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Most of the news following the Brexit vote has been centered around how this will affect the American Markets. Most coverage, however, has neglected to highlight the impact that this monumental event has had on the United Kingdom (specifically London-based) real estate market. Summer 2016 following Brexit has caused an immediate real estate boom in the UK and has sent sale prices surging, much to the surprise of many who wrongly assumed that Brexit would be troublesome for the economy and housing market of the UK.

The result of Brexit that is having the largest impact on UK real estate is border patrol. Increased border patrol seems to be playing a two-fold role: 1) it has re-established a feeling of safety and security by locals, and 2) it has caused interest to increase from foreign buyers who still wish to have a presence in the UK. For locals, increased feelings of safety are leading many renters to become first time home buyers, illustrated by the number of mortgages seeing a drastic increase in the summer months, which are usually slow months in the banking industry. For foreign investors, the opportunity to purchase investment properties that will be occupied by UK-only residents presents an opportunity for them to have fewer discrepancies in renting and leasing contracts.

Foreign investors have been purchasing property in London because they feel that with stability of renters, property value will eventually increase overtime. In the immediate impact following the referendum, it is the foreign buyers who have expressed the most interest in UK property. One of the main reasons for this uptick is that the pound had slightly decreased in value, making British properties more affordable world-wide. Zlata Rodionova reports, “European buyers can now snap up real bargains across London. Overnight London has become a more affordable global property hotspot – particularly for those paying in euros,” said managing director Andrew Bridges (1).

Interestingly, it seems that Brexit has – if anything – caused members of the EU to begin spending more money in UK property than they were pre-Brexit. Countries whose currency is comparatively low are now looking into London for further investment reasons. Since the UK is geographically so close to countries whose currency is the Euro, the majority of the buyers have ironically been from the European Union. Additionally, Hazel Sheffield of The Independent writes that, “estate agents in the UK have been swamped with calls from Chinese, Middle Eastern, Italian and Spanish buyers looking for a bargain after the pound tumbled to more than 30-year lows, making the exchange rate very favorable for foreign buyers” (2). There is no doubt that the UK will continue to see more buyers from near and far looking to invest in their property. When borders close, real estate booms.

Image Via ATRL

On the other hand, the New York City market has not seen as much activity despite the fact that many were hoping Brexit would positively impact the US housing market. Both local and foreign purchasers seem to be pulling back from the US real estate market, particularly in Manhattan, as evidenced by Corcoran’s latest report stating that July 2016 housing prices are down by 18% since July 2015 across the entire market including condos, co-ops, townhouses, and commercial property in both the resale and new development sectors. Interestingly, 2016 has unfortunately been a year of consistent terrorist attacks throughout the US, which is causing buyers to lack the feelings of national security which have seemed to bolster real estate sales in the UK.

The latest July market report in The Real Deal highlights the effects of a slower market. Kyna Doles writes, “According to the latest batch of market reports, landlords offered more concessions … in July” (3). In addition condo sales averaged $2.1 million in July, which is a nearly $500k drop from the July 2015 average sale price. This means that developers, property managers, and sellers have come to the realization that they need to offer incentives or lower prices to make properties more attractive for buyers. Time will tell if this does attract more buyers back to the New York market.

Written By Kylie Keller

(1) The Independent

(2) The Independent

(3) The Real Deal

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Both residential and commercial buildings in New York City have seen dramatic impact in the development process. With much transition happening in the industry, the developers are the leaders of the next stages of which direction the market can turn.

In the commercial sphere, many developers are taking initiative in an effort to further stimulate the economy and see growth in spaces for business use. For example, on the west side of Manhattan, in the Hudson Yards neighborhood, developers are aiming to build a community around a large tower overlooking Midtown in its entirety. The building has the tentative name of “The Spiral” and will be used for commercial use. “The Spiral” will punctuate the northern end of the High Line, and the linear park will appear to carry through into the tower, forming an ascending ribbon of lively green spaces,” architect Bjarke Ingels mentioned in a statement (1). With the growth of commercial space, residential buildings also develop. This has been seen in the past with the Financial District as well as Midtown on “Billionaires Row,” 57th Street. Rob Spreyer of Tishman Speyer states that “(the) tower will serve as a significant leap forward in the evolution of the modern, collaborative and sustainable workplace,” (1). Developers are looking to get ahead and move with the trends of the real estate market, and the commercial workspaces that are currently in demand. All, of course, while trying to maintain efforts to be environmentally conscious.

