The global credit crisis, the dislocation of foreign stock markets and the strengthening of the dollar has resulted in a reduction of the number of foreign investors purchasing apartments in New York City.
Sales of apartments by foreign investors are down by at least 50 percent year to date. Industry leaders say that a number of foreigners that bought downtown are being forced to sell residences as a result of the world financial crisis. According to Melissa Cohn, president of Manhattan Mortgage, mortgage financing for foreign investors is very difficult. Commercial banks which previously provided financing to foreign investors are pulling back. Earlier this year, she said she was able to secure financing from at least ten active lenders, but today that number is down to three or four.
During the past three years, Irish investors represented one of the largest groups who purchased Manhattan residential condominiums. The weakness of the euro to the dollar, coupled with the major loss in value in the Irish stock market, may have serious effects on the purchases of residential condominiums in New York City. Next year, closings are expected on apartments in two condominiums which were purchased in bulk by groups of Irish investors. These properties include a 43-story tower on Eighth Avenue in the theater district with a total of 122 units and a tower located on East 34th Street, between Madison and Park avenues.
At my class today at the NYU Real Estate Institute, a number of prominent real estate lenders on a panel stated that they feel that many of the sales of the condominium units in these two developments as well as other planned condominium developments will fall out of contract by foreign buyers. It is much less expensive to lose 10 to 20 percent on a contract than to purchase a condominium which may have lost significant value during the economic downturn
With the crisis affecting the entire world, industry leaders believe that foreign investors may no longer represent a major purchaser of residential condominiums in New York City.
Michael Stoler is a columnist for The Real Deal and host of real estate programs “The Stoler Report” on CUNY TV and “Building New York” on WEGTV in East Hampton. His radio show, “The Michael Stoler Real Estate Report,” airs on 1010 WINS on Saturdays and Sundays. Stoler is also an adjunct professor at the NYU Real Estate Institute and a former columnist for the New York Sun.