The five most expensive cities in the world.

Think New York City isn't affordable? Think again.

To buy a 970-square-foot apartment in Hong Kong, Mumbai, Beijing or Shanghai would take more than 30 years for a household with a median income, according to a recent report by Oxford Economics which looked at price-to-income ratios around the globe.

Here are five most expensive real estate markets in the world--only one of which isn't in Asia.

5. London
London's property prices are severely unaffordable to most residents after decades of growth. Since 2013, London's property prices have increased at a double-digit rate every year. Average home prices in the city have gone from £257,000 in 2006 to £474,000 in 2016, an 84% increase.
Government efforts to cool the housing market through high stamp-duty rates for luxury properties and new stamp-duty rates for investment properties have failed to failed to make much impact. But a recent survey of economists suggests London property prices could finally flatline or drop this year.

4. Shanghai
One of China's hottest property markets, Shanghai's real estate prices rose as much as 40% last year and were up 5% a single month last August. Housing prices have been difficult to clamp down on. Spooked by a weak domestic stock market in 2015, many investors poured into the property sector, seeing it as one of the few options left for favorable returns.
Prices could come under pressure soon though as regulators have put forth new efforts to keep prices down, or at least steady. In October, more than 20 Chinese cities, including Shanghai, introduced new measures to cool the housing market by implementing purchase limits and tightening mortgage restrictions.

3. Beijing
The most expensive housing market in mainland China, the average home price in Beijing is now $5,820 per square meter, according to the Municipal Commission of Housing and Urban-Rural Development. In September, average home prices in Beijing rose nearly 30% year on year. By comparison, prices in China's major cities rose about 11%.
Measures introduced in October may clamp down on skyrocketing prices but there's a risk to allowing prices to fall precipitously. Investors have come to expect double digit returns and much of domestic household wealth is tied up in real estate.

2. Mumbai
Located on a narrow peninsula, Mumbai is now home to some of the world's most expensive real estate. As Quartz notes, Mumbai's house price-to-monthly income ratio "is the highest among major Indian cities." And as the country accumulates wealth, developers have been struggling to find building sites in the crowded city where millions still live in densely-packed slums.
Housing came under pressure in November when the Indian Prime Minister, Narendra Modi, overhauled the country's currency and took 500 and 1,000 rupee bills out of circulation in an effort to root out corruption, counterfeiting and tax fraud. Much of India's real estate transactions are done in cash to avoid taxes. PropEquity, a data provider, expects property prices in Mumbai could drop by 30% this year.

1. Hong Kong
Holding on to its rank as the most expensive housing market in the world for the seventh year in a row is Hong Kong. The median home price was 18.1 times the median annual pretax household income last year, according to a recent annual report from Demographia. Though a small improvement from the year before when home prices were 19 median household income, Hong Kong still ranks as "severely unaffordable" the report said.
The city's housing prices have skyrocketed in recent years, driven by low interest rates and mainland Chinese buyers. Lack of affordable housing has become a top social issue as the city's poor crowd into "cage homes" and dangerous, subdivided apartments.

Source: Forbes

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New York City's 'Billionaire's Row' is dead — and a record-breaking foreclosure could be the 'nail in the coffin'

A full-floor penthouse in the landmark One57 condo building is headed to the auction block after it was seized under foreclosure, Bloomberg reported.

This is most likely the largest foreclosure in the history of high-end real estate in New York City, experts say.

The apartment, which was the eighth-priciest sold in the building, will go to auction on July 19.
It was purchased for $50.9 million in 2014, with a $35.3 million mortgage loan from Banque Havilland. It was due to be paid in full a year after purchase, but no such payment was made by the shell company the unit was registered under. Havilland is now forcing the auction to recoup the funds it's missing, plus interest, according to court filings.

