This month I had the pleasure of spending time in the dynamic city of Hong Kong. My mission was to educate potential investors on the opportunity of investing in New York City real estate. Each meeting added another layer of insight into the multi-dimensional marketplace of Hong Kong and its players. I have an overwhelming respect for the city, its residents, and its financial strength.
Three discussion points were touched upon in every meeting; continued growth of the high new worth (HNW) class, the importance of brands and quality, and the strategy for luxury real estate acquisition. These points are relevant parallels to our marketplace as many Chinese investors are looking to buy in the New York City market. Traditionally, they would look first toward Canada, Hong Kong, Australia and London, but that’s all beginning to change.
Some current challenges facing Chinese buyers include:
–Hong Kong – The government has implemented a 20% stamp duty for all new purchases. Additionally, multiple property purchases are highly restricted.
–London – As of April 2015 the city will implement a 30% capital gains tax which will taper foreign investment.
–Canada – The government has restructured their visa system which cancelled 59,000 pending foreign visa’s. 70% of which where from non-citizen Chinese.
–Australia – The market is a bit inflated and foreigners who buy in new development cannot resale to other foreigners.
New York City has become the front-running alternative because we represent luxury, quality, and the city is an international brand. Many pundits make overstatements about the influx of foreign money in New York City. Well, they haven’t seen anything yet… Here is why New Yorkers need to prepare for the boom:
-Far less economic and political risk than other international marketplaces.
-NYC real estate is considered affordable compared to other wealthy global cities.
-Chinese see great upside in the market, as we are nearly 30-50% less expensive for our luxury real estate compared to London, Hong Kong, and Shanghai.
-The 1031 tax exchange program makes the market more appealing than ever before. This is because Chinese buyers plan to leave their money in the market.
-EB5-Visa Immigrant Investors (a method of obtaining a green card for foreign nationals who invest money in the United States).
These drivers will keep Chinese buyers investing heavily into the U.S. real estate market. The owners of new developments and the resale categories will benefit the most. The uptick in pricing, high absorption and low inventory are here for the foreseeable future. As most investors will pay cash, Chinese buyers are not speculating, they are strengthening the market. However, this will limit product for domestic consumers. For the domestic consumer and investment community, now is the time to get in on NYC real estate market.