Benefits and Downside Risks of Buying Manhattan Property
Posted by Wei Min Tan on February 2, 2022
Investors from all over the world have always been buying Manhattan, New York property as a means of diversification. London and New York are the top two destinations deemed most stable and secure for global investors wanting a simple, easy to manage property in the form of an apartment.
If you are a successful professional or business owner looking to buy Manhattan property for portfolio diversification and stability, you are amongst the many such individuals who we work with. Welcome to exploring this avenue!
Before taking the leap, here are benefits and risks to consider.
Deal example: Client’s three bedroom apartment with open views facing the Goldman Sachs headquarters. We rented it out in one week. This strategy targeted the demand for more space by renters post pandemic.
Benefits of owning property in Manhattan
Value Stability: Property prices in Manhattan have stable appreciation. Historically during an upturn, Manhattan condo price appreciation ranges from 7 percent to 15 percent per year. During a downturn, the decline ranged from 4 to 10 percent. The price stability is driven by inflation and demand coming from population growth and investors wanting a piece of this magnificent island. New college graduates and corporate professionals move here every year. People who live in other boroughs of New York City want to move to Manhattan. Living in Manhattan is a status symbol. Globally the newly rich want to own property in New York, the iconic city with skyscrapers, high finance and fashion. More specifically, “New York” is the island of Manhattan.
Weimin’s article, Tech firms expanding in Manhattan
Limited Supply: This is an island that has been developed over the past 200 years. Whatever new development is but a very small percentage of total inventory. In a typical U.S. city (which is not an island), developers are constantly expanding the city by building further out of the core. But in Manhattan, there is no more space to build further. Yes, developers can build higher but there are two issues (i) NYC zoning restrictions, (ii) very expensive land prices. This means the resulting product has to be priced much higher, which makes it outside of the core price segment.
Owning a condominium is easy: Most property in Manhattan are apartments. Unless you intend to spend $7 million and above to buy a townhouse or mixed-use building, chances are you’d be buying a condominium apartment. With an apartment, you are essentially owning the airspace within the 4 walls of your apartment. There is a lot less headaches because you don’t have things like a roof, boiler, exterior wall to worry about.
Read our top rated Foreign Buyer Guide
Deal example: We got our client a great deal at this hot new development at 202 Broome Street. Reserved at pre-construction, waited for completion and now on the market for rent.
Downsides and Risks of owning property in Manhattan
Lengthy eviction process: About 75 percent of Manhattan residents are renters. The court system here is more friendly to tenants than landlords. This means if eviction is necessary, it would take between 6 months to 9 months (vs 1 month in most other cities). Hence, proper screening of tenants is very important.
High entry point: This is a matter of perspective, but a 500 square feet studio apartment starts at $650,000. A one-bedroom ranges from $1 million to $3 million, two-bedroom from $2 million to $5 million, three-bedroom starts at $4 million. Relative to cities like Hong Kong and London, Manhattan is cheap. Relative to other U.S. cities, Manhattan is very expensive. For example, $2 million can get you an 800 sqft one-bedroom in Manhattan or several houses in Texas or North Carolina.
Higher costs overall: Costs are higher overall in Manhattan compared to other U.S. cities. For example, labor cost is 4X to 5X the cost of material for renovation projects. This has to do with licensure requirements, permits and insurance, approvals, cost of (contractor’s) parking, limited use of elevator which extends renovation time, etc. When buying or renting out, the buyer and tenant have to submit a board package and that has various fees as well. Everything is just more expensive.
That’s the high level summary. If you still want to explore buying in Manhattan, feel free to email and we’d be glad to provide more reasons as to why you should (or should not) buy in Manhattan.
What We Do
Manhattan property broker focusing on global investors buying Manhattan condos for portfolio diversification and long term return-on-investment.
1) Identify the right buy based on objectives
2) Manage the buy process
3) Rent out the property
4) Manage tenants
5) Market the property at the eventual sale
1) Halcyon (photo below) new development in Midtown East. Represented clients who booked at the pre-construction stage. Rented out at premium rents upon condo completion. The building is close to United Nations, Blackstone, Citigroup Center, BlackRock.
2) 99 John Street (below), represented client in the purchase while building was being converted to condos and a few years later, at eventual sale. Apartment has very rare 500 sqft terrace, commanding premium sale price. Buying new launch condos, whether brand new or conversion, is an attractive strategy that we do with many clients.
3) Pre-war condo at Parc Vendome (photos below). Parc Vendome is amongst the most famous pre-war condo buildings. Detailed architecture and proximity to Central Park make this very attractive to both buyers and renters. We identified a value buy that needed renovation, managed the renovation and totally transformed the apartment. Rented out within 1 week after renovation completed.
This article was updated February 2, 2022
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