Brexit: A Blessing to New York

The exit of Britain from the EU (European Union) has brought fear and uncertainty to the world at large. While some are focused on the effect of the departure on the economy of Britain, economists have been concerned with the possibility of a new global recession. However, as bleak as the situation seems to be, it appears to favor New York’s real estate market. Imagine that - what seems to be a critical wound for Europe may turned out to be a blessing to New York and its investors. These are some of the areas pointing to how New York will benefit from the entire scenario:

Cheap Financing For Our Real Estate Market 

While our Federal Reserve was on the verge of raising its interest rates from its almost non-existent current ones, the advent of Brexit has created worldwide uncertainty that could culminate in a recession at any time now. The implication of this is that Fed may not carry out that plan to raise rates or may delay the plan until there is more clarity regarding Brexit’s impact. This implies continued cheap financing for our real estate market. There is even the possibility of mortgage rates going even lower.

The possibility of New York taking over from London

London has been a great haven for foreign investors, especially those billionaires who have been looking for a secure place to stash their money.  With Britain’s departure from their long time union with Europe, New York City might be the target of this wealthy class because no one wants to invest in an unpredictable economy. The future of Britain’s economy seems bleak at present. If London has been the center of luxury residential market, especially in high end penthouses, New York should get ready for new investors soon as it will very likely be the next target.

New York City as leading global investment market

There are signs indicating New York City real estate is becoming a leading global investment market, as opposed to international stock and bond markets. Going by the uncertainty affecting the global economy and even the fear of recession in some countries around the world, there is a tendency for investors to leave the financial markets completely for more stable ones, notably real assets. Both the residential and commercial markets in our city are globally viewed as a safe and stable investment.

There is a sudden boost in office sales

Recently, the city has experienced a new trend in one of its real estate markets, office investment. NY and London are the largest office markets on the global scene. For two centuries consecutively, London has maintained being the world’s leading financial capital. One thing that has favored London in maintaining this position is its place in the European Union. This come to an end with Britain’s exit from the EU. Investors would rather consider another alternative with more promising and stable economy than one operating on uncertainty. This is why the runner up, New York is likely next to be crowned. Office investors will definitely shift their focus from London to New York from now on. Even if they later go back to London when the dust settles, New York may have taken the leading position by then – and may keep it.

While we revel in the possible blessings which Brexit could bring us, we might not see any of this occur if Britain’s economic problems spill over to other parts of the world, leading to global recession. But as long as Brexit’s impact remains contained to the U.K., its effects on New York City are likely to be beneficial.

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Luxury Home: Reasons Sellers Drop Asking Prices

In many instances in life, flexibility can be key to salvaging a bad situation. The real estate market is no exception, and buyer interest – or the lack thereof - can sometimes force sellers to make adjustments. Lately it is has become common for sellers to make such adjustments by dropping the initial asking price for luxury homes. 

In fact, it has almost become the norm recently in the luxury real estate market ($5 million and above) for properties to be reduced from the initial asking price. For example, a 5-bedroom $10.5 million condo in Manhattan sat idly on the market for almost a year. When it was reduced to $9 million this past February, it sold within two days. A reduction of $1.5 million is substantial, but the seller may have felt compelled to finally act after the condo had languished on the market for so long. In this particular case, the seller also promised the buyer tickets to Hamilton, which may have encouraged the buyer, but the price cut was clearly the major factor in getting the home to sell.

A number of different explanations have been offered for the price reductions currently being seen in the sale of luxury homes. Some people are of the opinion that the high-end market is evaporating, while others believe it is an ongoing correction marking the end of the luxury real estate boom. Here are some other possible causes of price cutting by sellers:

·      High Listing Prices: Buyers have budgets, and if your asking price seems to be on the high side, buyers will look elsewhere. Most sellers are forced to reduce their asking price when it has been set too high for the market.

·      Uninterested Buyers: If a home has been listed for quite some time without any sale, the property tends to be overlooked. One way to revive interest is by giving the asking price a cut.

·      Low Offers from Buyers: No matter how high your expectations, if buyers don’t feel the property is worth the asking price, you will likely see low offers if you see any at all. This might mean a price adjustment is in order.