One of the major reasons that development on the commercial-use side has progressed is due to the investment from foreign companies and individuals that was secured when foreign entities were still pouring money into the New York real estate market. Speyer’s statement about the new design [of “The Spiral”] also revealed that the company had lined up $1 billion from “a group of international investors” to get the building underway.” (1).

Photo Via New York Daily News

On the residential side, because of the surplus of existing residential properties, developers are more hesitant to see these through. This could be due to lack of demand, cost, or both. However, “developers say delays are normal and no cause for alarm, even though building permits have expiration dates and loans can have strict terms about construction start dates and other milestones.” (2). For those who have already invested their money into large residential projects, developers are reassuring that this is nothing out of the norm. Sometimes developers are suffering the ramifications of dealing with difficult banks and loan contracts. “If private loans are now tougher to secure, especially for untested developers, policy decisions don’t always break their way either, developers say” (2). Since 2008, it is much more difficult to obtain a loan- for the protection of future residents, banks, the government, as well as the development company. The building must be safe and built on sound structure in order to be marketable, especially to those who are purchasing ultra high end condos and leasing commercial spaces.

There are already such a large amount of unoccupied luxury residential condominiums in Manhattan; and continuing to develop them does not necessarily stimulate the economy much further than it already has, because the money was coming from foreign investors who are, generally speaking, not occupying the condos. “The super high end — as in apartments for $10 million or more — has met with headwinds recently, but people continue to stream into New York, while developers benefit from cheap capital and a pro-growth mood” (2). Nevertheless, “stalled projects can be found around the city, including a glassy tower designed by Foster & Partners off Sutton Place, a 65-story spire on East 37th Street in Midtown (2). These projects could in turn be a great thing for New York’s real estate market growth, but developers must decide and agree with their partners in order for things to progress.

Written by Kylie Keller

(1) NY Daily News

(2) NY Times

Filed under: Blog by Antonia Watson
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The slowing in volume of real estate sales in the past year has investors and developers alike worried about the future for New York real estate. One of the main reasons for the recent shift is the tightening of regulations and transparency in real estate transactions.

Prior to the 2008 housing crisis, it was easy for individuals to purchase single-family homes and multi-million dollar luxury condos, and for companies to purchase commercial buildings. Banks would lend to clients who couldn’t afford the loans they were taking, and shell companies would buy up both luxury and commercial properties. Credit checks and regulations have been issued since then to create a safer environment for investors, banks, and property managers.

Now, even further transparency regulations are being put in place to protect domestic buyers purchasing in the ultra high end luxury market. These regulations are called “GTO’s.” A GTO is a geographic targeting order, an examination to track to people behind shell companies who are purchasing multi million dollar properties. “By expanding the G.T.O.s to other major cities, we will learn even more about the money laundering risks in the national real estate markets, helping us determine our future regulatory course” (1).

Of course, New York City is a rather large market that officials would like to have regulated, but there are some areas of the United States that will be more targeted than other areas. A lot of these regions are known for their stability during uncertain times in the real estate market, as well as their increasing property value over time. “There will now be increased scrutiny of luxury real estate purchases made in cash in all five boroughs of New York City, counties north of Miami, Los Angeles County, San Diego County, the three counties around San Francisco and the county that includes San Antonio” (1).

Especially after the housing crisis in 2008 and the stock market crash due to mortgage backed securities, regulations are expected by investors. The type of monitoring, especially in the past couple of months, has become rather strict. “Some brokers [have] predicted the new orders will have only a slight effect on the new markets covered by the order because foreign buyers already have been pulling back because of global economic turbulence…With luxury sales already on the decline in both cities, especially among foreign buyers, brokers said it was impossible to determine whether some buyers were deterred from purchasing because of the new order” (2).

