Every time a luxury condo building takes to the Manhattan skies it seems like there are always a slew of high profile celebrities and business tycoons ready to snap it up. Some ultra-expensive buildings, such as the decade old Robert A.M. Stern-designed 15 Central Park West, resemble an Oscars after-party with scores of famous names on the list of owners. I say owners as opposed to residents because most buyers have an extensive property portfolio. What they and their financial advisors have realized is that luxury New York real estate is the best investment they can make. Yes, even better than the stock market according a recent report by CityRealty and an article in Forbes.
Recently Manhattan has been awash with luxury towers and trendy conversions like The Greenwich Lane and 443 Greenwich St., both of which transformed from their industrial roots to luxury residences. Yet 15 Central Park West still sits atop all other recent developments when it comes to price paid per square foot, according to the CityRealty report. Its appreciation outstrips stocks and gold. The building has enjoyed an annual compound growth rate of 6.84 percent since it opened in 2008. The S&P 500 has grown at an annual rate of negative 2 percent and oil has fallen at an annual rate of 5.1 percent. Gold has fared better, growing at an annual rate of 3.2 percent in that time, according to the number crunchers at CityRealty.
The report states: “The buildings in the CityRealty 100 can be judged as a better, and more stable, investment than many other markets over the past decade.”
The report generally predicts stability as opposed to overheated growth in the next 12 months in the Manhattan market, which is bound to please conservative investors, wary of boom and bust cycles.
StreetEasy dived into specific returns on New York condos last year and found that they made up 11 percent of Manhattan listings during the first half of 2017 with many investors renting them out to seek both equity appreciation and rental income. They concluded that owners of newly purchased condos collected 2.5 percent of their purchase price in rents in the second quarter of 2017, with Upper Manhattan condos delivering most bang for bucks invested — a median earnings of 3.5 percent. Factor in a median 2.5 percent in appreciation, as well as tax deductions, and investing in a NY condo seems like a safe bet.
Those who favor real estate over the stock market often prefer it because it’s a tangible asset. Nowadays, with a volatile President, impending war, and ongoing scandals, stock holdings can be precarious investments, with a crash wiping out pensions and savings in an instant. Conversely, real estate, if purchased wisely, tends to weather most storms, particularly in Manhattan where there is a finite amount of space to build.
For foreign investors, New York real estate has been particularly popular. Many of their condos have remained noticeably empty. Data from the National Association of Realtors estimated that foreigners, led by the Chinese, invested $153 billion in housing in the quarter ending in March 2017, up 49 percent from the previous year. It’s a source of concern for many locals, with the vacant apartments stripping neighborhoods of a community atmosphere and driving up prices. According to data obtained by CoreLogic more than one in ten purchases in Manhattan now includes an absentee or “out-of-town” buyer.
Forbes summarizes the ongoing draw: “New York City real estate is based on an undeniable fact: The significant size of capital is only second to Tokyo, globally, and is the country’s largest market, domestically. Many investors, both institutional and local, are drawn to the city’s comparatively stable prices, land appreciation and liquidity.”