Some years back, record sales were making headlines, encouraging sellers to ask what seemed like staggering sums of money. The aspirational pricing technique was driven by the desire for personal gains over other factors. Aspirational pricing has been giving way to a more flexible and negotiable pricing where buyers are more focused on their budgets.

The fact that more sellers are reducing the prices of their luxury homes is an indication that they are ready to be more realistic about the values of properties being listed for sale. The global economic situation is shakey, and buyers are being much more careful. These factors are having a sobering effect on the luxury real estate market.

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Discover The Right Time To Sell Luxury Homes

The slowdown in the demand for luxury homes has resulted in a glut of new condos on the New York luxury market. Some developers who have just completed projects have decided to wait for prices to rise before trying to sell. The developer of the tower at 111 W. 57^th Street, for example, has all the documents necessary to begin selling, but is holding off due to the reduced demand for luxury condos. This property is the latest skyscraper to begin construction on Billionaire’s Row.

When the luxury market was booming, buyers bought homes that existed only as models. But now with the recent glut of luxury homes, it is better for the developers to wait until their project is nearly completed before listing the units. 5126 newly built residential units will hit the luxury market this year which is considered as the highest since 2007. 63 percent of these homes are considered luxury homes. Such homes are priced at $2400 or more per square foot.

However, many of these luxury apartments will stay idly on the luxury market for up to 3 months or more before they are sold. Many of these homes will be sold below the listing price. Compared to previous years, more condo towers are under construction right now in spite of the flood of luxury residences. Most of these are high-end condos and reports show that about 5377 mega-priced condos are currently being constructed. As foreign investors that dominated the luxury market are backing out, the market has become over-supplied with luxury condos.

Foreign Buyers

The purchasing power of foreign investors in New York luxury market has waned. This is a result of the strengthening of the US dollar against other currencies, the drastic decline of oil prices and the economic meltdown in countries such as China and Brazil. The shift in oil prices severely affected Russian investors, one of the largest groups of investors in the luxury market. It has been reported that the sale of luxury apartments declined in January and February this year by 30 percent when compared with the previous year. The reduced demand for mega-priced homes in Manhattan has made some developers delay starting projects, while other developers have changed their plans and models to build apartments that will appeal to a wider range of buyers. This is clearly not the optimum time for selling luxury homes in New York City.

In the heart of Billionaire’s Row, a collection of super tall buildings near the southern edge Central Park, is 111 W. 57^th Street. The developer of this 1427-foot tower plans to delay the marketing of its units until construction rises up beyond 800 feet. This 82-story building is currently just past its first floor, and is expected to be completed by 2018. According to the legal documents pertaining to this skyscraper, full floor homes will start from the 25^th floor. The units at this level will be priced at $15.5 million. The most expensive unit in this tower is a four-bedroom duplex penthouse. This duplex will start from the 74^th floor and is priced at $57 million. The two topmost units at the 80^th and 82^nd floors have not yet been priced.

Tallest Towers

111 W. 57^th Street will certainly be counted among the super-tall residential towers of New York City. Like One57, which is the building that spearheaded the boom in the luxury development, the design of this building will be its selling point. The structure will be a sight to behold and passers-by and tourists will be struck by its height and grace. The best time to market units in a building is when that building is the center of attention.

Contrarily, the sale of units at One57 started nearly three years before the residents moved into the building. The buyers were shown aerial pictures of the apartments taken by a camera mounted on a drone helicopter. The pictures showed different views from the building taken at different heights. The sale of apartments at One57 reached $1 billion within six months and the developer even increased the prices twice. Meanwhile downtown, the developer of 100 Avenue A started sales of apartments three months after the building reached its entire eight-story height. The 33 unit building is expected to be completed in July. Prospective buyers were promised that they will be able to move into the building this year. 432 Park Avenue is currently the tallest residential building in New York with a height of 1400 feet and about 141 apartments.

Buyers tend to become jittery about what is happening to their money while they wait for their apartment to be completed. So, it is better to start marketing when the building is almost completed or even wait until the project is completed entirely, allowing the prospective buyer to admire the beauty of the tower.