Photo Via Occupy.com

However, the argument has been made that sales, specifically luxury condominium sales in Manhattan, have not be affected by this new regulation. Hall F. Willkie of Brown Harris Stevens says that ” ‘not one issue in terms of this preventing a sale ever crossed my desk.’ ” (2). However, on the contrary, the fact that these sales “are not passing ones desk” also could be indicative of why sales volume overall is down significantly year over year.

In other words, we may not be seeing deals die due to the increased regulations, rather we are not seeing as many sales period. High monitoring by the government will always lead to a shift in the demand and supply of real estate. “Title insurance companies, which are involved in virtually all real estate transactions, are charged with carrying out the order” (2). Since there are so many different parties involved (between the policies put on from both title companies and banks) there will far less money laundering occurring in both the real estate market as well as financial institutions. This will make for more secure purchases on all accounts, which is much better for investors long term.

Written by Kylie Keller

(1) New York Times
(2) Wall Street Journal

Filed under: Blog by Antonia Watson
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It is no secret that the Real Estate market has seen changes and shifts in light of current events. Currently, there is a halt in the market, sometimes what investors like to call a “waiting period.” The New York City real estate market has slowed down and investors, sellers, and developers alike are waiting on a decision from the Federal Reserve or a shift in the way that properties are offered or marketed.

Looking at specific the neighborhood breakdown, there is an overall trend to move away from the pricier commercial districts to more reasonably priced ones in the Financial District and Midtown South. Kyna Doles of the Real Deal Magazine offers some statistics to get better insight as to why this trend may be happening. “Midtown Manhattan leasing activity totaled 1.2 million square feet in June, 3 percent below the five-year average. Year-to-date leasing is down 31 percent compared to the same period last year” (1). When the developers began building ultra high end luxury condos, back in 2012, perceived value and prices of Midtown began to increase as well. When neighborhoods become renovated, or for this article’s sake, “upgraded,” the standard of living for the residents and employees who work in the area also increases. Due to the upgrade in the district, commercial rents became rather expensive. Last year, when leasing in midtown reached an all-time high, luxury condos were being sold at skyrocketed prices. Fast forward to this year: companies are being priced out of the Midtown District and have moved to Downtown Manhattan, where “leasing activity [in Downtown] …is up above the five-year average,”(1).

Photo Via New York Times

Commercial Real Estate firms are now placing a lot of strategy in repositioning themselves to gain more tenants for the upcoming quarters. Many of the buildings in Midtown Manhattan are further developing their amenities to try to appeal to some of the younger, start-up companies, hoping that these amenities will help the start-ups to justify the high price points. One of the main focus points for developers has been terraces. “‘Everybody needs a little twist, and terraces add a lot of appeal,’ said Palmer Sealy III, who handles office leasing for TF Cornerstone” (2). Companies see the terrace as a value-added amenity; a way to entertain guests, employees, and clients. C.J. Hughes of the New York Times writes “New York is taking a fresh look at terraces, despite a climate in which workers can hardly depend on sunny days” (2). Many developers are adding seating, plants, and heating capabilities. Some firms are constructing these outdoor spaces so that companies have a private terrace for their exclusive use. Terraces, and any luxury amenity for that matter, are a perception of value by the consumer and a creation of value for the developer. Only time will tell if companies will be enticed; and whether or not this will have either a short or long term effect in commercial real estate for New York City.

Written By Kylie Keller

(1). The Real Deal
(2). The New York Times

Filed under: Blog by Antonia Watson
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In the past decade, the New York City real estate market has seen price surges, has endured economic panics, has skyrocketed, and now the market has come to a halt because of extremes overflow in supply. At first, sellers and developers alike thought there were no buyers ready for the market. However, there is a demand for these types of properties but not at the prices that were once seen in 2014 when luxury condos peaked in price at an astonishing eight figures.

