NEW YORK REAL ESTATE MARKET UPDATE

18 August 2013

The US economic resurgence is more than underway.

The national economy continues to recover well, with GDP growth climbing 1.7% in the second quarter of 2013 (US Bureau of Economic Analysis). The future is also looking brighter as the IMF forecasts the US economy to grow 2.7% next year while the US job market is going from strength to strength as unemployment across the nation dropped to 7.4% in July, its lowest level since the beginning of 2009 (US Bureau of Labor Statistics). Meanwhile, the Fed's quantitative easing programme and accompanying low interest rates are expected to last until between late 2013 to early 2014.

These factors have played a key role in the US having been recently voted the most stable and secure international real estate investment market by the Association of Foreign Investors in Real Estate.

Having been at the forefront of the US recovery, New York's reputation as a global economic financial centre remains fully intact. Much like London, the city is widely regarded as one of the world's real estate investment safe havens. Unemployment levels remain in line with the national average, with the New York wage growth rate currently the fastest in the nation, despite residents already boasting the highest average wages in the US.

New York Residential Real Estate

The main driver behind increasing residential prices throughout New York is the city's current record-low inventory, a result of strong demand and a limited new development pipeline.

  • Sales increased 18.8% to 3,144 in the year to Q2 2013, the most Q2 sales in six years
  • Residential inventory decreased by 31.3% in the same period
  • As of May 2013 condo prices had seen year-on-year price growth of 10%, but prices remained 5.6% below peak (Case-Shiller Index)
  • New York's median rent index increased 8% in the year to July 2013 (Zillow)

New York's economic and property market growth has resulted in a surge in demand from both domestic and international investors – with prices still below peak, investors are still very keen to take advantage of the high potential which remains. Rising entry costs in global hotspots such as Hong Kong and Singapore, where acquisition costs for a USD1m property can be up to 24%, are making the US an increasingly attractive option for international investors at the moment – the equivalent figure in New York is only around 4.4%. 

As New York is expected to add a million more residents by 2040, satellite neighbourhoods in boroughs such as Brooklyn and Queens will accommodate a substantial part of this population. As the housing market strengthens further, strong market activity is moving from typically in-demand Manhattan to other neighbourhoods that can expect to see excellent growth in the medium term. 

New York's Top Boroughs for Real Estate Investment

Manhattan 

Manhattan has been the traditional investment hot spot in New York, particularly among international buyers. However, the area's inventory has plunged to a seven-year low, and such limited immediate availability combined with the district's long-established lack of buildable new land are driving price growth higher still. When considered alongside the overall economic recovery and accelerating demand for properties across the city, Manhattan price growth is expected to continue strongly in the medium term.

Manhattan rental rates have risen relentlessly for two years now without a break, but the rate of growth has been slowing of late. Despite this, rental prices are expected to continue their upward trajectory owing to the near-record-high demand (Douglas Elliman).

New York Boroughs 

  • Manhattan's average sales price per square foot for residential properties, including co-ops and condos stood at an average of USD1,149 at the end of Q2, up 7.9% from 2012
  • Median condo prices jumped 13.6% y-o-y to USD1,250,000
  • Rental prices in Manhattan grew 1.5% in the year to July 2013 while the vacancy rate is just 1.9%

Brooklyn

As the most populous of New York city's five boroughs, Brooklyn was home to 2.6 million people as of 2012. This is in part attributable to the area's continuing status as the top choice for city commuters given its lower housing costs and close proximity to Manhattan. The citywide low inventory situation is also being felt in Brooklyn, with inventory at a five-year low resulting in rising prices.

  • Median prices jumped on the back of low inventory levels, increasing 15.3% year on year to stand at USD550,000 in July 2013 – the highest levels since 2003
  • Median monthly rental prices have also increased, rising 5.1% year on year to USD2,675 (Douglas Elliman)

Queens

Boasting a population of 2.3 million as of 2012 Figures, Queens is New York's second largest borough. Development in the area is increasingly rapid, encapsulated by the USD3 billion Willets Point Regeneration project in Flushing that is set to deliver substantial economic growth across the entire borough over the next three decades. The borough's close proximity to Manhattan is another attractor for potential buyers, with Queens seen as an ideal home for commuters which offers prices around 40% lower than in Manhattan.

  • Queens inventory is lacking as the number of listings fell by 28.9% to 6,225, the lowest level in eight years
  • Averages condo prices increased 15,7% to USD509,803 y-o-y in Q2 2013
  • The median home price in Queens is USD474,000, approximetley 40% lower than Manhattan (US Census Bureau)

IP Global

Written by IP Global

IP Global’s full-service approach is built on extensive market research and analysis combined with a significant financial commitment to every investment we offer. We are able to manage the entire investment process end-to-end, from sourcing, financing, and management to those all important exit strategies, making investment in real estate as straightforward as investing in more traditional asset classes. Our expertise, experience and strong record have produced over USD2.8 billion in international real estate investments in over 30 markets worldwide.

Related posts