New York stands out among other American cities because, although values there fell significantly after 2007, it did not see quite the same level of extreme falls as some others. New York’s recovery has also been rapid. The last year has seen high levels of growth in the properties that make up the Savills World Cities Index. Overall growth was 12% and the value of residential properties occupied by the seven SEU households is now back at its 2007 level.

New York stands out among world cities as looking particularly good value, especially from an income return point of view. As residential prices have seen much lower growth than other world cities, New York has fallen in rank from one of the most expensive to a distinctly cheap “old world” urban centre. Current values are only 23% above their 2005 levels and the average rental yield on properties occupied by the seven households in the SEU is 6.4% gross.

At the same time, the relative weakness of the dollar against many Asian currencies naturally encourages trans-continental investment flows. Therefore, the strong interest from Asia for real estate in North American cities is of little surprise.

There are, however, some possible impediments to investment in New York. These fall into two main categories: associated costs and housing tenure types. The entry, holding and exit costs associated with property are relatively high and the prevalence of the co-operative tenure for apartments means foreigners may find it more difficult to buy. They are relatively restricted to the 30% of stock that is condominium tenure. Were it not for these peculiarities, New York would be an extremely strong starting point for North American recovery investment.

On the face of it, New York looks a good investment for those seeking good medium-term capital growth prospects and healthy returns. For many Asian buyers, there is also the advantage of a weak dollar.

It is hardly surprising that the number of overseas buyers is increasing. What makes the city a continuingly attractive “deal” is the steady rental growth since 2009, indicating healthy underlying demand.

Taken from
Insights: World Cities Review Spring 2013

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