“The corridor in Midtown that holds many of these buildings, West 57th Street, has experienced what broker Dolly Lenz calls “a complete halt” in activity from über-wealthy buyers, and there are similar signs of a slowdown happening elsewhere” (1). Many of the buyers are waiting because they think the stock and real estate markets are unstable. Or perhaps they are waiting for sellers to drop prices. There currently is not an immediate demand for these properties; most of the properties will be for investment use. Even developers are currently putting projects on hold.

“It’s not that there aren’t any buyers at this level,” real estate appraiser (and Curbed columnist) Jonathan Miller told the Times. “It’s that there aren’t buyers willing to pay 2014 prices” (1). Currently, both mortgage rates and interest rates are low, which lowers the perceived risk for a new buyer to purchase a luxury condo. The Federal Reserve generally aims to keep interest rates low to encourage investments and further stimulate the economy. With the threat of unstable markets both abroad and domestically nearly over, there is a possibility of the Fed raising interest rates to be sure that inflation does not totally increase.

Image Via Zimbio

That being said, this potential rate hike could affect the real estate industry in multiple ways. The Real Deal wrote recently that “on the one hand, it indicates a healthy economy, which means more demand for office space, retail and housing. On the other hand, higher benchmark rates tend to trickle down to higher mortgage rates and bond yields, which raise the cost of financing and put downward pressure on commercial property prices” (2). When the next Federal Reserve meeting occurs in September, it should be interesting to see (firstly) if they do change the interest rates to be higher and (secondly) if they do, how this in turn will affect the real estate industry (and, more specifically, the luxury condominium market in Manhattan).

Written By Kylie Keller

(1) NY Curbed
(2) The Real Deal

Filed under: Blog by Antonia Watson
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New York City has seen its fair share of pressure in the real estate industry as of late. Although the overall pricing has dropped, there is a low demand for the properties that are on the market; and the industry has seen fewer sales. The Corcoran Quarterly Report states that “decreases in the resale market lead to a year-over-year drop in overall closed sales despite strong new development closings” (1). In addition, “the number of sales closed has dropped by 14%, and the number of contracts signed has declined by 20%” (1).

Despite the increase in inventory, there are a number of factors that could be contributing to the slow in sales of real estate. Corcoran’s market analytics states there are two main contributing factors: “The increase in inventory, combined with a drop in sales compared to last year, helped contribute to the longer average time from listing to sale” (1). A lot of recent halt is caused due to instability in the marketplace especially in light of the recent political events like the Brexit vote and the 2016 United States Presidential election.

Michelle Higgins of the New York Times writes that “It’s not just the volatility of financial markets that has big spenders sitting on their wallets. Other global trends that have put the lid on high-end spending include China’s tightened restrictions on capital outflows, uncertainty surrounding Britain’s decision to leave the European Union, lower oil prices curbing wealth in the Middle East, and tax increases and other measures that have driven up property transaction costs in some countries” (2). Both the real estate market and financial industry have become factors in real estate transactions. The modern buyer is not looking for just a property, but a wise investment for the long term.

These conditions pertain to foreign investors who often look to New York City as a stable marketplace for investment. The condominium developments that cater to these investors have shifted the overall market supply, especially in Manhattan. There is also a halt of purchases from the foreign investor due to transparency laws that have been enacted in the United States that require investors to identify themselves (to avoid hiding investments through shell companies). In addition, financial institutions are taking further action to ensure that another housing crisis does not occur due to their direct actions (or lack thereof). Banks are beginning to appraise property and owners are lucky to be able to take 60% out of their properties when they are owned in full.

From the point of view of the developer, many of the new development projects that are backed by private investors and venture capitalists aim to halt development now to avoid losses in the future, as the demand for ultra high end condominiums keeps declining. But even as properties are lingering on the market, developers continue to build these condominiums. The Corcoran Quarterly Report states that “the number of new development condos available is up 25% over the prior year” (1). However, over half of sales were for condos (versus co-ops) and “the amount of condo resales is up 20%” (1). That being said, this hesitation in investment and sales will halt the development and effect the prices of the ultra high end luxury apartments (that were high in demand in both 2014 and 2015) because of the overflow in supply.

