Buying in NYC
Everyone wants to live in a global metropolis – here are a few reasons why buying in NYC is well worth it.
In Popular Demand
The true New Yorker secretly believes that people living anywhere else have to be, in some sense, kidding. Thus was American novelist John Updike’s summation of the residents of ‘The City That Never Sleeps.’ Indeed, in New York the streets are wider, the buildings higher, the lights brighter and the steaks thicker than anywhere else in the world. Unfortunately, property is also scarcer. While the city’s real-estate values seem to have weathered the economic downturn just fine, only about 30% of all properties in New York are up for sale; the remaining 70% are rented.
According to Tony Sargent who publishes The Sargent Report, widely recognised as the best New York agent-created newsletter in the business, it is estimated that for every great one- to three-bedroom apartment in the city, there are three-plus buyers desperate to get their hands on it. And, because the number of wannabe buyers outnumbers the number of available properties, buyers often have to make a decision in a matter of minutes, and they usually have to pay more than the asking price – ‘98,6% of sellers get at least their asking price,’ claims Sargent.
Marked Scarcity of Properties
While turnover may be lightning fast, Manhattan is still considered a ‘bargain’ compared to London, Paris and Tokyo. But that doesn’t mean property isn’t expensive. Not only are prices in Manhattan far greater than the rest of the US – the median price for a two-bedroom apartment in Manhattan is $1,35 million (around R14,5 million) compared to the US national median price for a single-family home, which is $214 200 (R2,3 million) – but, according to Jonathan Miller of prominent New York appraiser Miller Samuel Inc., city properties under US$3 million (R32 million) are generally considered ‘non-luxury’ and the number of these properties on the market is shrinking fast, creating a massive shortage of affordable properties. ‘The number of “non-luxury” properties on the market has fallen by 36% year-on-year,’ says Miller, adding that ‘luxury listings have fallen by only 3,9%.’
NYC Property Market Ranked #1
Add to the relative stability of NYC’s property market the country’s improving economy, and it’s easy to see why many foreign investors regard Big Apple real estate as a safe investment, especially because the properties are valued in dollars, the world’s reserve currency. The recent Knight Frank Wealth Report 2013 ranks Manhattan as the number-one real-estate market in the world based on a variety of factors, from economic environment and political climate to quality of life.
Where to Look, What to Buy
When it comes to the best areas for investment, the risk-reward model applies decisively to Manhattan, which is probably the most efficient property market in the world. So, while an emerging area (like Hell’s Kitchen or the Meatpacking District) may have higher expected returns, it also comes with greater financial risk (such as higher vacancy rate). An established area like the Upper West Side or Tribeca, on the other hand, would have lower returns but would likely be faster to rent out and prices would not be as dependent on external factors.
Condo vs Co-op
As for what type of apartment to go for: it’s the age-old condo versus co-op toss-up. Condominiums (condos in New Yorker parlance) are independently owned units within a building, most usually with their own kitchens, bathrooms and living areas, though they may share large entertainment/games areas, terraces and, on the rare occasion where they can be found, gardens. Condos make up about 25% of the available property market and are generally governed by flexible rules, which make them easier to rent out or sell. That said, they are generally more expensive than cooperatives (coops) and, naturally, come with the greater legal responsibility of ownership of the property. Co-ops, on the other hand, offer buyers a type of corporate ownership of the property and are the more prevalent buying option in Manhattan. Buying into a co-op effectively means buying a percentage of the property through a proprietary lease. The value of the property unit is determined according to the number of shares given to that particular space as well as location of the building and services offered, and the shareholders are governed by a Board of Directors who make decisions as regards maintenance fees, building policy and leasing regulations.
Location, Location, Location
Co-ops require all purchasers to be interviewed and the board has the right to reject a potential buyer. They also require the provision by the prospective buyer of extensive personal and financial information. While condominiums are usually thought to be a better purchasing option, those choosing the co-op route are advised to look for a ’liberal’ co-op (in other words, one with flexible rules). When it comes to buying to let, location, location, location is the name of the game. According to a report published in the June 2013 Global Property Guide, rental yields in Upper Manhattan are between 4% and 5%, and in Lower Manhattan, yields are between 3% and 5% (interestingly, both figures are substantially lower than other US cities like Miami, where yields are between 6% and 8%).
- These leading NYC property agencies to help you find exactly what you’re looking for:
Text: Jocelyn Warrington and Juliet King
Photographs: Sotheby’s International Realty