Property

American Original

American OriginalDespite what we all see on television and in the movies, Boston has not been overrun with bizarrely accented families of bank robbers. Or rats. The capital of Massachusetts is one of the oldest cities in the Untied States, established by Puritans in 1630, and yes, it did get the nickname Beantown for the colonial penchant for beans. The recipe isn’t for Charleston Baked Beans after all.

One of the original thirteen colonies boasts the country’s first subway and public school system and was home to the eponymous Tea Party, an early protest act that indirectly led to the American Revolutionary War and ultimately the foundation of the United States. Boston is a great sporting town (the big four North American sports leagues have teams here), a great culture centre, and naturally a historically significant city given its age and role in the Revolution. The Boston Common is the US’ first public park. Most notable though is that Boston is possibly the best centre for education in the world from concentration perspective: Boston is the location of Tufts, the Massachusetts Institute of Technology, Boston College, University of Massachusetts, Northeastern University, the New England Conservatory and, of course, Harvard among about 100 others.

Given the presence of so many post-secondary institutions, Metropolitan Boston, which includes Cambridge (where Harvard and MIT have their main campuses), Peabody and Lowell among others, has one of the strongest economies in the United States based in education and biotechnology, with added support from financial services and tourism. Only Silicon Valley, New York and Washington have more high tech workers than Boston, and each of those cities has a considerably larger population than Boston’s 600,000. Millennium Pharmaceuticals, Genzyme, Trip Advisor, Avid Technology (if you’ve seen a movie in the last decade, you’ve seen Avid at work), New Balance (which still manufactures shoes in the US) and Bentley Motors have head offices in Boston.

It would appear Boston is a wise investment location, but the city is steadfastly not on the investor radar. “It might not be a world destination city, but it has the good economics in terms of job growth, bio-tech and so on. It might not be viewed the same way as New York and London internationally but within the US it has a lot of desirability,” explains Richard G Baumert of urban developer Millennium Partners. However, “Internationally we see the value of its reputation for colleges and universities. A lot what we’ve sold for people that have bought [here in Hong Kong] is for a place for kids to go to school.”

IP Global’s third quarter Property Barometer agrees that Boston is seeing activity and that home prices are rising (an average of 2.4 percent from April to May 2012 according to the S&P Case Shiller Index), underpinned by a strong local economy and limited supply. But, “Despite these facts and the relatively low unemployment rate of 5.8 percent, lack of mortgage availability and a 0.05 percent foreclosure rate makes timing the market’s recovery tricky.” Prices per square foot were sitting at around US$650 (HK$5,000) in the second quarter, and the average home price was hovering around $870,000 (HK$6.7 million). Sales were up 19 percent and prime districts aside from the central core were located at South End and Back Bay, where homes were selling for an average of $950,000 and $2.3 million respectively.

The state of the office market bodes well for high-end developments in the CBD. Colliers Greater Boston Market Viewpoint for the second quarter noted an uptick in office rentals, and that the quarter for both price and uptake was the strongest since 2011. In the residential sector, “Investor demand for multifamily assets in Greater Boston remains high, carrying into the second quarter unabated. Debt financing for apartments is readily available due to the sector’s low vacancy rates, favorable demographics, and rental growth projections. The attractive pricing and fundamentals are driving development of new supply.” According to Colliers over 2,000 new units are under construction and the Boston Redevelopment Authority has recently approved thousands of others.

With the Fed keeping a handle on low interest rates, commercial property will remain the prime investment for both American and overseas investors for strong yields. But as high tech and biotech industries continue to blossom, Boston’s residential investment sector is teetering on the verge of booming despite the wobbly American economy, ongoing European financial mess and upcoming elections, which are always a source of turbulence. If you have science prodigy kids, Beantown may be in your future.