One57 is emblematic of New York City's Billionaire's Row, a stretch of 57th Street near Central Park, which in recent years has become a magnet for new condos courting high-priced investment. One57 is considered the most expensive of the new buildings, with record-breaking sales that included a $100.5 million top-floor penthouse.

This is the second apartment in the building to face foreclosure in the last two months. A unit on the 56th floor, which sold for $21.4 million in July 2015, hit the auction block on June 14. It's unclear if the property has changed hands yet.

The foreclosures come as another sign that Billionaire's Row is dead as the Manhattan real estate market above $10 million continues to cool.

A glut of units available with no buyers, combined with an increase of scrutiny on shadowy, identity-hiding corporations by the US Treasury Department, cooled the market considerably last year. With new regulations on capital outflow abroad (especially in China), it's becoming harder for foreign investors to use these apartments as investment properties. Pair that with an uncertain global market, and it's clear why the developers of these unique buildings are feeling the pinch.

Source: Business Insider

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New York City Landlords Are Offering Deal

New York City’s rental season kicks into high gear this month, as college graduates start looking for apartments, along with anyone else hoping to move when the weather is warm and school is out. Most years, apartment hunters see rents rise with the temperature. But this season, as the rental market enters its third slow year, renters may instead see some deals.

In an effort to lure new tenants, landlords are coming up with increasingly creative offers. Want a free year’s subscription to Netflix with that lease? You might be able to get it. How about a flat-screen TV? That could be on the table, too. Even the security deposit could be up for negotiation, as landlords have been reducing that fee, too.

As thousands of new apartments flood the housing market, landlords face steep competition. Last year, 8,774 market-rate units opened in Manhattan and Brooklyn, with an additional 15,291 opening this year, according to Citi Habitats, a brokerage firm. Even though those apartments are among the most expensive in the city, so much new inventory is having an impact on prices at older buildings, even in neighborhoods without much new construction. So landlords are looking for more novel ways to stand out, without actually lowering the rent. 

 

“It’s the story of 2017,” said Gabby Warshawer, the director of research for CityRealty, which has seen a spike in buildings offering reduced security deposits, with some asking as little as $500, as opposed to the time-honored one month’s rent. “All of this historic level of new development has to be leased, and it will be, but not yet.”

Although discounts are concentrated in neighborhoods with new construction, like Downtown Brooklyn and the financial district, landlords across Manhattan and Brooklyn are sweetening the pot. Such offers are not as prevalent in the Bronx or Staten Island, however, because those boroughs have yet to see the same rapid development and price escalations. New projects are scheduled to open in both boroughs in the coming years, potentially changing those markets.

In Manhattan and Brooklyn, the number of listings offering incentives, usually referred to as concessions, more than doubled in April from the same time a year ago, to 28.6 percent in Manhattan and 14.7 percent in Brooklyn, according to a market report by Douglas Elliman. And in Queens, the number tripled during that same period, to 45.5 percent, the highest level since January 2016, when Douglas Elliman began tracking such data.

For the past two years, landlords have been paying broker’s fees, which can be as much as 15 percent of the annual rent and are usually picked up by prospective renters, and also offering one or two months’ free rent. They have also been doling out perks like gift cards and free gym memberships. But, in recent months, they’ve added new perks like free Uber rides and subscriptions to services like Netflix and Amazon Prime, as quirkier offerings, like free TVs, have become more common, according to a StreetEasy report.

“It’s a good season for renters,” said Grant Long, the senior economist for StreetEasy, adding, “The concessions are here to stay.”  

 
Because of all these concessions, asking rents have largely held, even though the amount paid works out to be lower when the concessions are calculated. In April, the median rent in Manhattan was $3,417 a month, 0.1 percent higher than the same time a year ago; in Brooklyn, it was $2,800 a month, 0.7 percent higher than the previous year; and in Queens, where concessions were highest, the median rent rose 12.2 percent during that period, to $3,088 a month, according to the Douglas Elliman report.

