Matrix Blog

I’m not saying the US isn’t seeing an uptick in buyers from China, especially housing markets such as Manhattan. After all, there is a global trend where money is chasing stability and safety. US real estate has been a key beneficiary of this trend.

However it is important to realize that there is no US data from independent sources that links overseas nationalities with residential real estate purchases. Why?…because of long time concerns in the US about fair housing laws and by extension, the gray area of tracking nationalities to housing purchases although it is the norm outside the US.

When any housing trend is discussed, it is important to understand where the source of the trend came from. I’d really like housing market followers to appreciate that the trend analysis on the foreign buyer subject bantered in the media as of late is literally based on nothing. There has been an outpouring of coverage of the topic over the past few months, but the sourcing is only from real estate brokerage anecdotes because that is all there is for reporters to work with. I was interviewed for some of the following articles but disagreed with the general story premise, and I assume that is why my view wasn’t inserted.

Whichever stance you take on this particular trend – that Russians used to dominate the Manhattan housing market and how the Chinese have taken their place at the top – there really is no wrong answer, because there are no facts. All sourcing on the topic to make that point are from real estate agents referring to their opinion, often based on their past few transactions.

Russia
I first noticed this new new storyline when Russia invaded Crimea. Would the Russian position as the number 1 foreign buyer of real estate in Manhattan now go away? The brokerage community, or at least a couple of real estate agents claimed this to be the case.

I have no evidence to the contrary even though there are huge capital outflows from Russia that began with the Russian invasion of Crimea. In my view, the real estate agents were confused by the high profile sales by Russian buyers (think of Russian Oligarch buying 15 Central Park west for $88M) and perhaps has some direct feedback in some of their own transactions. However I don’t think Russians were ever the top homebuyers in Manhattan, just the highest profile.

If we have learned anything from the current Manhattan new development boom, it is the fact that high profile, high end transactions are not a proxy for the balance of the market much like a handful of high profile Russian purchases are not a proxy for some sort of Russian real estate dominance.

Manhattan Real Estate Feels a Russian Chill [NYTimes]

China
Now that the Russians are “out” (see previous) of the top spot, that must mean that the Chinese are “in.” Check out the headlines to this storyline although much of these articles build on the Reuters piece (linked below) which is based on real estate agent anecdotes. A slew of brokerage PR driven stories on the Chinese are now dominating the real estate headlines in New York City.

Perhaps this uptick as something to do with recent closings at well published Chinese buyer favorites like One57 and perhaps the fact that China is poised to become the world’s number 1 economy.

NY real estate firms woo Chinese buyers [China Daily] The Chinese take Manhattan: replace Russians as top apartment buyers [Reuters]

U.S.CHINA’S RICH BECOME BIGGEST FOREIGN APARTMENT-BUYERS IN MANHATTAN [Al Jazeera]

Who are the dominating the foreign buyers of Manhattan real estate?
Anecdotally I think it remains Canadians but is dominated by Europe (UK, France, Germany, Italy, Spain, Ireland, etc combined) because they are still the largest tourism group. Brazil doesn’t get enough respect since they are the 3rd highest source of tourism to NYC. This list is 2 years old but I doubt China has passed Europe or even come close but this is, shall I say, “anecdotal.”

From NYC & CO., here are New York City’s top international sources (2012 figures):

1. Canada 1,063,000
2. United Kingdom 1,033,000
3. Brazil 806,000
4. France 667,000
5. Germany 605,000
6. Australia 595,000
7. PR China (excl. Hong Kong) 541,000
8. All Middle East (incl. Israel) 478,000
9. Italy 449,000
10. Mexico 387,000
11. Eastern Europe 384,0000
12. Spain 380,000
13. Japan 328,000
14. South Korea 281,000
15. Argentina 272,000
16. Ireland 224,000
17. India 215,000
18. Israel 203,000
19. Netherlands 203,000
20. Sweden 190,000

Tags: Canada, Russia, China, Brazil

Comments Off on Stories on Chinese Overtaking Russian Home Buyers in Manhattan is Purely Anecdotal

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Where we’ve been

Knight Frank’s Global House Price Index is published quarterly and tracks the performance of mainstream national housing markets around the world. They use Case Shiller results for the US market.

