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When I was shopping for rentals two years ago in the 5-8K area, I would say about one third of the apts I looked at were owned by investor Europeans. Since the Euro has declined by 5% in the past month and heading lower, and the Euro tourist trade in NYC has dropped off a cliff (Fifth avenue retailers are really feeling the loss), I wonder how the investor apts will be affected. The carrying costs for these apts have just increased enormously thru the currency exchange -- either the LL's will raise rents or as recession grows in Europe, they might divest and repatriate the money to cover costs at home.
It will be interesting to see which way it goes. But I think that with fewer tourists, there will be fewer purchases of apts. I think we might see more inventory on the market in the next year due to euro concerns. And if the euro goes to parity, I think the number could really rise.
Haven't the Euro's been replaced by Swiss, Brazilians, Russians, Chinese, etc. They are the ones with the $$ now and the currency strength vs. the USD. I'm also hearing a lot of Russians buying property in the Hamptons recently.
Meanwhile apt23 is counting on South Americans to save her underwater purchase in miami.
Goes to show you how smart Europeans were to buy here. It's quite probable that Capital Controls will be introduced into a number of Euro countries. The governments there may also fordibly convert their Euros to a new currency with less buying power. If anything, what's going on in Europe will only make investment in NYC real estate more appealing. We're like a big safe money market fund.
apt23, the Euro was actually lower two years ago. It's also almost exactly where it was at the start of the year. Conjectures on forex are fun and all, but seldom reliable in my experience. If the euro goes to sh!t (something I've heard people say with a lot of conviction many many times in the past, oh, 10 years), then yes, some European owners will probably start to sell. But as a half-euro myself, I can tell you the appeal of NYC as a vacation destination is quite, quite strong, even in tougher financial times.
The Euro was a bad idea from the start with many pedictions of failure in the press.
IMO and experience the Euro was only good for those of us math-challenged travelers.
I still have a money belt with sections for the good old money of different countries.
there were probably ^pedictions^ but not in the press.
A general non factor.
Forex can be a great determiner on the timing for the initial purchase of the apartment for Europeans but once they're in, the US$ carrying costs is being paid by the US$ income, a wash.
Of course if a european's european household is in trouble, yes I could see a dump of the international asset first.
(I think if Greece doesn't leave it will go to sh*t)
For Europeans who bought when the Euro was significantly stronger, today may be a propitious time to divest themselves of their U.S. real estate. In general, I think that a stronger dollar vis-a-vis the Euro could lead to more sales among European investors.
bjw: yes the forex trades always fluctuate and the euro was lower last year for the same reason --greece. But as they say, this time is different. Last year there was not the same fear of contagion that there is now. And, china was not leaving the euro as it is now.
That said, since china seems to be buying into the dollar and the chinese visa applications are still high, it could be argued that if europeans leave the market, the chinese will be there to buy.
I was interested to see that there are 31 condos on the market at The Plaza which seems very high ---including a seller who is a high end broker who markets to asian buyers. since he has his apt on market at discount to purchase price , i guess he will not be able to make any sales at the plaza.
once they're in, the US$ carrying costs is being paid by the US$ income, a wash.
truth10: yes, but it is still a margin squeeze.
Europeans buying real estate assets have a large amount of disposable income.
I think Forex is the last factor and will chase them away much slower than say... something that might compete with a NYC foreign property instead.
An aside, NY may very well attract japanese expatriots as well. And as conservative as they are, NY is a much better option than LA.
I know it sounds silly but I find myself wondering how Japan will survive as a functional country the next 20 years.
>(I think if Greece doesn't leave it will go to sh*t)
I also think Italy should get the jump and get out of the Euro. My very humble opinion the Euro hurt this country the most.
truthskr: Have you read Kyle Bass on Japan? If he is right, then I think your position on japanese ex pats buying NYC RE may turn out to be correct -- if they get out in time.
Investments are investments. Europeans may have large disposable income, but if RE prices go down as carrying charges go up -- through currency and/or taxes, it is just not a great investment.
however, if buyers are coming to NYC to flee political problems --like the russians or the chinese-- then price doesn't matter.
