The NYC re-opening. We are back!
New climate in New York real estate
Our last newsletter indicated that the growth in real estate sales in New York was a simple technical adjustment linked to the long period of closure of the market, what in the stock market is referred to as the 'dead cat bounce'.
Today, however, from the careful observation and analysis of market data (see graph below - source Urbandigs - Forbes), we can say that the recovery has actually started in the real estate cycle; For those who focus on revaluation, this is the time to buy!
It is necessary to accept an initial period of modest returns. In fact the rental market, more influenced by current events, is still suffering from the economic effects of the pandemic and remains at the lows of the last 10 years.
Manhattan, number of units for sale (supply), you mean under contract?) (pending sales), or sold since the beginning of the year. It includes all types of properties regardless of price.
(Source: Urbandigs - Forbes )
Sales prices rose compared to the levels of 2019, thus reversing a downward trend that has continued without pause since 2015 (obviously exasperated in 2020 by the pandemic).
The sales and price growth figures compared to the pre-pandemic period are even more interesting if you think that:
a) for the most part, the buyers are almost exclusively local, with the international market still blocked at the airports, andb) the values of the leases, more affected by current events, remain lower than 2019
We are navigating this market firsthand by managing our clients’ portfolios of properties in Manhattan and Brooklyn throughout the pandemic.
Here are the current and long-term factors that give life to (or are fueling) the recovery underway:
• The season - historically spring coincides with the reopening of the real estate market. This year, in addition to the arrival of summer, New Yorkers who have returned to the City found a climate that has not been seen since 2019: busier streets, open shops, crowded parks ... a city that comes back to life without (or with much less) fear.
• The vaccination campaign - more than a third of the New York population has already received their dose of the vaccine. A great success for the campaign that is moving much faster than expected. The Mayor anticipated that by July 1st everything should reopen as before the pandemic.
• Interest rates - the gradual improvement in the economic situation will lead, in the short term, to a rise in interest rates. Even if the expectations are of a minimal increase, the fear of missing an opportunity adds pressure to buyers.
• Savings - after a year of smart working and a drastic reduction in social activities, many have found themselves with a small unexpected saving which, in some cases, allows them to switch from rent to purchase.
• Politics - The New York spring does not end here. In June we will vote for a new Mayor, ending the administration of the much criticized (both from the right and from the left) Di Blasio. The front runner is a candidate with national recognition and a much higher turnout is expected than in previous elections. In addition, in order to stimulate the local economy, Governor Cuomo has signed legislation, which we jokingly call"green", for the legalization of cannabis for recreational purposes. The new legislation is expected to bring tax revenues of approximately $ 350 million, and over 60,000 new jobs.
In the super luxury sector (residences with prices above $5 M), the absence of foreign investors, heavy taxation and the weakness of the rental market are holding back prices, despite good activity in the first quarter of 2021.
What to do?
One of the most notable characteristics of New York City real estate is its resilience
in the face of crisis; Y2K, 9/11, and Subprime mortgages, to name a few. We’re on the verge of overcoming COVID-19 , at least on the local scale. Precisely for this particular resilience, NY has been considered, despite the modest rate of return, one of the safest places in the world in which to make real estate investments with long-term prospects.
For those interested in this type of diversification, we believe that this is the best time of the last 10 years to invest in New York, and as those who follow us now know, we do not say certain things lightly.
Of course, a successful investment will have to take into account many factors besides the time of purchase. In particular, today we will have to take into account the rapid progress of smart working, which by allowing you to work remotely has given new meaning to the old adage Location, Location, Location.
Last, but not least, the decisive factor in the success of any investment is the management that we offer locally through the dedicated services of VPM NYC.
