China’s recent currency devaluation had some real estate executives heralding a negative impact on New York real estate. But Joe Sitt isn’t having any of it.
“In terms of the 10 percent devaluation making it more expensive to buy in New York, I’ve got an answer: what if the ultimate devaluation of the Chinese Renminbi is actually 30 percent?” Sitt, the CEO of Thor Equities, said at at New York Multifamily Summit Wednesday.
Sitt argued that the recent devaluation of China’s currency could be a mere first step in a series of further devaluations aimed at making Chinese exports more competitive and revive the economy. This, in turn, could cause Chinese investors to rush into dollar-denominated New York real estate before their renminbi-denominated assets fall further in value.
“While macroeconomic and political instability may make it a little scarier for foreigners to invest in cities like New York, the smart ones may look at it as still early in the game of the uncertainty in their local markets,” he said, at the summit hosted by Eastern Consolidated.
The People’s Bank of China, the country’s central bank, began devaluing the renminbi in early August, making U.S. real estate more expensive for those earning an income in Chinese currency. At the time,Terence Tang of Colliers International’s Singapore office told The Real Deal the added cost could lead to a slowdown in Chinese demand for New York properties. Other observers argued, like Sitt, that the prospect of further devaluations might actually encourage Chinese investment in the U.S.
David Dollar, an economist at the Brookings Institution and former U.S. Treasury emissary to China, took a third view. He recently told TRD that the 2 percent devaluation itself will not have a big effect on Chinese investment in the U.S. “The question is where the currency goes from here,” he said. “There could start to be a devaluation trend but I do not think that is likely.”