Why Foreign Buyers Are Coming Back
For decades, foreign buyers have buoyed the highest end of Manhattan’s bonkers residential real estate market — using the city at times like a Swiss Bank vault to safeguard questionably earned fortunes. Over several years after 2008 however, their largesse began cooling as concerns grew over capital controls and potential legal repercussions stemming from breaking trade embargoes or other overseas restrictions on wealth. Then, over 2015 and 2016, they roared back with a vengeance.
What Is The Profile Of A Foreign Buyer In The US?
In 20019, roughly $800 million was spent by foreign buyers on U.S. property. Since then, however, activity dropped significantly. By May of 2021, a total of $85 million had been invested by foreign citizens—an 81% decline from 2008 levels, according to a survey conducted by Real Capital Analytics (RCA). A new report from RCA sheds light on how foreign nationals made these purchases over that time period and where they’re most likely to be based now.
Where Do These Foreign Buyers Live?
During boom times, foreign buyers often rented out their apartments—the thinking being that it was better to have your money working for you by collecting rent checks than having it sit there on a depreciating asset. But with rents and interest rates low, there’s less incentive for foreign investors to rent out their swanky digs. And so they’re starting to put their money into hotels, office buildings and even other homes, betting that these investments will appreciate more quickly than their empty apartment ever would.
How Is NYC Attracting Them?
Foreign buyers had become scarce since Trump’s election, with a little more than two dozen foreigners spending $2 million or more on the property each year. But already, three such deals have closed in 2018.
The biggest splash was made by Vail Resorts CEO Rob Katz, who bought an 8,000-square-foot duplex penthouse at One57 for $50 million last month—that’s $6,250 per square foot—from fellow billionaire Michael Dell and his wife Susan. Before that, Russian oligarch Dmitry Rybolovlev resold Unit 69A at 220 Central Park South to Jona Rechnitz — son of Jake Rechnitz —for $16.5 million. And German banker Matthias Krull recently sold a condo at 740 Park Avenue to Nima Capital investor Oleg Gnedin for $17.7 million.
What Makes Manhattan Such An Attractive Investment?
Let’s talk about Manhattan specifically. First, it is one of two counties (the other being neighboring Bronx County) that fall under direct control of New York State government, meaning Albany doesn’t like handing its precious tax revenue over to a city council for redistribution. Second, there are no local income taxes and property taxes tend to be lower than elsewhere in America.
Why Is This Important To NY State?
For years, foreign investors have held a large role in some of Manhattan’s most expensive properties. Foreign investment is not a new phenomenon – it has been a major source of income for New York State and Local governments for many years. The NYC Real Estate Board reported that international investment made up 17% of all residential sales to foreign nationals between April 2020 and March 2021.