Foreign Buyers Take Manhattan- nytimes

[jk]

Foreign Buyers Take Manhattan



KENNY TIMMONS has spent three long weekends in New York City since 2003, catching up with friends he knew in Ireland, visiting ground zero, restocking his wardrobe at Armani and Niketown and chatting about real estate with a bartender in an Irish pub in Midtown Manhattan.

That was enough of a glimpse of New York for Mr. Timmons, a 32-year-old carpenter [!!] from County Meath, Ireland. Last summer, he put down 10 percent on a $760,000 studio under construction at 75 Wall Street.

Mr. Timmons has never seen the apartment and does not plan to live there. Instead, he hopes to rent it out for $3,000 a month when it’s finished next year and eventually to sell it at a profit.

[snip]

This enthusiasm for Manhattan real estate isn’t felt by just a few enterprising foreign buyers. Real estate brokers say that they are seeing more sales to foreign buyers than ever before and that these buyers are helping to fuel the Manhattan market.

etc

http://www.nytimes.com/2007/11/04/realestate/04cov.html

[EJ]

Re: Foreign Buyers Take Manhattan- nytimes

Foreign Buyers Take Manhattan



KENNY TIMMONS has spent three long weekends in New York City since 2003, catching up with friends he knew in Ireland, visiting ground zero, restocking his wardrobe at Armani and Niketown and chatting about real estate with a bartender in an Irish pub in Midtown Manhattan.

That was enough of a glimpse of New York for Mr. Timmons, a 32-year-old carpenter [!!] from County Meath, Ireland. Last summer, he put down 10 percent on a $760,000 studio under construction at 75 Wall Street.

Mr. Timmons has never seen the apartment and does not plan to live there. Instead, he hopes to rent it out for $3,000 a month when it’s finished next year and eventually to sell it at a profit.

[snip]

This enthusiasm for Manhattan real estate isn’t felt by just a few enterprising foreign buyers. Real estate brokers say that they are seeing more sales to foreign buyers than ever before and that these buyers are helping to fuel the Manhattan market.

etc

http://www.nytimes.com/2007/11/04/realestate/04cov.html

Well, if foreign central banks aren't going to send us any more spending money, maybe we can sell private investors on "cheap" US stocks and real estate–cheap in euros, yuan, and yen, that is.

[jk]

Re: Foreign Buyers Take Manhattan- nytimes

i couldn't resist posting more from the article:

Jonathan Miller, an executive vice president and the director of research at Radar Logic, estimates that foreign buyers have bought about 1,000 newly constructed or converted condos in Manhattan in the last 18 months, which is about a third of the condo sales in Manhattan in that period.
And while in the past an influx of foreign buyers could often be traced to boom times in a particular country, brokers say that the interest in Manhattan real estate is now worldwide, with buyers from Australia, Korea, Russia, Israel, Italy and Colombia.
“In the late ’80s, we totally depended on the Japanese market,” said Louise Sunshine, development director for the Alexico Group, who has sold apartments to foreign investors for more than two decades. “It’s a diversity of a different kind. There’s a huge amount of new wealth everywhere.”
In her work on several Manhattan condo projects, Ms. Sunshine sees this changing market up close. Buyers from five continents inquired about condo suites at the Mark Hotel at 25 East 77th Street, she said, and people from Dubai, Indonesia and Portugal bought apartments at the Laurel at 400 East 67th Street.
Manhattan real estate is also benefiting because buyers have lost confidence in other United States markets, especially Florida. “There is the fear factor that prices are going to go down even further,” especially in Miami, said Jacky Teplitzky, an executive vice president at Prudential Douglas Elliman.
She said that she had seen a 20 percent jump this year in inquiries from Latin Americans about the Manhattan market and recently, more inquiries from Eastern Europeans, specifically Russians.

ms. sunshine indeed!

[zoog]

Re: Foreign Buyers Take Manhattan- nytimes

Well, if foreign central banks aren't going to send us any more spending money, maybe we can sell private investors on "cheap" US stocks and real estate–cheap in euros, yuan, and yen, that is.

ManhattanGoinUp ;)

[jk]

Re: Foreign Buyers Take Manhattan- nytimes

ManhattanGoinUp ;)

............

[c1ue]

Re: Foreign Buyers Take Manhattan- nytimes

Maybe it will work out better for the Europeans than the Japanese...

[jk]

Re: Foreign Buyers Take Manhattan- nytimes

Maybe it will work out better for the Europeans than the Japanese...

you raise a good point. the last real estate peak was late '80s, coinciding with the japanese stock and real estate markets. i don't know that the japanese ever got into this kind of retail investing in real estate. they went for the tophies: rockefeller center and the pebble beach golf course. still, the current real estate bubble isn't confined to the u.s.; it's in europe, the u.k., australia, n.z. i don't see us following japan's deflationary course, however, so.... i don't know. this raises the issue of global processes that feel significantly different than the 1989 top. does the weakness of the dollar mean that foreign buyers will prop up the manhattan market? or does a u.s. recession exert enough of a global downward force to prevent that? i think we have to fall back on risk/reward. given the uncertainty, i think there are more prudent things to do with my money than buy a manhattan condo.

