The euro may be muddling its way through an existential crisis, but there’s still real estate to be had across the continent — and buyers, including New Yorkers, looking to plunk down all cash for it.
This month, The Real Deal talked to brokers and analysts to find out where New Yorkers are buying in Europe, given the euro crisis’s effects on global trade and investment as well as the recent political tumult, and to see how the various submarkets are holding up.
The focus is not on the villa- and chateau-dotted regions of Italy’s Tuscany and France’s Riviera, where wealthy New Yorkers bought during the Cold War era. Those regions, brokers say, are dominated now by buyers from newly emboldened economies, especially Russia and China.
Instead, New Yorkers are buying (or looking to buy) property in old urban stalwarts like London, Rome and Paris, and in less discovered places like Dubrovnik, Croatia, and perhaps even the tiny country of Montenegro on the Adriatic Sea.
Americans overall make up slim percentages of the buyers in these markets. In central London, for instance, 3.7 percent of buyers July 2011 through July 2012 were American, while in Italy, 6 percent of buyers in 2011 were American, according to London-based brokerage Knight Frank.
Many of these American buyers, though, hail from New York. What’s more, brokers and analysts say interest has increased from Gotham addresses. In fact, the one financial constant on a continent in economic flux may be the sophistication of the New York homebuyer.
“Unlike the buyers coming into New York, who ask questions because they’re not familiar with the market, any [New York] buyer we’re seeing who’s buying in places like this actually knows the market fairly well,” said Neal Sroka, a Prudential Douglas Elliman broker and president of DE Worldwide, a global real estate sales consultancy based on Madison Avenue.
“Somebody who decides to buy an apartment in Paris, I would venture to say, has been visiting Paris for 30 years or has business there,” he added.
Below is a rundown of some of the European destinations in New Yorkers’ crosshairs — and how they’re holding up.
New Yorkers will always have Paris: Market observers say they continue to buy homes in the French capital, even as the country’s new president toys with significant tax increases.
“Everybody wants a piece of Paris,” said Alon Kasha, who eight years ago relocated to the French capital from New York with his wife and launched A+B Kasha, a firm specializing in selling and renovating pieds-à-terre for foreigners.
The economic uncertainty following the May election of Socialist Party President François Hollande has not impacted the real estate market in Paris, Kasha argued. Nor has the euro crisis dissuaded New Yorkers from apartment-hunting there, other sources say.
In fact, after dropping during the recession, prices for prime apartments in central Paris’s most desirable neighborhoods climbed steadily.
In 2011, they were up nearly 15 percent annually, to roughly $1,070 a square foot, according to the Global Property Guide, a U.K.-based website that tracks real estate worldwide. (All reported dollar amounts were converted from euros based on last month’s rate of $1 to €1.22.)
Such increases are similar to those seen in Paris during the last decade’s real estate boom, inviting fears of a housing bubble in France. However, Knight Frank has said the city’s prime areas will “continue to stabilize” and has reported that prices have essentially been flat in 2012.
Further muddying matters, Hollande has famously proposed a top individual income tax rate of 75 percent, which some say could trigger an exodus of French les riches, upping the city’s luxury inventory as wealthy property owners vacate to beat the taxman.
Sellers in Paris do face high transfer taxes. But according to brokers, that is not likely to stop New Yorkers from buying there.
“As far as Americans buying apartments in Paris,” Kasha said, “they are not doing it as an investment decision. What they are buying is the lifestyle.”
Elizabeth Stribling, the veteran New York broker who also does business in Paris, echoed this assessment of the typical higher-end New York buyer.
“Those New Yorkers who contact me about Parisian property are generally in a pied-à-terre-buying mindset,” she said. “They know they are going to spend along the lines of a New York pied-à-terre.”
Stribling rattled off parts of central Paris where she said most of the buyers have been foreigners, including Americans: the two islands in the Seine, Saint-Louis and Cité; the 7th Arrondissement; and the 4th Arrondissement, where she herself has a flat.
And whereas New Yorkers would have paid around $650,000 for a one-bedroom during the boom, according to Kasha, they will now pay into seven figures for two- to four-bedroom apartments.
Late this summer, Diletta Spinola, a broker with Sotheby’s Realty in Rome, sold a $7.75 million, 2,690-square-foot penthouse apartment off the Piazza Navona to a New Yorker. (The apartment also has a 1,076-square-foot terrace.)
Such deals, Spinola said, are indicative of a Rome where the higher end continues to perform better than the rest of the market. She said she has seen an increasing number of New Yorkers house-hunting in Rome at the higher end. They prefer the larger apartments in the city’s more fashionable center — terraces, in particular, are always in demand.
“Most of the requests we’re getting from the U.S., and especially from New Yorkers,” she said, “are for penthouses, and there aren’t so many for sale.”
Higher-end downtown apartments in Rome start at around the equivalent of $1,900 a square foot — “and that goes up,” Spinola said.
Still, for New Yorkers buying on the high end, Rome can offer deals. Indeed, by comparison, the average price per square foot in Manhattan is $2,113 for the luxury market (which is the top 10 percent of the co-op and condo market), according to appraiser Jonathan Miller’s second-quarter market report.
Statistics on the Rome market are general and unwieldy. But they show that the middle and lower end of the market remains tepid, if not depressed. Prices and sales volume overall dropped in 2011, the most recent year for which data is available, by single-digit percentages, according to Knight Frank.
Overall prices have been dropping since the recession started in 2008, prompting the New York Times to label Rome a “buyer’s market” in June.
With both economic and political uncertainty, Rome prices are not expected to rebound during the last quarter of 2012, according to a forecast by Knight Frank. Still, the city’s higher-end market has had a stronger 2012 than other European cities, including Geneva and Madrid, the report said. Prices at the higher end have risen perhaps as much as 5 percent during the year.
