The current perception is that Manhattan real estate is as good as gold. Manhattan’s property market continues to serve as a long-term equity play for asset preservation.
Domestic and foreign investors alike are turning to the relative safety that Manhattan’s real estate market offers. Market volatility and currency devaluations make real property a smart investment for risk-aversion in the midst of uncertainty. The relative cost, when compared against other global cities, also makes Manhattan property a great value, and some of the views aren’t bad either.
As a long-term hold, real estate offers a great way to diversify a portfolio, hedge against inflation, and, of course, make a competitive risk-adjusted return. The low-volatility characteristic of real estate and stable pricing, due to infrequent transactions and market lag, also add to overall attractiveness.
How Does Today’s Market Compare?
The experts agree, today’s market is different than the last housing boom we saw in Manhattan prior to the Lehman collapse. The defining difference is the lack of available credit across the board. Although purchasers are still finding ways of securing traditional financing, today’s market is being driven by all-cash transactions.
Fannie Mae (FNMA) has recently announced that it is loosening the rules that have forced banks to buy back flawed home loans to ease the credit crunch. Banks will be freed of liability for mortgages with three years of steady payments.
We don’t see the market showing any signs of weakening. We believe that interest rates will remain stable through the end of the current administration to avoid any major fiscal problem. New York continues to see job growth, and foreign demand for property is increasing, despite current events around the globe. These factors have fueled developers to continue to build new residential buildings to satisfy the demand.
The increasing cost of land throughout the city is something we are monitoring closely. The higher cost of acquisition of buildable land is reflected in pricing of new developments.
When looking at new developments, we recommend being wary of stretching neighborhood boundaries and of subpar product being pushed to fill demand. We advise our clients not to speculate on forward-looking projections on price or neighborhood performance. In contrast, there is nothing wrong with purchasing a premium product in a premium location, for a premium price right now.
Mercedes/Berk has thirty years of experience navigating Manhattan’s real estate market. We pride ourselves on providing our clients our undiluted attention and global perspective in sales, acquisitions, and investments in Manhattan and the Hamptons.