A recent article in the Financial Times revealed what may or may not be an inadvertent bias on the part of the London-based publication comparing premium real estate values between London, New York and Hong Kong. The article suggests that London is probably the best value for the high net worth real estate investor dollar, given a broad range of considerations from tax burden to price and a host of others. Citing an exclusive report viewed by the FT, their assessment finds despite the high prices of London properties, Hong Kong is even pricier; and while NYC’s prices may be lower, they’re offset by the city’s higher tax burden.
Speaking with clients who have (or have had) properties in these three cities, I found that the consensus was all were pretty comparable in terms of key amenities and requirements sought after by real estate investors. Close proximity to world trade and banking centers? New York, London and Hong Kong all get a check mark. World-class nightlife, cultural outlets and accessibility? Check! Marquis properties with global cachet? Each burgh has it in spades. So what it all really comes down to, as is the case with nearly all types of investments, is the potential for change in valuations in the future.
At the risk of appearing biased, I contend that New York City offers the best premium real estate investment opportunity now and in the foreseeable future. Here’s why:
New York real estate is not subject to the kind of governmental intrusion facing both London and Hong Kong. London’s mayor is proposing to increase taxes by as much as ten times on homes bought as investments that sit empty, while Hong Kong’s real estate market has been artificially cooled by the Chinese government’s legislative efforts to avoid a speculative bubble. Never mind the complexities of English land law the Economist explains in this article. The downright depressive effects of China’s policy are covered in-depth, in a South China Morning Post article predicting a “perfect storm” for the Hong Kong market.
New York enjoys a laissez faire capitalism and while the taxes may be higher than London or Hong Kong, NYC still has the greatest growth prospects. Investors I’ve spoken to are bullish on New York because of promising macroeconomic factors including a housing shortage caused by the City’s fast rising population and a sharply increasing hiring rate compared to other metropolitan areas over the last few years. Add to that a wave of projects designed to appeal to ultra-wealthy buyers; a surge of visas issued to Chinese developers fleeing the weakened markets in their overheated homeland; and the resiliency demonstrated by Manhattan’s real estate market during and after the 2008 recession—the NYC advantage becomes obvious. New York City seems to be poised to deliver ongoing ROI and growth, while its other two rivals appear to be losing steam.