Back HomeCharting the Foreign Investment Trends: Where is the New York Real Estate Market Now?
As of late, there has been a lot of speculation with regards to the New York City Real Estate market. With New York seemingly at the center of all media channels (both in and out of real estate) it is hard to ignore New York as one of the top target markets for domestic and foreign investors.
A significant amount of action has come directly from the Middle East. Bloomberg reports that many investors from that region have shown a significant amount of interest in purchasing real estate in the last two quarters, especially in commercial real estate. Christine Maurus writes, “Economic growth and favorable exchange rates combined to make the U.S. appealing, particularly for sovereign-wealth funds, according to CBRE Group Inc. Among the $6.5 billion of New York deals was Qatar Investment Authority’s purchase of a stake in the Manhattan West development, and, following the period CBRE studied, the authority paid $622 million for 9.9 percent of the company that owns the Empire State Building” (1). The Empire State Building is just one example of the many planned investments for the future.
The Real Deal magazine published that “Middle Eastern investors pumped $6.5 billion into New York City in the past 18 months ending in June” (2). The government also announced that it would continually make investments in the Untied States, specifically the New York market. “In 2015, the Qatar Investment Authority announced that it would invest $35 billion in the U.S. over the next five years” (2).
Even though much has been planned for future investments, there have been a lot of transactions in the present just between the United States and the Middle East. The Real Deal states that “the purchases of nearly $10 billion of U.S. commercial real estate by Middle Eastern investors in the first half of 2016 represented over 20 percent of global cross-regional investment, CBRE said” (2). Since there will be more than triple that amount of investment over the next five years, that percentage of cross regional investment will most likely increase. Given the transparency of the Qatar government as well as the newer United State regulations, it will be both clear and easy to see the patterns in which the real estate market in New York City will be trending.
The benefit to having investors from other countries pour into domestic markets in the stimulation of the economy, room for development to be completed, and the possible rise in competition of investors within the United States. The resurgence of interest in the New York real estate market comes with many advantages.
That being said, there is also an opposition to cease the continued growth of foreign investment in the United States. The government’s website clearly states that “congress created the EB-5 Program in 1990 to stimulate the U.S. economy through job creation and capital investment by foreign investors. In 1992, Congress created the Immigrant Investor Program, also known as the Regional Center Program” (3). However, there has been a recent movement to modify this bill which would remove and completely change the dynamic of foreign investments in the United States, as it applies to Nee York Real Estate specifically. The Real Deal Magazine published that “The new bill, sponsored by Congressman Bob Goodlatte (R-Va.), would raise the minimum amount investors would need to pump in to get a green card. That in itself was expected. But what makes it unusual is a provision that would require existing investors to retroactively cough up the additional amounts. It is this provision, real estate insiders say, that could cause investors to pull their money out of U.S. real estate projects, leaving developers in the lurch” (4). This bill would affect the both citizenship of foreigners as well and foreign investors and the minimum requirements and it would, effectively, end the EB-5 program.
It will be interesting to see if there will be any changes to the EB 5 Program and how recent events like terrorist attacks will continue to affect foreign and domestic real estate. According to the IRS website, “generally requires that foreign financial Institutions and certain other non-financial foreign entities report on the foreign assets held by their U.S. account holders or be subject to withholding on withholdable payments” (5). Since New York is such a large target for terrorists and investors, both the terrorists attacks and laws to keep the transparency in foreign transactions could deter investors from seeing New York as a safe place to live and to invest.
(1) Bloomberg
(2) The Real Deal: Middle Eastern Investors
(3) US.Gov
(4) The Real Deal
(5) IRS
