In most cities, traditionally, the choicest pieces of real estate are owned by native sons and daughters, people who are from the area. Money comes in from everywhere, but the entrepreneurs making that money are homegrown. Heinz and Carnegie in Pittsburgh, Ford in Detroit, and more recently, Bill Gates in Seattle.
New York City is not necessarily like that. New York produces wealthy citizens, true—but even more, it lures them here. Manhattan is an urban flame, drawing high-net-worth moths from all over the world. The rich, the successful, the powerful, gravitate towards New York because, simply, it is the economic and cultural capital of the United States—which makes it, some might argue, the economic and cultural capital of the world.
Because of its cachet, New York is not easily roiled by fluctuations in the financial markets that can grip the rest of the country. Yes, there are downturns in the real estate market. Harlem’s black population was established because an economic crisis, combined with the building of Penn Station in the district formerly known as the Tenderloin, afforded African-Americans both the opportunity and the capital to buy vacant apartments. The late 1980s saw another dip in the prices of apartments. But overall, a two-bedroom apartment on Central Park West is just as sound an investment as blue chip stock—and unlike stock, is not merely conceptual.
In cities like Pittsburgh, Cleveland, Phoenix, Miami and Dallas, recession means fewer buyers. In New York, it means a weak dollar, opening the door for foreign investors uninterested in other, less glamorous cities. Indeed, foreign investment in New York is on the rise. According to a survey conducted by the Association of Foreign Investors in Real Estate (AFIRE) earlier this year that tracked the buying preferences of its members, foreign investors account for $230 billion worth of property in the U.S. alone. In terms of investment ranking by the survey for the top 5 U.S. cities, New York City held the top score of 98, with Washington, D.C. coming a not-so-close second at a ranking of 80, and Los Angeles coming in a distant third with a score of 26. Among international capitals, New York also ranked first over the likes of London and Paris.
Why Here, Why Now?
According to AnneMarie Alexander, director of sales and marketing for HJ Development, LLC, in Manhattan, Europeans are buying up Manhattan real estate, largely because it is “on sale.” With a weak dollar and a strong Euro, they can get their own piece of Manhattan for about “50 percent off.” Alexander’s company, which has developed 211 East 51st Street—a converted building of 73 luxury condos—has seen quite a few European buyers, particularly from France, Italy, and Spain. In general, these European buyers are drawn to new developments, in part due to the stringent financial examinations of existing co-op or condo boards. A “no finance contingency” insures for the seller (the developer) that if the foreign buyer cannot get a loan, he/she must come up with the cash or lose the 10 percent downpayment on the property.