The growing strength of the
U.S. dollar against other currencies gives foreign investors the impression
that the United States is a safe country, which in turn makes New York appear
to be a safe haven to store wealth. As a global megacity, foreign investment
has contributed significantly to the growth of the real estate market in the
Big Apple. However, the recent increase in prices of real estate in New York
will force some foreign investors to seek easy bargains and purchase properties
in markets with prices lower than New York City.
Currency
Rates
As a global currency, the dollar serves as a
trading and reserve currency. The rise in the greenback has reduced demand in
the New York real estate market as some foreigners are reluctant to purchase
properties. With the strength of the dollar against other currencies, they may
not be willing to lose money on currency conversion. The crash of Russian
rubble against the dollar can push real estate in New York out of the reach of
Russian investors. Since Russia is an oil-dependent country, the falling price of
oil has resulted in the dramatic decline of the rubble. However, the crash has
not been stopped even with the government’s effort to do so.
Likewise, the Canadians now find it difficult to
get easy bargains due to rising currency conversion rates. Instead, Canadian
vacation homeowners prefer to resell their properties to make a profit from the
rising dollar rates. This has resulted in reduced demand for seasonal vacation
homes. As the Chinese Yuan tracks the dollar closely, the Chinese investors are
not affected by the rising strength of the dollar. With the dollar growing
strongly against other currencies, investing in New York real estate will seem
attractive to Chinese buyers.
Real
Estate Market
Most foreign home buyers do not have the
intention of maximizing profits from their properties. Instead, they want to
preserve their wealth. These investors seek an escape from the economic fallout
in their countries and they view real estate as the answer. However, the rise
in the greenback seems to be weighing down the interest of foreign investors in
New York real estate.
With the construction of luxury condominiums,
there has been a boom in the Big Apple real estate market. As a result of the
dollar appreciation, the prices of luxury properties have escalated. The real
estate prices in Brooklyn and Manhattan have risen, with the latter being more
expensive. High-priced condos and mansions which flooded the market now stay on
the market longer with some finally being sold at a lower price. This pullback
can be attributed to the wane in the purchasing power of foreign investors. An increased
supply of properties has resulted from the reduced demand by international
buyers due to the strengthening dollar.
However, wealthy investors such
as the South Americans and the Chinese can take advantage of this situation to
secure real estate properties. As the Chinese are not affected by the dollar
gain, they have increased their purchases of properties in Manhattan.
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