Back HomeStability in the Marketplace
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.
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).