No haven't read Bass. Just always felt JApan was a slow 100 year death until it went nuclear.
>Investments are investments. Europeans may have large disposable income, but if RE prices go down as carrying charges go up -- through currency and/or taxes, it is just not a great investment.
Buying a 2nd international home is usually not competing with buying stocks,bonds, and other speculations. It's usually done with the extra extra you have.
Though Schumer's new "oh no you don't Mr rich guy" proposal could be problematic. I can see a lot Euros maybe transforming income they earn here into buying real estate here being affected. I'd bet that's one of the biggest sources of european NYC purchases. Dont know the how and the why of it. But like US$ income paying off US$ carrying costs, it also eliminates some FOrex there as well. (and we don't know euro tax laws so well, or I dont)
It's crazy to think that Europeans would want to diversify out of U.S. real estate, especially those fromthe Olive Oil regions of Europe. We're probably the safest part of their asset allocation. Greeks will probably lose their life savings if they are stuck in the bank, and just this week Bankia, one of Spain's largest banks who only last year passed the Euro stress test with close to flying colors came running to the gov't for a cash infusion was turned down.
A similar story holds for Russia and China, where the gov't could come after you , take away your assets, put you in jail or do both.
>just this week Bankia, one of Spain's largest banks who only last year passed the Euro stress test with close to flying colors came running to the gov't for a cash infusion was turned down.
Would you put your money in a bank called Bankia?
The weakening Euro, and (more importantly) strengthening dollar means 1) NYC real estate is far pricer for Euro / foreign buyers than in recent years, and 2) the double-dip recession will absolutely force some / many to sell.
Basically the strengthening dollar becomes a headwind for NYC real estate, for sure.
Here is an interesting article about some Irish investors.
http://www.nytimes.com/2012/03/18/magazine/midtowns-irish-elite.html?pagewanted=all
Wow. Tomnevers. That is a very insightful article about the details of the bubble. And the aftermath is gruesome. The losses those people took at the Centria are already horrible and are bound to get worse. Here is just one of the listed sales at the Centria.
STREETEASY HISTORY
06/06/2007
Previous Sale recorded for $1,501,918.
04/30/2012
Listed by Stribling at $1,100,000.
tom, if you already own the property, doesnt a stonger $$ make ur property increase in value compared to the euro ? why current european owners sell an appreciating asset (in currency terms ) to move back into a weakening currency ?
lets make it simple. you're a savvy european---perhaps you're greek. you made a great investment in a nyc apartment. the rest of your assets are invested in greece. greece assets turn to shit....income from nyc investment is not sufficient to make up for lost income from greek assets.
now what?
time to sell nyc investment because you need the money to cover your problems.
note what JP Morgan Chase is doing at this precise moment to cover trading losses. selling other better performing assets.
chicken or the egg ?
Marco: many of those investors that were pulled in to that sales scheme at The Centria are either underwater or at par. The currency trade might work in their favor for covering carrying charges as long as it lasts, but since they don't have any cushion, how do they ride out vacancy. If NYC real estate turns down, (e.g. global recession) they will risk foreclosure. Much safer to bail now. And, consider that this building was completed in 2007. If a competing building went up in the area, it would be built with copper and steel that are at decades lows. There are a least five high rises within a radius of 4 blocks from me that are either being renovated or new construction. There might be more competition for the rentals at The Centria. These buyers got taken -- in so many ways.
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Marco - Agree 100%. Even if euro broke a buck there is no justification in selling since the value here remains unchanged and then all you could do is swap for similar.
To apt 23s position I don't see many europeans that would sell to take back the proceeds even if they would benefit from the exchange. It would be a desperate move. Maybe they could sell and buy another for less money and take back the difference. It would make more sense to move here and get away from the problem. What riversider said.
hope the bros from the hood kick their bottom, the europeans started slave trades
do neither one of you get the concept of needing to liquidate because other assets have become significantly devalued?
Cc in a fantasy world of mark to market real estate.