New Yorkers’ Wealth Surges

One factor that has a huge effect a country’s economy and the standard of living of individuals within it is wealth. This has become evident among New Yorkers, whose level of wealth has grown to the point of affecting the price of real estate market in Manhattan. In the past, high prices of real estate were attributed to foreign investors. More recently however, New Yorkers, with an average yearly income of one million dollars, have really started to impact the city’s real estate market. So while foreign investors are curtailing investment in NYC real estate because of the global economic crisis, New York City residents are stepping up to fill the void.

Data collected from tax payments reveal that the number of New York residents earning a million dollar or more per year has risen significantly since 2012. Not only has the number increased, it is far greater than the income of residents of neighboring cities. In fact, New York City is home to more than half of the millionaires in the state, which is even more impressive given that New York State is ranked second among US states with 12 percent of the entire country’s millionaires. Only California has a greater share at 15 percent of these earners.

One effect of this increase in the wealth of city residents has been a tremendous boost to the local economy, increasing transactions for both services and products. Another effect has been the push it has given the prices of median condos, which are now at record levels. 

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A New Dawn for New York Thanks to Brexit

For decades, investors have been attempting to choose between London and New York as the best location to invest their resources, with each city being one of the strongest real estate markets in the world. It has often been a toss-up between Canary Wharf or Wall Street, Islington or Brooklyn Heights, Kensington or the Upper East Side. But now, thanks to Brexit, the balance has tipped in favor of New York City, which is now seen as more stable compared to London due to the uncertainties surrounding the British economy.

The superrich tend to keep well informed regarding world affairs in order to be sure their money is in safe hands. Ever since Britons began agitating for an exit from the EU, investors have been looking for investment alternatives to London real estate. Various brokers and lawyers in the residential real estate industry have been receiving calls from billionaire investors in countries all over the world who are planning to shift their focus from London to New York. Some who already had expensive real estate in London have been selling off those residential estates and buying new ones in New York.

In the past, both cities have been in sharp competition in the real estate market. Investors are now seeing uncertainty surrounding Britain’s economy, and many are perceiving New York to have an edge over London, as there is no safer place than New York right now - the wealthy have been investing there for decades and understand the market perfectly. New York has been experiencing a slowdown in the luxury real estate market recently due to an oversupply of high end residences and things have been going badly enough for developers here that some have had to attach promotions in order to sell their new condo properties. But with the current situation in Britain, London is sure going to lose ground to New York as a prime location for property investment as Brexit is leading to predictions of a 5 to 15 percent drop in London real estate prices in the next few months. The departure of Britain from the European Union is a blessing in disguise for New York City real estate and for those who are ready to take advantage of it.

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Sotheby's International Realty® Brand to Target China's Wealthy with New Juwai.com Alliance

MADISON, N.J., Sept. 7, 2016 /PRNewswire/ -- Sotheby's International Realty Affiliates LLC has announced an alliance with Juwai.com that enables the luxury real estate brand to generate Chinese buyer interest on one of the world's most prominent real estate websites with over two million monthly visitors. As a truly international brand, Sotheby's International Realty now has the most global representation on Juwai.com, displaying luxury listings from 65 countries and territories.

 Chinese Wealth

Because of its rapid economic growth, the number of Chinese dollar millionaires is expected to reach 2.3 million by 2020, a 74 percent increase compared to today.[i] Largely due to China, Asia was responsible for 70 percent of all new billionaire wealth in 2015.[ii]

 Chinese Real Estate Buyers

 China is already the second-largest source of visits to sothebysrealty.com, only after the United States, and accounts for one out of every 10 visitors.

Chinese investors favor real estate as an asset class. Chinese purchasers acquired at least US$350 billion of U.S. real estate between 2010 and 2015.[iii] 69 percent of Chinese purchase on an all-cash basis.[iv] Between 2009 and 2015, Chinese buyers went from accounting for 10 percent to 28 percent of all foreign residential real estate acquisitions in the U.S. In the same period, its annual investment level increased more than nine-fold.[v]

Looking forward, Chinese buyers are expected to continue their international real estate purchasing spree. The best estimate is that they will spend at least US$218 billion on existing U.S. real estate between 2016 and 2020[vi] – with investments in the rest of the world on a similar scale.

 Details of the Alliance

 The Sotheby's International Realty brand alliance with Juwai.com includes the following components:

·         Listing display: Sotheby's International Realty property listings will appear on Juwai.com and in its real estate search results.

·         First responders: Juwai.com's Chinese-language team is located in mainland China so they can respond to consumer inquiries in real time, translate the inquiries into English and forward them to the Sotheby's International Realty sales associate who has the listing.

·         Brand page: A Sotheby's International Realty brand overview page carries information about the brand, a contact form and the network's listings – all in one place.

