Steven Toumbas, an equities investor in London, is a shining example of the type of buyer foreign newspapers are fawning over these days. He’s taking advantage of the tumbling dollar and falling U.S. real estate prices to make his dream of buying a second home in Manhattan a reality.
Toumbas planned to buy a 540-square-foot luxury apartment in the Trump SoHo listed at $1.2 million, London’s Financial Times reported Nov. 10. At then-current exchange rates, it would only cost him about £572,000, or 820,000 euros, but he decided to wait for even more of a discount.
“I’m going to let the subprime fallout stabilise, let the Fed further cut interest rates, and let that further weaken the dollar,” Toumbas was quoted as saying in the article. “The Brits know the pound is strong.”
As the dollar has plummeted in value against foreign currencies in recent months, journalists overseas and across the Canadian border are offering potential buyers advice on how to how to make the most of a rare opportunity.
The articles repeat the same refrain: There’s never been a better time to find a bargain in New York City’s once cost-prohibitive luxury real estate market. They cite statistics like the fact that nearly one in five U.S. realtors has sold a home to an overseas client in the past year, according to a study published in July by the National Association of Realtors. A third are sold to Europeans, and of those, 12 percent are sold to people from the United Kingdom.
And while a few articles caution buyers about market volatility and preparing for unexpected costs such as maintenance fees, nearly all have stories of prime New York properties being snatched up at incredible discounts by people like Toumbas.
“The dollar’s collapse has taken many by surprise and rendered one of America’s most elite housing markets suddenly affordable to foreigners, even as suffering locals remain priced out,” the Observer in London reported Nov. 18. These days, investing in New York City real estate is “an absolute no-brainer,” Eric McLendon, a broker at Corcoran, was quoted as saying.
A May 12 article in the Irish edition of the Sunday Mirror described buyers from Ireland buying apartments, mansions and even unfinished high-rise building blocks in Manhattan.
“It is all a far cry from the days when penniless and starving Irish arrived in New York, eking out a meagre wage doing jobs no one else wanted, while living in rat-infested slums,” reporter Julian Brouwer wrote.
Anne Marie Moriarty of the Corcoran Group, often quoted in the foreign press, said that most of the Irish buyers she deals with purchase one or two apartments at a time, and they don’t even travel to New York beforehand.
“Even if they could afford to buy in Dublin, they could not get rent anywhere near what they get here,” Moriarty said in the article.
A July 12 article in the Irish Times suggested buying properties in the former city headquarters of JP Morgan Chase Bank at 75 Wall Street, which is being refurbished by the Hyatt Hotel Group into 251 hotel suites and 349 private condominiums.
At that time, condo prices in the building ranged from $615,000, or 447,691 euros, for a 439-square-foot studio, to $2 million, or 1.46 million euros, for three-bedroom apartments of 1,692 square feet.
After taxes and maintenance fees, owners could expect a monthly rental income of about $3,000, or 2,184 euros for a one-bedroom apartment.
But the condos are also a good investment because of the building’s location near Ground Zero and resulting tax breaks, the article said. “75 Wall Street will benefit from significant property tax reductions for 15 years, with no tax payable in years two to nine – a huge asset, as property taxes are high in Manhattan,” the story said.
A Nov. 10 article in the Daily Telegraph of London provided a list of properties and tips for buying real estate in the U.S., such as getting a lawyer and seeking independent financial advice. Investors were advised to be cautious, though, because “Many property investors and developers believe that 2008 will be characterised by uncertainty.” But for those “with the time, money and patience to be in it for the long-haul, however, the outlook looks promising.”
Some of the most promising deals in New York City can be found in Brooklyn, the Daily Telegraph reported on Oct. 27. Brownstones in Brooklyn neighborhoods are not only more affordable, they appeal to British “sensibilities.”
“With their ornate cornices and tall sash windows, they resemble the type of period townhouse which British buyers might covet in London or Bath,” reporter Mark Martin wrote. “It is easy to see why many an English expat would prefer living here to being filed away in the vast anonymous ziggurat that is a typical Manhattan apartment block.”
And the values of Brooklyn’s property should only increase in the coming years, thanks to a waterfront development “which will include a stretch of parkland to rival any in the city, while to the east of Boerum Hill a copse of high-rises called Atlantic Yards is going up … The scale of these projects is so great that some analysts predict that this region of Brooklyn will become a second Manhattan, giving prices a further boost,” Martin wrote.
That same unbridled optimism was echoed just north of Manhattan in Canada. Like the pound, the Canadian “loonie” continues to rise in value against the dollar, and newspaper articles have encouraged Canadians to head south and buy more than iPods and designer jeans.
A July 7 article in Canada’s Financial Post pointed out that New York City real estate is an even bigger bargain than people think, thanks to the depreciating dollar. “The latest cost-of-living survey by Mercer Human Resource Consulting found that New York is the 15th most expensive city in the world (it was 10th last year). Mercer’s quality-of-living survey, however, ranked the city 48th overall and 77th in terms of health and sanitation.”
New York City’s high-end residential properties aren’t the only bargains to be found these days. An article in the International Herald Tribune on Dec. 12 said that groups of Irish, Italian, Spanish, German, Australian and Asian investment groups are “trophy hunting” for landmark commercial buildings in Manhattan such as the Chrysler Building, the Seagram Building and Lever House.
“Hardly a week goes when you don’t see a new offshore investment group coming into the market,” Dan Fasulo, managing director of Real Capital Analytics, was quoted as saying. “Any trophy office building that comes up for sale, you’re going to get offshore inquiries. With the global cash boom, there aren’t enough assets to go around.”