Destination New York

The Big Apple's healthy residential and commercial real estate returns are attracting investors from across the world.

21 January 2014, Words by Paul Tostevin

 

New York stands out among world cities as receiving the largest share of UHNWI investment in direct residential property, and it seems set to grow further as a destination for private investment. This is particularly true for mainstream property, especially in terms of income return. New York fell in rank from one of the most expensive to a distinctly “cheap” old world urban centre after 2007, but one with significant capital value growth potential.

This has set the scene for a wave of cross-border investment in the city’s commercial real estate. New York is the largest global real estate market by sales volume, a position it has held since 2010, according to RCA. Much of the wealth flowing into New York is from foreign sovereign wealth funds and private individuals. The biggest foreign investor in New York real estate in recent years has been Zhang Xin, through her company SOHO China, which has spent more on Manhattan real estate than any international investor in the last three years. Pension funds from Korea and Canada have also been particularly active, while the Kuwaiti sovereign wealth fund is part of a consortium of investors behind the huge Hudson Yards scheme.

International lenders have been active too, but their profile has changed. Precrunch, the big property lending banks came from Ireland, Switzerland and France. Today the major players are from Germany, China and Hong Kong.

Although smaller by monetary volume, some of the most significant flows of private capital by number of transactions into the US have been into residential real estate. Foreign nationals accounted for $68.2 billion, or 6.3%, of the $1.08 trillion spent on US residential real estate between April 2012 and March 2013, according to the National Association of Realtors. Chinese buyers are increasingly common — they grew from 5% of all international residential buyers in 2007 to 12% in 2013. Aside from the Chinese, notable buying groups in the top tiers of the New York residential market include Russians, and Eastern Europeans and wealthy Latin Americans.

US tax policy is still cited as a major hurdle to international investors, both in the residential and commercial sectors. Proposed changes would set the scene for significantly more investment waiting in the wings.

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Paul Tostevin

Paul Tostevin

Associate Director
World Research

Savills Margaret Street

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