Monday, December 8, 2014

Manhattan, New York property investment performance

Manhattan, New York property has always been a destination for foreign buyers because of the associated brand recognition and for the price stability.  Top reasons cited by our foreign investor clients buying apartments in Manhattan include investment diversification, stable appreciation, brand recognition and limited supply.

The media likes to talk about $10 million to $50 million Manhattan apartments because of sensationalism.  In reality, 85 percent of transactions in Manhattan are for apartments priced less than $5 million.  Still, the median Manhattan condominium price at $1.3 million is about seven times (7x) the median US house price.  The average price per square foot of a Manhattan condo was $1,500 in 3Q'2014.

It is interesting that financially-focused media such as The Wall Street Journal and CNBC, while updating about prices of Manhattan property every quarter, seldom describe the investment performance of Manhattan property.  Understandably, given the high price entry level of a Manhattan condominium, the audience is very limited.  As example, a studio condo starts at $600K, a 1 bedroom ranges from $800K to $2 million, a 2 bedroom ranges from $2 million to $5 million.

Investment performance of a Manhattan property exceeded performance of the Dow Jones Industrial Average by 5X as I had written in Annual Return of Manhattan Property vs Dow for some time ago.  We often mention to investor clients that historical appreciation of Manhattan property has been around 10 percent and this is net of the 2009 downturn.  With leverage, common with property purchases through mortgage financing, the return on equity could be anywhere from 20 percent to 40 percent depending on the amount of leverage used.  This in turn, depends on the cost of funds clients are able to get and the cost of funds could be especially low to clients of private banks who have extensive relationships with their bank.

Unlike emerging markets in Asia, investors should not expect property prices here to appreciate 20 percent or more per year.  But since this is a stable, low volatility market, prices should not come down that much either.  As example, during the recession of 2009, while the rest of the US property market came down by 35 percent, the Manhattan market only declined 15 percent.

Manhattan property is a long term strategy and not a quick flip which would be better suited for a more volatile emerging market.  For clients interested in holding for 5 years or more, the Manhattan, New York market presents a good, low risk diversification alternative with considerable returns.

Editor's note:  This blog has been updated, originally posted May 23, 2012.

Wei Min Tan is a Manhattan, New York condominium specialist focusing on investors and foreign buyers.  He is often interviewed by top media including CNBC, CNN and New York Times.  Wei Min can be reached at  

Wei Min's website - Manhattan, New York investment property specialist

Foreign Buyer Guide to New York Property

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