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The Crash of the Luxury Condo Market in Manhattan

One57, a 1004-foot condo tower in Midtown Manhattan, was the envy of the real estate world when it was under construction. This skyscraper aroused interest in wealthy investors everywhere and sparked a new demand for luxury condos. The resulting boom in luxury real estate had developers betting on an ever-increasing demand for luxury residences. Fast-forward to the present, however, and the sale of apartments at One57 has been reduced to a trickle and 20 apartments are still left unsold.

The demand for mega-priced condos in Manhattan has dropped drastically amid a surplus supply of high-end apartments. Meanwhile, the demand for average-priced apartments is still strong, with a limited supply of them. The situation in Manhattan is similar to that of other major cities worldwide. In London for instance, the luxury property market has slowed and now various projects, some completed and some still under construction, are seeing sales stagnate. Many of these projects may have sold few or no units at all.

Many New York developers entered the luxury market as it boomed three or four years ago, only to be met later by weakened demand and a glut of high-end properties. One developer of super-tall towers referred to this situation as a “temporary imbalance” which would be absorbed in subsequent years, but most developers are still worried about the dwindling luxury market. The upper floors of the Sony Building underwent a conversion to smaller units, while a proposed high profile building on Central Park South was shelved. A developer of a 900-foot tower on East 58^th Street filed for bankruptcy last month. This happened after the developer was unable to obtain long term financing to complete the project. The remaining developers are hoping that the thousands of units now under construction can still be sold for at least $3500 per square foot.

A tower under construction near the Museum of Modern Art has about 140 luxury apartments in addition to a penthouse priced at $70 million. At 520 Park Avenue, there is a slim tower with 33 units each priced at $38 million. Along “billionaire’s row” on 57^th Street is 111W. 57^th St., the slenderest tower ever built. This tower, which will offer 60 units, is to rise 1400 feet above the ground and past the Empire State Building at 1250 feet high. Additionally, construction is about to commence for the development of another very slim 900-foot tower. This project is financed partially with money from Chinese buyers. Developers of these projects had been hoping for the continued growth of the luxury real estate market and the presence of super rich investors.

The luxury market, however, is very volatile and can easily be affected by interest rates and currency conversion rates, unlike the demand for office space or an ordinary rental apartment. The weakened economy in China and lower prices for oil have greatly affected the luxury market. Even as condo developers experience the slowdown, they are still predicting an increase in demand for the high end projects. They believe that sales will continue at high prices, but perhaps at a lower rate.  However, they are now finding that sales are much slower than at the height of the boom. A listed unit can stay on the market up to 90 days before it is purchased. This is a considerably a longer time compared to when the market was booming.

One developer suggested that those developers that have buildings with views of Central Park should hold out until they can sell at a higher price. This is because apartments with such views are limited. Thus, the developers are delaying a marketing push while waiting for better prices. The Central Park view has always been one of New York City’s most beautiful and sought-after views. Developers are counting on the luxury market to recover before the loans they’ve taken out are due for repayment. Fewer projects are being started now, which may help keep the luxury market from an even greater glut.

International buyers have accounted for about 40 percent of Manhattan luxury home purchases as well as 20 percent of New York mega-priced buys, and their hesitance to continue investing will affect the luxury market negatively. The increased demand for luxury homes by these foreign buyers, especially the Chinese and Russian investors, is what led to the boom in the first place, with the result being a profusion of new skyscrapers doting the Manhattan skyline. These super rich investors were seeking ultra-luxury homes to serve as stores for their wealth. To satisfy their tastes and give them value for their money, developers included “super amenities” in these in the newly constructed towers. Most of these amenities are fit for royalty and include swimming pools, catering kitchens, restaurants, children’s playroom, basketball court, yoga studios, gyms and hamams. Recently, the availability of valets, spas and concierges have become standard for ultra-luxury homes.

However, the strengthening of the U.S dollar against other currencies, the decline in oil prices and the economic meltdown in Asian countries have discouraged buyers from further investment. This resulted in the flooding of the market with luxury properties. Moreover, many units of luxury condos are still under construction. Despite the hopeful predictions of the builders, there is a risk that the flooded luxury market may still outstrip demand for years to come.


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