The New York City metro area accounts for almost 10% of the entire GDP of the United States. NYC is a major center for finance, insurance, real estate, media, professional services and the arts. In the last ten years, however, New York City has become a major technology hub and center for creative industries.
The City's comptroller reports GDP growth of 2.7% for Q1 2018 compared to Q4 2017, with inflation riding low at just 1.6%. Corporate earnings are up, and venture capital investment continues to grow. Private investment is up 7.3% putting the Metro Area's figures at the 2nd highest on record. The Current Business Conditions Index (CBCI) rose to 60.3. Any score above 50 equals growth.
Despite the impressive economic results, high end real estate in Manhattan is well-priced. Douglas Elliman issues quarterly NYC market reports for New York and Miami in conjunction with appraiser Miller Samuel. Knight Frank, an affiliate of Elliman compared the five top luxury real estate markets with New York City. The average price for comparable luxury properties shows the following. The first dollar amount is price per square foot, and the second is per square meter:
While we have only shown the top five global cities, NYC luxury real estate came in at #9 on the list. NYC beat out Singapore, Geneva, and Moscow on investment value for money. Accordingly, it’s quite evident that luxury condos NYC are a bargain compared to lesser cities.
An effective Manhattan property search with the right broker will deliver the right results.
Strong economic factors and the array of property types in NYC draw buyers not only from New York and the United States, but from all over the world. So far, we have discussed the "Why" of investing in Manhattan real estate. Now let us look at the "How."
Currently, New York City is second to only Tokyo, Japan, when it comes to generating “Gross Domestic Product”, or GDP. McKinsey Global Institute, however, in their new report released in March of 2011, Urban World: Mapping the Economic Power of Cities, predicts that of the 600 urban centers throughout the world which will generate 60% of the world’s GDP in 2025, New York City will rank #1 in GDP. The report goes on to rank New York City in 2025 as follows:
NYC's impact on the world is immense. It is, indeed, the cultural, financial and media capital of the world, and is also a center for research, technical development, education, entertainment, sports, and politics.
New York City consistently has topped the Knight Frank Wealth Report jostling with London for the #1 spot. The Wealth Report is a guide to the world of international prime residential property and offers a perspective on the key luxury property markets around the globe. In their recent survey, the Wealth Report ranks New York City as:
With more than 8.2 million people, New York City is the most populous city in the United States. The “Big Apple” is one of the world’s leading business, financial and cultural centers and its influence in politics, education, entertainment, media, fashion and the arts all contribute to its status as one of the major global cities. The city boasts a high quality of life, extremely high household incomes, and vast opportunities for cultural and entertainment activities.
The UBS Global Real Estate Bubble Report scores NYC 0.2, which is a "fairly valued" market. This is a better score than, for example, Vancouver, Sydney, and London. Manhattan's house price dynamics were recorded as much stronger than in the two previous years. This strength was put down to global investor activity and new luxury developments coming on the market.
These indicators result from our strong economy and venture capital investment. This year, private sector jobs have increased by 2% and seasonally adjusted unemployment rates fell to 4.2% (3.9% in Manhattan) putting employed residents at an all time high.
The growth is mainly in eight business sectors including education, health, professional and business. This growth spectrum shows greater diversification than in previous years; another positive sign that NYC's economic strength should continue. The Metro Area's employment rate is the highest ever recorded and shows the longest job expansion since the mid-1940's.
Despite the impressive economic results, Manhattan's luxury properties are well-priced. Knight Frank compared the five top luxury real estate markets with New York City. The average price for comparable luxury properties shows the following. The first dollar amount is price per square foot, and the second is per square meter:
Per Square Meter
Per Square Foot
#9) Hong Kong
#9) New York
|City||Per Square Meter||Per Square Foot|
|#9) Hong Kong||$27,300||$2,539|
|#17) New York||$22,600||$2,102|
|#36) Madrid||$10,500||$ 977|
The two primary decisions buyers must make are property location and property type. We have explored why New York City, and Manhattan, are an ideal location so, now let us look at property types. Manhattan has four main types, townhouses, condominiums, cooperatives, and condops (which are a blend of condo and co-op.
Every state in the US and every country in the world have different laws governing the purchase and sale of real estate. The two parties to a real estate transaction are the seller and the buyer. The seller will use a dedicated real estate selling broker or agent to represent them throughout the transaction. This selling agent or broker will work solely in the seller’s interest - getting the highest price and best terms for the seller. Accordingly, buyers should have their own dedicated representative!
In the US, all broker commissions are paid by the sellers. Then, they are split between the seller's agent and the cooperating buyer's agent. Accordingly, hiring a buyer's agent is free of charge to the buyer. The buyer's agent has a vested interest in the buyer, the buyer's goal, and in getting the best outcome for the buyer.