Photo Via New York Times

Despite the relatively slow investment in the real estate market, “there is still very good activity,” said Gary Barnett, the president of Extell. “It’s hard to close deals because people are not in a rush” (2). People have the mentality that they “can come back in a month and it will still be there or maybe the price will be lower” (2). Perhaps that will be the case. However, the developers, property managers, and sellers will need to provide an incentive for buyers if they want to expedite the process. Otherwise, they must wait until the market becomes more attractive and competitive worldwide.

Written by Kylie Keller

(1) Corcoran Quarter 2 Report

(2) New York Times

Filed under: Blog by Antonia Watson
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The current New York market may seem stable: and it is, to a certain extent. However, recent events (specifically the Brexit), a surplus of condos in the real estate market and stable mortgage rates have effected the marketplace both domestically and internationally. This may cause investments in stock, mutual funds and real estate to take a quick turn.

Image Via Governor NYC

In the New York City real estate market, sellers are getting eager to sell their homes; and apartments are staying on the market far longer than they should. Theresa Agovino of CBS writes that “…homes with lofty price tags are lingering on the market longer in New York, with residences sitting around for 274 days, up 24% from the year-earlier period” (1). Compared to 2014 and 2015, the demand for luxury properties and condos in New York has decreased dramatically. Developers and property managers will lose a lot of money as foreigners and domestic buyers alike come to bid on properties. Donna Olshan states that “there are problems in the luxury market. Prices got too high and there is just too much inventory” (1). Even with people looking to use New York City as a real estate market for investment purposes, the ultra high end luxury market is one that is not realistically attainable for most investors. It will be interesting to see how the market plays out once the prices start dropping due to a low demand and high supply of luxury properties.

In order to prevent situations like this from happening in the future, developer must ask themselves what they can do differently. Frances Katzen, a real estate broker at Douglas Elliman says that “developers have to think in terms of what people want to buy” (1). Instead of focusing on the “awe factor”, developers should aim to switch the mentality to aim for something more practical, yet equally luxurious.

In the stock market, Chad Bray of the New York Times writes that “mutual funds that focus on real estate face a particular problem in the current tumult. Such funds hold assets that are difficult to trade, but investors can ask for their money back at anytime. When investors panic, the redemption requests can quickly exhaust the funds’ cash on hand” (2). Both the New York and international markets (specifically London) will look vulnerable during the next couple of years through the transition of the Brexit. If investors panic, the ramifications of their decisions could cause a further panic and perhaps a crisis if hedge funds do not position themselves as a haven of stability.

Laith Khalaf, a senior analyst at Hargreaves Lansdown, a British financial services company, puts it into perspective and says, “the reality is we don’t fully know what the economic impact of the Brexit is going to be, [but] the concern is it’s going to be negative” (2).

Written by Kylie Keller

(1). CBS
(2). NY Times

Filed under: Blog by Antonia Watson
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The decision is finalized, and the Brexit vote has made possible that the United Kingdom will leave the European Union over a 2 year period. Although the process is prolonged, the short term effects of this decision are already being felt on a global scale.

“The value of the pound dropped to its lowest since 1985, and the FTSE took a steep dive” (1). This affects the imports and exports between the United States and the United Kingdom and there will be less of a demand of US good over time, but will make it cheaper for Americans to buy goods from the UK (and travel to the UK).

For a quick return on investment, buying stocks and pounds at their lowest price in 30 years with the intention of exchanging for dollars in the future would be a wise investment.

However, “in the short term, markets will trade on emotion, so make sure you don’t end up becoming your portfolio’s worst enemy,” warned Bob Stovall, a U.S. equity strategist speaking to USA Today. He advised investors to “stay calm and carry on” with their long-term plans” (1).

The volatility in the British market has left the United States Real estate market, specifically that of New York City, a more attractive investment option. Foreigners will continue to flock to New York to invest in US Real Estate. This, in turn, could drive up real estate prices once more since there will be more competition and more people bidding on properties. “New York has always been a global city, and this will only become more true as wealthy foreign buyers who may have considered London are put off by this isolationist turn” (3).

Photo Via NYTimes

On the other hand, the long term affects of this decision could be a European recession, which could turn into a global recession. The New York City real estate market will not then be immune to the effects of the Brexit then.

