Brexit & New York Real Estate 2017
Can we be real about the situation in the United Kingdom? It does not look too good over there especially after the passage of Brexit, but that does not mean New York City real estate brokers cannot benefit from this new global phenomenon.
The United Kingdom made the unprecedented decision to leave the European Union. But this democratic decision had rather drastic results. As an immediate result, the global economy has seen the value of the British pound drop to new lows that have not been seen since 1985, the Dow Jones plummeted more than 500 points, and their prime minister, David Cameron, resigned.
Some believe that Brexit will have a positive impact on the real estate economy of the city, which is becoming a relatively stable place to store wealth.
Some believe that Brexit will have a positive impact on the real estate economy of the city, which is becoming a relatively stable place to store wealth.
Many economists and real estate brokers expect that there will be a small increase in the demand for an investment-grade real estate, the United Kingdom will survive and so will the European Union.
The political and economic climate will be different and there will be a period of adjustment. But what people are going to find eventually is that there will be less certainty. Consequently, if there is less certainty in the United Kingdom, then investing in New York City becomes that much more appealing.
Recently, Manhattan real estate lawyers and residential brokers were getting calls from international buyers looking to shift investments to New York City and leaving from London.
European markets are freefalling in the wake of Brexit. Britain's housing market is expected to take a hit. But we do not know how severe the blow will be or how long it will last.
Now might be the time for opportunistic real estate investors to get in while the market is low because it is the right time to buy in London.
London already is a global gateway city and competes for investment dollars with other cities such as Hong Kong, Monaco, and New York.
For New York City, this is a great thing since the luxury real estate market has already begun to see a softening and doubt is arising because of a possible slow down.
Luxury real estate representatives at Compass, Brown Harris Stevens, and Sotheby's International Realty also received phone calls before the U.K. voted. Many potential buyers worryingly predicted that real estate in London would drop 5 percent to 15 percent.
The United Kingdom is soon realizing that nothing is certain because of the free-flowing, political situation. Some Celtic Britons called for another vote and Scottish leaders were mobilizing to declare independence from the United Kingdom.
Days after the Brexit measure passed, Manhattan brokers who have cultivated relationships with international clients, spent a lot of time on the phone talking with them. European buyers are working to protect their assets now that London is no longer an economic option for them.
According to the global real estate consultancy firm, Knight Frank, around 2015 and 2016, London apartments sales prices rose. The average square foot was $4,480 compared to Manhattan's $2,568. And while prices had been rising faster in New York, some would argue it is because of the uncertainties in London, especially with the possibility of a mansion tax.
In 2014, Manhattan's luxury prices increased by 18.8 percent while London's prices grew by a mere 5.1 percent. All in all, the vote on Brexit will establish a time of uncertainty in the prime London residential market.
Top real estate analysts at NYU's Schack Institute of Real Estate said the Brexit vote completely changed the entire notion of London as a safe haven and analysts believe that other residential markets, besides New York, will feel the global impact.
International investors will begin to look closer at Manhattan as a core commercial market with renewed interest. While uncertainty is on the rise, this is the time investors are looking for capital preservation and not appreciation.
Brexit will not change the tempered attitude toward new development from banks or any other key fundamentals in New York. Those in the real estate profession believe that underwriting will remain conservative for new projects.
According to data and research executives at Douglas Elliman, if we assume that London's upheaval could boost gateway markets through America, then cities like New York should not worry. But, if the United Kingdom's exit from the European Union causes a critical global ripple effect, then all deals are off for Manhattan's success.
Some hope that New York, Miami, and Los Angeles will become more attractive even if prices in New York rise to the under-$4 million range. The luxury real estate brokerage firm, Engel & Volkers', predicts investors coming straight from the United Kingdom because if the British pound continues to go down, then buying in America is a great hedge.
