How the Big Apple stacks up against other global gateway cities for international investors
New York City real estate is never short of mantras and catch phrases, but few have taken hold of the industry’s collective mind like “safe haven.” Seemingly no conference, panel discussion or research report can do without these two words. The notion that the New York market is a “safe haven” for foreign investors fleeing economic turmoil has become a guiding ideology for developers, investors and brokers from the Bronx to the Battery. Regardless of whether that claim actually has merit, it’s based on an undeniable trend: the significant growth in foreign investment in the Big Apple’s real estate market in recent years. And, many of these new investors are drawn here by the city’s comparatively stable prices, relative liquidity and easy accessibility. But what the true believers often fail to mention is that New York isn’t the world’s only “safe haven.” For today’s investors, the choice is no longer between buying in Midtown or Lower Manhattan. It’s often a choice to invest in one of a handful of global urban powerhouse cities, particularly New York, London and Hong Kong, but also Singapore, Paris and other so-called gateway cities around the globe. And like New York, many of these cities have seen an influx of foreign capital since the 2008 worldwide economic crisis. This month, The Real Deal stacked New York up against these other megacities in several key real estate investment areas, including luxury residential purchases, commercial trophy properties, retail investments and taxes. The goal was to figure out why investors would choose, or bypass, New York when deciding where to park their cash.
The gap widens
Real estate in gateway cities has always sold at a premium, but in the last decade, the gap between top-tier cities and the rest of the world has widened considerably.
In London, the average price per square foot for luxury apartments has more than doubled since 2006. And in New York, prices are up by more than 50 percent in that same time, according to data from the UK-based brokerage Knight Frank. And that’s all despite the financial crisis.
On the flip side, the S&P/Case-Shiller Index, which measures home prices across the United States, is slightly below its 2006 level, while its U.K. equivalent has just barely risen.
As the gap has widened between these top global cities and the rest of the world, the competition between them has also grown fiercer. Indeed, for many serious investors, evaluating decisions on where to buy property often involves pitting these cities against each other.
And it’s not just megacities like New York, Hong Kong or London. Leonard Steinberg, president of the Manhattan-based brokerage Compass, said “other centers beside those” also draw interest.
Last month, during a panel discussion hosted by TRD in Shanghai, industry experts cited six U.S. cities — New York, San Francisco, Los Angeles, Boston, Washington, D.C., and Chicago — in the top 10 for Chinese real estate investment globally.
