Londoner Maggie Dimmock, 61, used to be content with quick trips across the
pond for an exhilarating dose of New York bustle and boldness. Now she and
many other Britons are securing their own chunks of the Big Apple, as
investors, big and small, take advantage of the most favourable exchange
rate with the US dollar in 25 years to buy homes in New York.
Just six years ago, sterling bought little more than $1.40, but for much of
2007, Britons have enjoyed an exchange rate of more than two for one. Last
week, it hit $2.10 to the pound.
“It seems like a nice place to put your money, and it should grow,” says
Maggie’s husband, Ray, 62. A monthago, the retired couple – he was a
banker,she a psychologist – paid £908,650 ($1.89m) for a flat on the Upper
West Side, in Manhattan. “New York is a fantastic place,” Ray says. “It’s
everything it sets out to be. I don’t know what other cities you can walk
into, say ‘I want to buy’, then get it done fairly easily.”
The couple, who live in Canary Wharf, now also have a spacious two-bedder with
views of the Hudson River in the Avery building, at the southern end of
Riverside Park.
While prices in much of America, including Florida – a popular destination for
British buyers – have declined every month this year, the market in New
York, especially in the smarter parts of town, is thriving. Halstead
Property, a real-estate broker, says in its third-quarter report that the
average price of a Manhattan flat rose by as much as 26%, to £624,890, in
the 12 months to September.
The average price of a condominium (individually owned flat) shot up by 38% to
more than £769,140; that of a cooperative property (in which the buyer
purchases shares in the building) rose by 10% to £509,445. About 70% of
flats are coops, but the building boom produced a rash of condos, and sales
of the two are now 50-50.
Other brokers are more conservative.
In an overview released last week, Prudential Douglas Elliman Real Estate put
growth for the same period at 9%. Yet, despite the rises, Manhattan still
looks relatively cheap to foreign buyers, says Gregory Heym, chief economist
at Halstead Property: “The weak dollar effectively means there’s a sale
going on.”
High-end homes in New York have been cheaper than those in London for some
time, though a comparison of the two luxury markets by Savills, the property
group, reveals that in the past decade, the rate of growth has been similar.
Since 2005, London has been outstripping Manhattan, a reflection of the
money flooding in from Europe, Asia and the Middle East. In May, a Wealth
Report by Knight Frank and Citi Private Bank put prime NY property (most of
which is in Manhattan) at £1,600 per sq ft, behind Monaco at £2,190 and
London at £2,300.
“For many people, overseas buying in Manhattan isn’t just an investment,” says
Jonathan Miller, research director at Radar Logic, a New York-based property
analysis firm. “Europeans, particularly, have a relationship with the city.”
As in London, the market in Manhattan has been boosted by the strength of the
financial industry and the buoyant broader local economy. Indeed, Savills
says there is a close link between that and the performance of the Dow Jones
Industrial Average, subject to a one-year lag – indicating that the prime
market is driven by Wall Street bonuses.
Miller believes Manhattan has also bucked the national trend in part because
of foreign buyers – who, by some estimates, account for 10% of all sales
there, and are drawn by the weak dollar. “There is a direct correlation
between demand levels in Manhattan and the exchange rate,” he says.
Formal annual forecasts are not due for a couple of months, but Heym
cautiously predicts no drop-off in the fourth quarter and expects record
foreign investment to continue. This is despite the money-market turmoil
that has led to expectations of bonuses lower than the record-breaking
levels of recent years, seen multi-billion-dollar mortgage-related
write-downs and claimed the scalps of key figures such as Chuck Prince, the
chairman of Citigroup.
“Manhattan has a record of stability,” Heym says. “People see that and want to
be part of it. Some people may be waiting to see what Wall Street bonuses
are, but even if they are off by 10% to 20% from last year’s levels, that’s
still pretty good.”
More financial-sector trouble may prompt some to stand on the sidelines, he
says, but while properties for sale are in short supply, many will feel they
can’t wait too long to see what happens.
Jill Sloane, a broker with the firm, says the shortage of stock has been a
problem. A development surge has produced a record number of new homes, and
she predicts this will continue, as builders break ground before changes to
building codes next year. Even so, the influx of new property is not
expected to provoke any drop in prices, merely to keep pace a little more
with demand.
