New York may have remade itself in the last two decades, but it remains one of the globe’s smartest property investments
Not long ago New York had one of the dodgiest urban reputations in the world. Its crime rate was notorious and its near-bankruptcy was the stuff of stand-up comedy legend. But gone is the era when the Rolling Stones were singing about rats on the west side and the outre sleaze of Times Square. Through it all New York has remained the most vital city in the United States going all the way back to its origins as New Amsterdam in the 17th century, and in reality its only real rival as a financial, cultural and political centre (regardless of the fact that it is neither a state nor federal capital) is London. Not surprisingly, like London, it has one of the strongest property markets in the world.
The five boroughs that make up the metropolitan area – Manhattan, Queens, Brooklyn, the Bronx and Staten Island – are home to almost 9 million people, many from other parts of the country and the globe. And as in London and Hong Kong, supply is limited and demand is high; about 8,000 flats are available for purchase on any given day. Most developments come as regeneration projects, and with the exception of the World Trade Center site, new builds are hard to come by in Manhattan, which remains the most popular of the five.
New York’s appeal is its historically stable market with strong enough fundamentals to ride out most storms. Investment, right now, “Is sitting extremely well. It’s probably still the most important city on the planet,” says Tim Murphy, managing director of IP Global (and host of Channel NewsAsia’s Buying Asia), a property investment services provider that has brokered US$900 million worth of pure investment properties since 2005. “Sitting in this part of the world there’s no denying Shanghai is extremely important, will continue to be and might be in the future, but New York still has 790,000 business. Since the dawn of the industrial revolution that and London [have been] the two most powerful commercial centres in the world and that’s not going to change just because we’ve had a recession.”
PriceWaterhouseCoopers and the Urban Land Institute’s 2011 Emerging Trends in Real Estate stated, “Troubled Assets Relief Program and Fed funds directed at banks helped markets with financial services businesses and eased job cuts, benefiting New York City, which shows the biggest ratings jump in the survey over last year,” labeling the city a recovering market. Residential prices were up approximately 10 percent in 2010, putting an average flat at around $1.2 million (HK$9 million) but the aforementioned lack of supply, a strong domestic market and healthy amounts of cash in the system have buoyed the market in the wake of 2008 as well. “I think people are saying, ‘The world’s in a bit of a mess, equity markets are still quite volatile, the New York market has been stagnant. Depending on where you buy prices are off 10, 15, maybe 20 percent, but it’s not going to come down anymore. I’m going to get in there now,'” Murphy reasons.
New York investments, however, are not for the in-and-out speculator. Long term works best, capital appreciation rules over rental yields and cautious banks make immediate returns unlikely. Ultimately, “Why buy in Vietnam or Colombia when you can buy in a prime residential market that you know, over time, always performs when you can get a deal. IP Global has sold over US$200 million in the last four months and not one of those has been in an emerging market.”
As far as that capital growth goes, gains on Manhattan property can be substantial. Even though the island is generally still expensive, “Following the financial crisis, apartment prices depreciated significantly and remain 15 to 20 percent below peak values,” Murphy points out. “The income return component will be lower, principally because of the higher building outgoings payable on Central Manhattan apartments, however, investors can expect strong capital growth over a 12 to 24 month investment hold.” Investors can also consider moving away from the core, which will offer lower prices the farther away you go. For income returns, Murphy suggests heading across the river to New Jersey, for example, were prices can be 70 percent lower but where rents are only half. “Depending on what district, on average you pay $1.4 million for a residential property in Manhattan. In Jersey you pay just shy of $250,000. And you can be on Wall Street in 25 minutes. I know it doesn’t sound quite as sexy, but the reality is as an investment angle you get good tenanting.” Usually from Manhattanites that can’t afford Manhattan rents.