Written by Kylie Keller

(1) The Real Deal
(2) DNA Info
(3) NBC New York

Filed under: Blog by Antonia Watson
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The Real Estate market, anywhere, can be a tough investment in times of instability and transition.

Ari Harkov of the New York Daily News writes that “the key is to focus on the math and to put aside the emotional pain we all feel when we see our properties go down in value” (1). If you can afford to upgrade your existing apartment, that is bettter off in the long run for your investment. Hypothetically, if the market was down an overall 10%, that million dollar property of yours is only worth $900,000. However, if you were upgrading to a 2 million dollar property, that would be sold for 1.8 million. The difference is $100,000 of value (or more, if you offer lower than market and the sellers accept).

Photo Via New York Daily News

“The stability and strength of New York real estate, as compared with the volatility of other asset classes, is one of the many reasons why so many buyers from around the U.S. and the world have chosen to purchase homes and investment properties in the city, and those who have tended to do the best have often purchased during periods of uncertainty” (1).

And speaking of periods of uncertainty and stability, the New York City Real Estate market is looking far more attractive than the London market to foreigners. Just this morning, the United Kingdom voted in favor of leaving the European Union during the Brexit vote, which not only affects the European economy, but the New York City real estate market as well. Here are the “after – effects” of the decision:
1. The low interest rates will make New York City apartments a continued attractive investment for foreigners and domestic investors alike and it makes it easier to finance the investment.
2. New York City real estate now becomes the primary market to invest in, due to the collapsing value of the pound against the US dollar.
3. All assets including real estate have become an attractive and safer investment. “New York real estate (both commercial and residential) is widely considered one of the safer investments — BlackRock’s Larry Fink recently described it taking over gold’s traditional role as an “instrument for the storing of wealth” (2).
4. Commercial real estate and office space leasing in New York City will soar. ““Too many things are “TBD” in London right now, so NYC office, multifamily and high street retail will likely benefit from even more capital flows,” wrote Daniel Parker of Hodges Ward Elliott” (2).

Conclusively, until there is visibly and proven stability in the London Real Estate Marketing, New York City will be a continued wise investment for locals and foreigners alike.

Written by Kylie Keller

(1) New York Daily News

(2) The Real Deal

Filed under: Blog by Antonia Watson
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The Upper West Side has undergone many transitions over the past few decades. Among the beloved prewar walkups and buildings that give the neighborhood its charm, are high rises that are popping up throughout the neighborhood. Even restaurants, boutiques, and grocery stores have opened up recently, especially near the Columbia campus. The Upper West Side is just a small sampling of the changes to come in New York City real estate development.

The high rise buildings bring “modern” change to the Upper West Side and with that, the mom and pop shops and delis are replaced by chains. In an interview / profile piece in the New York Times, Joyce Cohen writes that “He [Mr. Zoglin] misses some of the small shops in his old neighborhood, especially the Broadway Farm market, open all night…He makes do with the nearest options — a tiny deli and the grocery section of an enormous Duane Reade” (1).

Some of the other things the Upper West Side is famous for are the family owned, hole in the wall restaurants and bars that you cannot find anywhere else but in Manhattan. Recently, Joshua David Stein of Gubstreet did a piece dedicated to the Upper West Side, featuring some local spots. One of which, Absolute Bagels, is an neighborhood gem where the infamous Ess-a-Bagel, has been perfected.

Even individual apartments, buildings and townhouses are all seemingly receiving upgrades. For example, “55 West 95th Street will be renovating their lobby by building a custom desk for the doorman [and] updating the interiors of their elevators” (3). Albeit small, these changes add much more value to an existing apartment and attract a different kind of buyer altogether.

Photo Via Corcoran

It is the community and the atmosphere that gives each New York City neighborhood its charm. The people living in the Upper West Side can usually identify with its surroundings; and with the change in real estate development, comes change in atmosphere.

Written by Kylie Keller

(1) New York Times
(2) Grub Street
(3) Corcoran

Filed under: Blog by Antonia Watson
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