Since the 2008 global financial crisis, topics relating to the housing market, like property and real estate development have not been discussed much in the mainstream media. There has been a general belief that the agony of the last decade’s housing bubble will stick around forever and the property and real estate sectors will continue to crash, especially with rising interest rates. However, investor Ralf Lai suggests this isn’t necessarily the case, as investors can find comfort in the fact that property prices were actually rising alongside interest rates, meaning that rising interest rates don’t necessarily lead to a crashing real estate sector.
Considering all this, what then does the news of Manhattan’s worst real estate sales in a decade mean for potential investors?
For sellers, of course, this is bad news as New York is currently in a buyer’s market. According to the New York Times, sellers in Manhattan have not been able to sell at the prices they would have last year. Although property owners may just have to cut their losses, this is a ripe market for investors looking to buy property on the cheap.
Before making a move though, investors should take note of new developments. As noted by the Commercial Observer, new tax rules like the increase in New York real estate transfer tax, and an expanded mansion tax for sales over $1 million, could affect potential investments. Even with a wealth of online tax tools available, most investors find that they cannot justify the financial implications resulting from these changes. This is especially relevant with the city’s notably large luxury market, as Yoreevo’s James McGrath explains how the value of Manhattan apartments has doubled, with a $1 million residence in 1989 now worth $2 million. Commercial and residential brokers speculate that the slump experienced by New York’s high-end condo market will only get worse due to the new tax regulations.
As a result of the new taxes, many investors looking to buy property have opted to buy elsewhere on the East coast, in areas such as Florida instead. But although the new rules have driven many to buy property outside of New York, this only leaves more opportunities for other investors looking to buy in the Big Apple, as prices for certain developments are sure to go down.
For investors still not convinced by the opportunities, the news of New York City Real Estate Investment Trusts (REIT) dropping may just do it. In a report by Bloomberg, the drop came about as a reaction to news of Amazon backpedaling on plans to build its headquarters in New York City, after facing intense pressure from local politicians and residents. Although many of the city’s residents were also hoping to benefit from the increasing job opportunities and revenue, they may not have to mourn for too long as a statement from Amazon has hinted at future development opportunities for their New York operations. The possibility of Amazon moving back in, only means that investors should seize the opportunity to buy now, as the drop in prices could well be reversed with Amazon’s return.
Seasoned investors know that with any crisis, there is also opportunity. While news of notably low real estate sales can prompt many to go into panic mode, taking a step back and evaluating your options could pay off.
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