“The concessions have largely been working” to hold rents steady, said Jonathan J. Miller, the president of Miller Samuel Real Estate Appraisers and Consultants, which prepared the Douglas Elliman report.

TF Cornerstone, which owns and operates over 7,000 rental units in the city, is one such landlord, offering discounts to avoid cutting the rent. For many of its listings, the company pays the broker’s fee and reduces the security deposit to $1,000.

A reduced security deposit “is sort of becoming the new normal,” said Sofia Estevez, an executive vice president at TF Cornerstone. Ms. Estevez likened the concessions bonanza to the experience of walking into a department store and expecting to see marked-down merchandise. “People like to get something,” she said. “It’s become expected.”

Some offers seem more like gimmicks than genuine discounts. Does a one-year Netflix subscription, worth around $100, really make a difference in a tenant’s life? Rents are punishingly high in New York, and the cost of moving is staggering. How much would a few free Uber rides really affect your bottom line if you pay $4,000-a-month rent? Renters who really just want to pay less rent might not be convinced.

“People want to save money,” said Sarah Saltzberg, a co-founder of Bohemia Realty Group in Upper Manhattan. “Five hundred dollars to an Amex gift card is great, but cash is better.”  Shop around, and there’s a good chance you can find a deal, or haggle until you get one.

“The first question out of every renter’s mouth is, ‘Can we waive the fee?’” said Nadia Bartolucci, a saleswoman for Douglas Elliman. Ms. Bartolucci and her partner at Douglas Elliman, Rachel Altschuler, an associate broker, are the listing agents for a renovated eight-family brownstone in Crown Heights, Brooklyn, where the landlord is paying the broker’s fee. Some brokers, however, are confident the deals will shrink, and in some cases evaporate, come summer.

“The last 45 days have been fantastic,” said David J. Maundrell III,  the executive vice president of new developments for Brooklyn and Queens at Citi Habitats. “We have actually, in certain circumstances, explored reducing concessions.”  But the market still has a long way to go before all the new apartments get rented. Thousands of units haven’t even opened yet, and most cost more than what many New Yorkers can afford. As those apartments hit the market, “it’s going to be a roller coaster,” said Mr. Maundrell.

So what does renting in a roller coaster market feel like? For Beatriz Ramos, 33, who works in business development and recently moved to New York from San Francisco, it meant looking at 100 apartments in search of a $2,800 one-bedroom. About a third of the listings offered discounts. Some brokers called or emailed her a few days later, hoping to lure her back to apartments no one seemed to want.

At the end of March, she signed a lease for a one-bedroom in a new rental tower in Downtown Brooklyn, with the help of Jason Burke, a salesman for Citi Habitats. The $3,395-a-month apartment came with two months’ free rent and no broker’s fee, bringing her effective rent down to $2,829 a month, about what she hoped to pay.

Without the discounts, Ms. Ramos said she would not have been able to afford the apartment, which has a 600-square-foot private terrace. “I have trees and a hammock,” she said. “Who in New York has a hammock? I’m pretty happy.”

Source: The New York Times

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Real Estate Deals Vanish in New York

Landlords are cutting rents and prices, spooked lenders are holding back, and the industry loses hope for Trump tax cuts.

Real estate developer Louis Ceruzzi has grand plans for a sleek $1 billion Manhattan skyscraper, featuring luxury shops and condos that soar high above Fifth Avenue.

Two years after Ceruzzi and a partner bought the site, they have yet to break ground. For now, all he has to show for his trouble is an empty lot, an idle backhoe and scattered piles of rubble.
The delay suggests an irony: even with election of Donald Trump, the first developer as president, commercial real estate investment has slowed to a near standstill—especially in Trump’s hometown, the nation’s largest market.