Eric Roche, a sales agent with Sotheby’s International who deals almost
exclusively with Britons, says interest is “just ridiculous”. One client is
Gerard Loughran, an Irish-born food-industry executive who lived in London
for 18 years before moving to Manhattan last year. Loughran, 35, has let his
home in Fulham, southwest London, and bought in his new city. “I was renting
on the Upper East Side, but found it a little too quiet,” he says. “I looked
down toward the Meatpacking district, through the Chelsea gallery district
and around the West [Greenwich] Village.”
He has bought off-plan in a still-gentrifying western corner of the Chelsea
neighbourhood, on West 28th Street and 8th Avenue. The £1m flat isn’t ready
yet, but Loughran is pleased with the quality of others in the scheme. “That
was important. Quite a lot of new developments seem to have poor finishes.”
Erika Uffindell, 47, also bought off-plan in Chelsea, but only after a lesson
in the differences between buying coops and condos. Uffindell, who owns
UffindellWest, a London-based brand consultancy, wanted a flat she could use
on business trips, but also maybe rent out. She fell in love with a coop,
but bought a condo when it became clear that the restrictions the former
would impose would make that too difficult.
Some New York-based foreign nationals, however, are in a bind. Tracey Bennett,
a sales executive for Medley Global Advisors, a Manhattan-based consultancy,
wanted to return home with her family after 10 years away. They were to
settle in Kent, to care for her ageing mother. However, the slow market in
her Connecticut commuter suburb and the poor exchange rate have made the
move impossible.
Now, she says, they will fly her mother over regularly: “We’ll buy the tickets
using dollars – it’s cheaper.”
Rules of engagement:The ins and outs of investing in the city that never
sleeps
Probably nowhere other than in Manhattan would you be expected to show your
salary slips to prospective neighbours before you can buy a flat. But that
is central to the vetting procedure when you buy a cooperative apartment in
New York – and I know, because I have just spent six months trying to do so.
Coops have dominated the city’s residential market, helping to promote
stability in the sector. Coop boards, made up of residents, lord it over
many of the best prewar buildings, picking who they want in their “clubs”.
The city is full of horror stories of intrusive or downright obnoxious boards.
Even if one deems you worthy after nitpicking through your financial,
personal and professional life, waiting for an invitation to be interviewed
by “the building” can take months, particularly in summer when many of them
take vacation.
In our case, after months of silence, punctuated by odd inquiries about
financial minutiae – such as an updated statement from a long-forgotten
pension fund irrelevant our retirement planning – we were released from the
deal. The experience cost $35,000 temporary housing and legal and other
expenses. As for foreigners trying to buy an upscale coop – forget it, at
least until lately. Coops, the saying goes, are for Yorkers.
Similar to company title, a coop purchase is in shares in the cooperative
corporation that owns the building; you don’t buy a flat within it. Coops
can 10%-25% cheaper than condos, where buyers have more conventional
outright ownership, but may incur higher monthly charges. There may be an
underlying mortgage on the building, as well as taxes and common charges. A
coop purchase usually requires a deposit of at least 20% and sometimes 50%.
Crucially for buyers – especially from overseas – coop boards often do not
allow letting. If they do, there may be tight restrictions or prohibitive
surcharges.
Condos are far less restrictive. Some developers don’t even ask for a deposit
before completion, and investors can usually buy and rent them out without
consulting other owners in the building.
It is no coincidence that the surge of British and Irish interest in Manhattan
has corresponded with the rise of the condo: it has opened up the
possibility of buying in many prime neighbourhoods. Parts of the Upper East
Side, particularly along Fifth Avenue, flanking Central Park, remain
staunchly “coop”, as does Gramercy Park, further downtown, but slabs of the
family-friendly Upper West Side and a good proportion of Chelsea, Soho,
TriBeCa and Greenwich Village have large condo offerings; they are even
springing up in once purely commercial areas, such as the financial district
surrounding Wall Street.
There is a third type of property, the “cond-op”, though it accounts for only
a tiny percentage of sales. It gives owners coop benefits with condo rules.
You may be able to let your flat, and sell quickly, because if a prospective
buyer’s finances pass muster, the board can’t stop the sale on other
grounds.