[Spartacus]

Re: Foreign Buyers Take Manhattan- nytimes

Vancouver without the pot, shrooms, mountains, skiing and laid-back attitude

Mancouver

............

[Guest]

Re: Foreign Buyers Take Manhattan- nytimes

JK -

How about me buying a manhattan condo for you with your funds, and acting as a property custodian for a couple of years? I can even offer my services on a good will basis?

given the uncertainty, i think there are more prudent things to do with my money than buy a manhattan condo.

[touchring]

Re: Foreign Buyers Take Manhattan- nytimes

since 2003 - this was ancient.

Now, anything denominated in dollars is avoided like plague.

i even changed my $1000 balance in paypal to euros!

[GRG55]

Re: Foreign Buyers Take Manhattan- nytimes

you raise a good point. the last real estate peak was late '80s, coinciding with the japanese stock and real estate markets. i don't know that the japanese ever got into this kind of retail investing in real estate. they went for the tophies: rockefeller center and the pebble beach golf course. still, the current real estate bubble isn't confined to the u.s.; it's in europe, the u.k., australia, n.z. i don't see us following japan's deflationary course, however, so.... i don't know. this raises the issue of global processes that feel significantly different than the 1989 top. does the weakness of the dollar mean that foreign buyers will prop up the manhattan market? or does a u.s. recession exert enough of a global downward force to prevent that? i think we have to fall back on risk/reward. given the uncertainty, i think there are more prudent things to do with my money than buy a manhattan condo.

I noted the same thing as C1ue:

“In the late ’80s, we totally depended on the Japanese market,” said Louise Sunshine, development director for the Alexico Group, who has sold apartments to foreign investors for more than two decades. “It’s a diversity of a different kind. There’s a huge amount of new wealth everywhere.”

The commonality of today's global bubble with the Japanese real estate bubble is that the most egregiously overpriced real estate is in the financial centres, just like Tokyo was the most inflated market in Japan. Whether its Central London, NY, Toronto, Sydney, Shanghai, or Dublin, the collapse of the financial asset/credit instrument bubble could well deflate these financial centre real estate markets more than any other in their respective jurisdictions. For example, if you really want to own a home in Australia, you may be better off buying an overpriced bungalow in Perth, where the mining boom is the driver, instead of Sydney. Just a thought...

Postscript: The fact that foreign real estate buyers are apparently flocking to Manhattan (still going up) and loathing Florida (well into collapse) increases the probability of the above scenario in my mind.

[touchring]

Re: Foreign Buyers Take Manhattan- nytimes

The commonality of today's global bubble with the Japanese real estate bubble is that the most egregiously overpriced real estate is in the financial centres, just like Tokyo was the most inflated market in Japan. Whether its Central London, NY, Toronto, Sydney, Shanghai, or Dublin, the collapse of the financial asset/credit instrument bubble could well deflate these financial centre real estate markets more than any other in their respective jurisdictions. For example, if you really want to own a home in Australia, you may be better off buying an overpriced bungalow in Perth, where the mining boom is the driver, instead of Sydney. Just a thought..

This scenario is not far away. You just have to look to HK 1997, home prices fell about 50% in less than 2 years.

At least in Florida, you can find a job in the tourism industry. But what would you do in Manhatten when one bank after the other closes down?

[c1ue]

Re: Foreign Buyers Take Manhattan- nytimes

JK,

I actually think Manhattan is a giant money trap for foreigners.

Just as the Japanese (and HK-nese before them) threw lots of bad money into the Manhattan real estate well, now the Europeans are doing the same.

I have nothing against Manhattan, my view is simply that the financial industry drives prices there. As world financial economies deteriorate, so does the financial industry and therefore those who thought 'You can't lose' by buying real estate in Manhattan soon pay for their new found knowledge.

There is definitely a land/building restriction in Manhattan, but the real driver is the mass of money going into financial worker's pockets.

With all the good things going on now, do you really think the mass in question will not go down significantly?

Foreigners such as Europeans also generally don't know how property taxes, et al can become a serious factor.

[metalman]

Re: Foreign Buyers Take Manhattan- nytimes

Vancouver without the pot, shrooms, mountains, skiing and laid-back attitude

Mancouver

this is a cool thread. reminds me of jk's other great thread where he asks us to think like we are not in the usa and don't think in dollars. what to invest in? why... manhattan real estate! why didn't i think of that!

[grapejelly]

Re: Foreign Buyers Take Manhattan- nytimes

I love the arithmetic.

Figure on $3000 income, less vacancy factor of, say, 10%, so that's $2700 monthly income.

Monthly Expenses:

taxes & insurance $1000
loan payment $5000


So you lose $3000 per month, or so. Great investment!

The real fun begins when 1000s of people like this see that values are *falling* and decide to head for the exits.

Thing is, about the FIRE economy...nobody in the FIRE economy expects these to be real money numbers. Nobody expects to go to the bank and say "let me have $700,000 cash from my equity, please."

There is amazing power though in cashing in your FIRE chips if you are EARLY. If you are not early, you get nothing. If you are early, you are sitting pretty. Preferably equity out into gold, of course.

But silly people, the insist on buying more real estate. So last year.

I wrote this story up on my stop foreclosure fast blog.