In New York City, first-quarter property sales plummeted 58 percent, to $4.3 billion, compared with a year earlier, according to data from brokerage Cushman & Wakefield Inc.  It marked the lowest quarterly sales volume in six years. Nationwide, the picture wasn’t much better. Sales dropped 18 percent, research firm Real Capital Analytics Inc. found.
“People are just not making decisions quickly at all,” said Robert Verrone, a principal at Iron Hound Management Co., a New York-based real estate advisory firm. “Everything in real estate is taking longer.”

Much of the slowdown has nothing to do with Trump. Concern is mounting that real estate prices have peaked following six years of record-shattering growth, and there are signs of overbuilding in large cities such as New York and San Francisco—the biggest beneficiaries of the recent boom.

Some of this hesitancy, however, can be traced to Trump’s gilded door. Real estate investors worry that Trump’s industry-friendly tax cuts will fail to pass. At the same time, others figure that lower taxes and higher spending could spark inflation and rising interest rates—a liability in the debt-driven business.

“If the rules of the game they have been playing for 30 years might change, that gives investors pause,” said Dave Bragg, an analyst at Green Street Advisors LLC., a Newport Beach, California-based real estate research firm.

It’s not just taxes. Uncertainty about the fate of Trump’s entire economic agenda is holding up deals across the country. Buyers and sellers “need to have shared expectations” before signing on the dotted line, said Jeff Friedman, a principal at Mesa West Capital, a Los Angeles-based real estate investment firm.

As sales of existing properties languish, developers are mired in a glut of hotels, condos and apartment complexes following a construction boom. Landlords are cutting rents and prices, and spooked lenders are holding back.

In Manhattan, even the biggest names in real estate are scrambling. To scale back debt, Harry Macklowe, a fixture in the business since the 1960s, is revamping his condo conversion of 1 Wall Street, a New York landmark. Macklowe is well aware of risk since he lost the General Motors Building to creditors during the financial crisis.

Time is money, and developers need more. They include Gary Barnett, known for building One57, one of the tallest operational residential skyscrapers in the city. Barnett’s Extell Development had to negotiate with lenders for time to find additional funding for Central Park Tower, a $3 billion skyscraper on West 57th Street that will house the city’s first Nordstrom store.

Some projects appear to be moving forward. Last week, developer Ziel Feldman, a former partner of Barnett, closed on a $1.25 billion loan to start building two towers beside the High Line, the park built atop an unused railroad track in Manhattan’s Chelsea neighborhood.

The financing came together two years after Feldman’s HFZ Capital paid $870 million for the site that occupies a full block. It was one of the most expensive development sites ever sold in the city.
At the time of the acquisition, Feldman said that the project would be ready in 2018. Now, the plan is for 2019. In an interview earlier this month, Feldman said the shift in timing is immaterial and unrelated to the slowing real estate market.

“Of course the pace has slowed down, because the pace was frenzied,” he said. “Well-priced, well-executed buildings” are selling units briskly.

Like Trump, Ceruzzi—the developer with the vacant lot on Fifth Avenue—got his start outside Manhattan. He built shopping centers and apartment buildings in suburban New York and Connecticut before setting his sights on the big city.

In 2015, Ceruzzi teamed up with China’s SMI USA to purchase the plot at 520 Fifth Ave. for about $275 million, almost double the price paid for the property in 2011. They shelled out roughly $50 million more for additional air rights. At the time, Ceruzzi envisioned a 71-story glass skyscraper with retail, a hotel and apartments.

In November of that year, Ceruzzi told the Commercial Observer, a publication that covers the city’s real estate industry, that construction would start in the spring of 2016. On a recent weekday, there were no workers at the site two blocks from Grand Central Station. Ceruzzi didn’t respond to requests for comment.

Even if Trump enacts policy changes that benefit real estate developers, it will take time to translate into improvements in the property market, according to Robert Knakal, chairman of New York investment sales at Cushman & Wakefield.  “It’s not like the stock market.” Knakal said. “Nothing happens overnight.”

Source: Bloomberg
Image credit: Bloomberg

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