·         Banner advertising: Sotheby's International Realty banner ads will run on the Juwai.com homepage, promoting the company's new brand page and listings to Juwai.com's audience.

Quotes

 "We are constantly looking for opportunities to expand globally by adding new distribution opportunities that showcase properties to affluent consumers in key growth markets. The alliance with Juwai.com achieves that by giving us better access to a market that is already one of our most important, and which promises great future growth."

 "From now on, our listings will also be promoted on Juwai.com. Having Juwai.com's team respond to leads in timely fashion overcomes the cultural and time-zone challenges of working with overseas buyers. That's a huge competitive advantage to our affiliates and independent sales associates, and to their clients."

 "One of Juwai.com's key advantages is that it is hosted on both sides of China's internet firewall, so its listings are visible online both within China and outside of China." -- Wendy Purvey, chief marketing officer, Sotheby's International Realty Affiliates LLC

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Renters Fight For Better Deals In Manhattan

During good economic times, people tend to spend more freely without looking carefully at the true cost of things, and we certainly have seen some of that behavior during the past few years. But lately, we seem to be in a period when people are ready to conserve rather than overspend. Even the superrich have become careful in their spending because, to many of them, the future appears bleak – or at least uncertain. The tendency toward more frugal spending is reflected in the current Manhattan apartment rental market, with renters fighting for better deals on rent prices.

For landlords, the objective is to maximize rental income while for renters of course, the objective is to minimize the amount they must spend on rent. The introduction of new and sometimes less expensive apartments into the Manhattan rental market is tipping the balance in favor of renters, who suddenly have more options. In newly leased apartments, there are reports of landlords granting concessions in almost 10% of new deals. There has been a substantial increase in the number of apartments in Manhattan compared to just a year ago. With more apartment inventory on the market, renters can now take to their heels and look elsewhere when their existing landlords are increasing rents. These new apartments might even be better than the existing ones. In addition, some apartment seekers are taking refuge in Brooklyn where leasing has increased dramatically due to the presence of newly constructed high-end towers, which are more affordable compared to those in Manhattan. Manhattan landlords have been forced to take all of this into consideration - and as a result, they are generally reducing their prices.

One way landlords are striking better deals with tenants is through discount deals consisting of an average 2% reduction in rent – an increase from the 1.1% average reduction in the previous year. Instead of leaving for alternatives, with these discount deals, tenants are negotiating and staying in many cases.

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Trophy Homes Experience Market Fall In New York

There is a new trend in the once-frenzied real estate market for ultra-luxury homes. The end has come to ever-increasing price tags despite the skyscraping towers, luxury finishes and helicopter views. There is now often a huge difference between the price these trophy apartments are fetching and their initial asking price. The market has been flooded by a four- year construction boom targeted at buyers able to spend more than ten million dollars for a home. This is happening in the face of unstable global financial markets resulting in the pulling back of the rich investors, while the U.S. government is making an initiative to investigate cash-dominated transactions.

Many people have pointed to volatility in the financial markets as the reason for the pull-back in spending by the ultra-wealthy. While it may in part be true, other global factors are worth considering. Some of these include: the restriction by China on its capital outflow, Brexit, the impact of the reduction of oil prices, and increased tax rates in many countries. The effect of these combined factors is a dwindling volume of real estate sales, especially at highest levels. This has resulted in the delay of some projects, while other developers have resorted to drastic price reductions.

In one example, the initial asking price of a penthouse was 60 million dollars, but this was eventually sold for 42 million dollars after over 3 years on the market – a 29% reduction from the original price. In another example, a triplex penthouse which had been on the market for over a year at a price of 45 million dollars was eventually broken into two separate units. These two units are now being listed for 11.5 million and 28.5 million dollars respectively, giving a total value less than 40 million dollars. Similarly, the tallest of the new residential towers, located at 432 Park Avenue, once consisted of full-floor apartments priced up to 85 million dollars. These have been divided into two equal halves and each is now priced at about 40 million dollars. Meanwhile, there has been a postponement of any major marketing effort of a planned skyscraper at 111 W. 57th Street.

This high-end market meltdown is not limited to New York City. There has been a drop in property values in London, Singapore, Paris, Dubai and Moscow. All of these cities had been regarded in the past as stores of wealth for investors. In Manhattan however, in addition to the general trends affecting all of these global real estate markets, observers have identified some factors that are particular to the Midtown area. These include: oversupply, peak pricing and a lack of distinction between one glassy high-end unit and the next.

Excess supply can be a problem in any market. To the developers who built these ultra-luxury residences, it certainly looked like a good investment at the time. However, the situation has changed, and now even waiting for next year can be a risky proposition as no one can predict how the real estate market will be then.

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