In contrast, the seller's agent's goal is to get the highest possible price and the best possible terms for the seller. The buyer agent's role is to work for the buyer and to get them the right property, at the right price, on the most attractive terms and with least amount of hassle. The buyer, therefore, can rest assured that they have on their team a specialist who knows:
The buyer's agent is crucial to achieving a totally successful purchase – of the right property, on the right terms, and with minimum hassle or any long-term regret. Buyers who are financing their purchase will want to have their mortgage application pre-approved as far in advance as possible. An offer to purchase supported by a mortgage commitment from a respected lender adds a lot of weight to the offer, especially in a city that has a lot of cash deals.
If the purchase is for a condo or co-op, the buyer must also be approved by the board. Boards can deny an application for different reasons. An experienced buyer agent will know about individual condo and coop boards. They will be able to advise their buyers on whether it is worth pursuing a particular property or to avoid the likelihood of being rejected by the board. For example, condo boards have "right of first refusal". They can decide to buy the apartment themselves from the seller instead of accepting a new buyer into the building. In contrast, coop board can flat out reject buyers. Generally, coops are for primary homeowners. Therefore, if you are a foreign buyer or investor interested in renting out their new property, you are very likely to be rejected the coop board.
The real estate broker helping the buyer will also help to decide on which attorney to hire to take the transaction through to successful completion. They also have an array of connections that can help you get a mortgage.
The United States real estate market is different from other countries in several ways. Firstly, the US encourages overseas buyers. The market is transparent; every licensed real estate agent New York acting as a buyer's agent can search the entire market, regardless of which company is marketing a property. Few other countries have such a transparent process.
The US does not, unlike some other countries, charge extra stamp duties to foreign buyers. London, Hong Kong, Vancouver, Sydney, and many other cities, charge foreign investors and extra stamp duty from 7% to 30% of purchase price. These extra stamp duties are extraordinarily high. In the US, there is no extra stamp duty for foreigners.
Financing is also readily available from household-name banks to foreign investors and at very attractive rates. US mortgage rates are currently at historic lows which adds to the attractiveness of Manhattan real estate.
When a foreign investor sells their real estate, they do become subject to the Foreign Investor Real Estate Transaction Act (FIRPTA.) This is simply a withholding requirement and not a separate tax. Essentially, this Act exists to protect the US Government from a foreign investor who is not meeting their income or capital gains tax obligations. Ten percent (10%) of the selling price is withheld at closing until all tax liabilities are met is returned once the final tax return is submitted by the seller.
Capital gains tax can be deferred simply by reinvesting the sale proceeds into a new property (of like-kind) as long as the transfer process and timeline meet federal requirements. The seller's attorney will manage this part of the transaction to ensure all is as it should be. The smartest and richest property investors use these 1031 Exchange Rules.
A cash transaction will incur buyer closing costs of approximately 3.5% of the purchase price. A financed transaction will incur lender fees, etc. and will amount to about 5.5%. Potential costs breakdown as follows:
The transaction can be closed, and ownership taken without having to be physically present. The buyer or seller can assign power of attorney to their lawyer to complete the transaction for them.
Different property types incur different costs, but they all incur real estate (or property) taxes. In NYC this is, basically, about 1.2% of the purchase price each year. Manhattan offers tax mitigation programs to owners for up to 20 years. Other costs include:
We offer a Light Property Management service at no charge to our clients. Full- service property management is available through our partner RD LLC. In total, we provide a service which includes:
The overall US Tax Laws rates are lower than in some countries, and there are reasonable ways to mitigate tax liability. For example:
Often, countries may have a tax treaty with the US. Accordingly, we advise all our clients to discuss their potential tax liabilities with a US tax attorney or CPA that is familiar with tax laws of their own country. We are happy to refer you a specialist.
Cost, investment appreciation, rental income, and lifestyle are all primary factors when deciding on a neighborhood. The Manhattan market offers upscale, luxury properties across many neighborhoods. The top 10% of the market is where you will find New York luxury condos. They can be found in just about every Manhattan neighborhood. We discuss each neighborhood in detail in other areas of our website. But here is a whistle stop tour of what many people think are some of the most popular districts:
Relocating to anywhere is both exciting and complex. With our help, our clients research potential areas, explore them in person, and choose both the right neighborhood and the right property for them. We have contacts to assist with all the practical steps: legal issues, preparing the property for their arrival, shipping their personal items, shopping for new furniture, and moving in when relocating to New York City. Some clients feel that it is best to rent in New York before buying. However, others, who know the city well, come prepared to buy. Either way, we are here to help you sift through all the luxury apartments NYC.
We have been serving buyers and sellers for more than 15 years. We are experts in all aspects of New York Real Estate and Miami Real Estate from an initial property search and exploring districts through contract negotiation, closing, and property management. Our clients are both local as well as coming from all over the world.