“It’s true the medium market has been affected,” Spinola said of prices, “but not the top end.”
Italy’s financial and fashion capital has mimicked the country’s political capital, Rome, in housing — with a twist: New Yorkers are looking outside the center of the city.
Though, as in Rome, Milan statistics can be unwieldy, a Knight Frank analyst said that home prices in the city might be down as much as 15 percent in the last two to three years, a slide similar to elsewhere in Italy. Meanwhile, little price growth is expected in 2013, according to the Global Property Guide. Apartments in Milan of around 1,200 square feet average about $962,600, according to the guide.
Sources say some New Yorkers are looking to buy at the higher end beyond the city center in areas of the Milan region that have become more fashionable.
Sroka said the situation is “similar to what’s happened in New York, where people have gone to Brooklyn and Long Island City.”
Sroka is involved in a large mixed-use project northeast of Milan led by Bizzi & Partners (the developer behind the Setai Fifth Avenue in New York) and a Korean investment house. The project — which will include around 10.8 million square feet of commercial and residential space, including apartments — will rise on the site of an old steel factory and will be designed in part by acclaimed architect Renzo Piano.
Sroka said he expects the project, which is due for completion around 2015, to draw interest from American buyers, including New Yorkers.
A June report from commercial brokerage Savills concluded that London’s real estate markets, including its housing market, “bottomed out” in early 2009.
Since then, the report said, London “has seen a period of intense activity and price growth.”
“Higher-value markets have been boosted by international investor and ‘safe haven’ demand,” the report added. “As a result, prime central London values are 21 percent above peak.”
Indeed, while New York has seen a record-breaking sale at 15 Central Park West for $88 million in late 2011 and buyers signing contracts in the $100 million range at Extell Development’s under-construction One57, London seems to handily beat New York’s highest prices.
For example, there was the $220.9 million, 25,000-square-foot triplex sale in spring 2011 at the condo One Hyde Park (two wine cellars included), and the listing last month of the 45-bedroom Rutland Gardens manse of the late Saudi Arabian crown prince, Sultan bin Abdulaziz, for $487.3 million.
Price reductions at the higher end, however, are not unheard of. And, a forecast by Knight Frank concluded that prices in 2013 would essentially be flat in the higher-end Central London housing market, where New Yorkers are most apt to buy.
Also, prices are expected to grow by only 4 percent in 2014.
It’s not necessarily that the London market is struggling — it’s that, like Manhattan, it recovered sharply and quickly (at least compared to other housing markets) from the recession. The same Knight Frank forecast noted that between March 2009 and September 2011, central London prices went up 37 percent — “the fastest rate of recovery seen in the market for 35 years.”
“The London market’s been up historically, year over year, about 10 percent over the last few years,” Sroka said. “And, then, the last few months we’ve seen it basically go flat.”
Ground zero for the euro crisis presents opportunities for Greek-Americans, according to Sroka, including those from the nation’s biggest Greek neighborhood, Astoria.
While there is not as much evidence of more New Yorkers buying and home-hunting in the Greek capital compared to other European cities, the conditions would seem ripe for picking up Athens apartments.
According to indices kept by the Bank of Greece, prices have been on a downward slide since the recession started. By 2012’s second quarter, the price index was at its lowest since at least 2007.
The bank put it bluntly in an April statement looking back over the previous year: “The Greek real estate market, having shrunk substantially during the current crisis, remains at the same low level, without any signs of recovery as medium-term expectations are still negative.”
The statement went on to cite very high inventory — “a considerable stock of unsold properties” — plus “very low demand.”
Apartment prices in Athens appear to be on average one-tenth cheaper than cities like Rome and Paris, according to listings on the Global Property Guide, asking as little as $100 to $200 a square foot.
Kieran Kelleher, a Savills broker based in Dubrovnik, had an unusual experience with a seller whose 1,076-square-foot apartment (which overlooked the city’s medieval old town) had been on the market for a few months. When Kelleher called the owner to say the apartment had not sold, the seller responded by telling Kelleher to raise the price.
That response was, of course, the opposite of what most sellers with a languishing property would do. But it worked: The apartment sold to a Scandinavian for around $590,000.
“The local people selling don’t seem to be in a tremendous rush,” Kelleher said. “Price goes up as the time goes on.”
The Dubrovnik region, along the Adriatic coast, has seen intense interest from Americans, including New Yorkers, in recent years, and that has helped fuel its housing market. It’s been 15 years since the end of the Balkan wars, and Croatia will enter the European Union in July 2013 (and convert to the euro within a few years after that). Kelleher, and other brokers, have begun to see more New York home-hunters and buyers, a trend likely to continue.
“There seem to be a lot of people who have started to vacation there and realize the value,” Sroka said. “You can own on the water in Croatia for about one-fifth the price of what you would buy on the water in France or Italy.”
The waterfront of Montenegro, a nation of barely 632,000 southeast of Croatia, is even cheaper. While it’s mostly Russians buying now (particularly near yacht berths), according to Kelleher, Croatia’s rising tide among New Yorkers could lift Montenegro’s housing market as well.
Per-square-foot prices in Dubrovnik’s old town were running around $900 a square foot in early 2012, according to Kelleher. Prices for homes beyond the old town and with only partial water views can run $100 to $200 less per square foot.
All of the prices have increased several percentage points over the last few years.
Unlike other European cities popular with New York homebuyers, however, Dubrovnik has seen very little new development. That may change, Kelleher said, as more foreigners discover the region. Prices, too, could grow 5 to 7 percent annually in the next few years, he said. The locals would expect nothing less.