Why foreign buyers are coming back
For decades, foreign buyers have driven the higher end of Manhattan’s crazy residential real estate market, using the city at times like a Swiss bank vault to safeguard questionable fortunes. For several years after 2008, however, his largesse began to cool as concerns grew about capital controls and the potential legal repercussions of breaking trade embargoes or other restrictions on offshore wealth. Then, during 2015 and 2016, they roared loudly.
What is the profile of a foreign buyer in the US?
In 2019, foreign buyers spent an estimated $800 million on American properties. Since then, however, activity has dropped significantly. By May 2021, foreign nationals had invested a total of $85 million, a decrease of 81% from 2008 levels, according to a survey by Real Capital Analytics (RCA). A new report from RCA sheds light on how foreign nationals made these purchases during that time period and where they are most likely to be found now.
What does foreign investor mean?
During boom times, foreign buyers often rented out their apartments, thinking it was better to have their money working for you cashing rent checks than having it there in a depreciating asset. But with rents and interest rates low, there is less incentive for foreign investors to rent out their fancy digs. And so they are starting to put their money into hotels, office buildings, and even other homes, betting that these investments will appreciate faster than their empty apartment would.
How is New York attracting them?
Foreign buyers had become scarce since Trump’s election, with just over two dozen foreigners spending $2 million or more on property each year. But three such deals have already been closed in 2018.
Making 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, or $6,250 per square foot, from billionaire Michael Dell and his wife Susan. . Before that, Russian oligarch Dmitry Rybolovlev sold 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’s one of two counties (the other is the neighboring county of the Bronx) that are under the direct control of the New York State government, which means Albany doesn’t like to hand over its precious tax revenue to a city council for its redistribution. Second, there are no local income taxes, and property taxes tend to be lower than in other parts of the United States.
Why is this important to New York State?
For years, foreign investors have played a major role in some of Manhattan’s most expensive properties. Foreign investment is not a new phenomenon: it has been a major source of revenue for New York State and local governments for many years. The New York City Real Estate Board reported that international investment accounted for 17% of all residential sales to foreign nationals between April 2020 and March 2021.