow down the rate at which developers and homeowners can receive lending, and ultimately the rate at which houses and condos are being built.
In 2010, a regulation known as Basel III was instated to prevent developers from flooding the market with new properties too quickly. The Real Deal Magazine says it “require[s] banks to keep a larger equity cushion as a buffer against any loans deemed risky, including real estate construction loans” (1). This, of course, was put in place after the housing market crash in 2008. The government wanted to be sure that no loans (especially sub prime mortgages and bonds) were distributed that seemed disproportionately high risk. Konrad Putzier writes that “the current regulations are “slowing the lending community’s willingness to finance construction, which is working to stop overheating and overbuilding,” (1).
This means that in New York City the surplus of condos on the market will begin to decrease, and that the market for buyers will likely become significantly more competitive. This has a two fold meaning: first, it means that the time to buy is now, and second, it means that it will be a good time to sell soon because there will be a higher demand for properties on the market. On the other hand, Barney Frank told the Real Deal Magazine that he “think[s] that’s going to make more capital available,” pointing out that banks would be left with few other investment options (1). Hiten Semati of the Real Deal writes “The California Association of Realtors protested the ruling, saying it would limit consumer choice. It’s not clear, however, why this would be the case: though the ruling sets a higher standard for dual-agency deals, it doesn’t restrict them. And since dual-agency deals make up a sizable chunk of the market, the ruling has the potential to increase transparency for a large number of buyers. And that’s a positive step” (2).
“Arguably the biggest way in which Trump’s victory could impact real estate finance is through interest rates. Trump has proposed a major infrastructure plan and tax cuts… a debt-financed spending spree typically can accelerate inflation, which in turn is likely to push up interest rates” (1). Now that Donald Trump has been elected President, he will have control over choosing the decision-makers that influence the interest rates.
This could in turn shift the market drastically in a positive way, and stimulate economic growth, especially in the real estate market. The Real Deal states, “again, investors appear to predict this will happen: the dollar has appreciated by about 4 percent against the Euro since Nov. 8. Chandan argued that because the dollar could well continue to rise, investors may continue to flock into New York real estate to benefit from the appreciation” (1). As evidence already shows, the markets have taken an upward turn in light on the election results.
There is no doubt that the recent presidential election results will greatly impact the real estate market, especially the New York City real estate market. We have already seen how the election results have favorably affected the stock market, with record highs being hit post-election and wise investors earning loads of money between the 8th and 9th of November. Faith Hope Consolo of Douglas Elliman states in the Wall Street Journal that she is “predicting the best holiday season [she has] seen in five years” (5). Antonia Watson of Corcoran asserted in a recent interview that “with fewer banking regulations, and with tax breaks for high income earners and corporations on the horizon, there is certainly a great chance for the market to repair itself during the next few years. For the first time in eight years, the wealthiest Americans will have more disposable income to invest back into the economy, which ultimately boosts it.”
It is no surprise that the investment sales market has been suffering in New York City and has greatly impacted the overall real estate market. As a result of the decline in investment sales, “New York City’s tax revenues declined about 1 percent in the past few months, reversing a trend of continuous growth since 2012.” (1). Despite trends that the media has portrayed, there have been a decline in sale prices and the market has taken the biggest hit since the housing crisis of 2008. Properties have been sitting on the market unsold for record lengths of time and the mortgage market has become distressed.
In the latest report by The Real Deal, “In the distressed mortgage market, private equity companies and landlords may purchase over-leveraged debt in foreclosure and attempt to finish the foreclosure as a means of taking over the building. While they may have enough capital to purchase the debt, oftentimes these distressed units sit in limbo while the new owner waits for the foreclosure case to conclude or for the market to recover so they can resell the buildings for a profit.” (4). This applies not only to property owners but also investors who have purchased condos and residences in this state of the market.
Konrad Putzier of The Real Deal writes that “New York City’s residential market had the biggest quarter since at least 2006, according to a new Real Estate Board of New York report, with $13.6 billion worth of condominiums, co-ops and one-to-three family homes trading hands between July and September” (3). What the report does not show, is that these properties have been sitting on the market for a long period of time, and the turnover rate reflects a decline in the market, rather than a simple increase in sales.
The reason that prices of condos in all five boroughs are slowly increasing, is because managers are adding amenities to add perceptive value to make up for the decline in the market because they cannot pay their increasing property taxes. The Wall Street Journal writes that “an index that tracked confidence of both commercial and residential brokers fell sharply in 2016 and to its lowest-ever level during the third quarter, according to report compiled by the Real Estate Board of New York, an industry group. The decline corresponded with weakening residential and commercial sales, especially in Manhattan” (5). The sense throughout the industry post-election seems to be one of relief and confidence in the trajectory of the stock market and real estate market.
Written by Kylie Keller