Europe at bottom:

With the Eurozone now in its second recession in three years buyer confidence is at an all-time low and it is no coincidence that all the bottom 12 rankings are occupied by European countries this quarter.

The top performers:

But it’s not all bad news. Six markets recorded double-digit annual price growth in the year to September; Brazil, Hong Kong, Turkey, Russia, Colombia and Austria.

Where we’re going

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I help provide their Manhattan and Miami insights and they liked the way I characterize the state of luxury housing as a “safe-haven” and the “new international currency.” Here are the top line observations in their Q4 12 Prime Global Forecast:

• In 2013, we expect prime residential prices across the 14 cities included in our forecast to rise by 2.5% on average, with Moscow, Miami and Dubai being the strongest performers.
• A sharp slowdown in the global economy is the highest risk for the world’s prime residential markets closely followed by government cooling measures.
• However, the current economic uncertainty is also considered a key driver of demand in prime cities as HNWIs seek the shelter of ‘safe-haven’ investments.
• Supply, or the lack of it, will be a key determinant of price performance in cities such as New York, Moscow and Miami in 2013.
• We envisage that government-imposed regulatory measures will keep a lid on price growth in Asia in 2013 but the west-east shift in the economic balance of power suggests more promising prospects in the medium term.

Q3 12 Global House Price Index [Knight Frank]
Q4 12 Prime Global Forecast [Knight Frank]

Tags: Europe, Case-Shiller, Brazil

Comments Off on [Knight Frank] Global Reports That Look Forward and Backward : Europe As Denominator

No surprises here. Knight Frank’s Global Home Price Index comprehensive ranking of housing price changes in 55 countries showed Brazil and it’s economic boom at the top of the list. The Brazilians have jump started the Miami housing market nearly single handedly because housing prices at home remain so high that the US appears much cheaper.

Highlights

• The index rose 1% year-over-year
• European countries fill bottom twelve rankings for YOY price growth
• Price growth in Asia Pacific is slowing

Global House Price Index 3Q12 [Knight Frank]

Tags: Europe, Brazil, Greece

Comments Off on Knight Frank GHPI 3Q12 – Brazil up 15.2%, Greece down 11.7% YOY

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Our friends across the pond at Knight Frank just released their Q3 2012 Prime Global Cities Index which our firm and Douglas Elliman in NYC and Miami contribute content to.

Miami was #3 after Dubai although that placement was exagerated by the drop in distressed sales in south Florida (and they will rise going forward). Still, Miami has come a long way in 2 years. Manhattan showed decline but most of that was attributable to the shift in mix to entry level sales as mortgage rates continue to fall to new record lows. However it’s quite interesting to look at Manhattan as more mundane a market than the super-luxury segment would suggest. Further proof that the top end is not a proxy for everything else.

Cities such as Dubai, Miami, Nairobi and London are increasingly considered investment hubs for HNWIs in their wider regions. In the wake of the Arab Spring, Dubai has been seen as a relative safe haven for MENA buyers while Venezuelan and Brazilian investors have looked to Miami to limit their exposure to domestic political and economic volatility.

HNWI = High Net Worth Individual

Here’s KF’s top line overview:

-Fifteen of the 26 cities tracked by the Prime Global Cities Index (58%) recorded flat or positive price growth in the year to September, but over the last quarter 20 of the 26 cities (77%) have seen flat or positive growth – indicating an improving scenario.
-The index now stands 18.7% above its financial crisis low in Q2 2009 with Hong Kong, London and Beijing having been the strongest performers over this period, recording price growth of 52.9%, 45.4% and 39.5% respectively.
-Five cities recorded double-digit price growth in the year to September; Jakarta, Dubai, Miami, Nairobi and London – a city from each of the five key world regions.

Q3 2012 Prime Global Cities Index [Knight Frank]
The Elliman Report: 3Q 2012 Manhattan Sales [Prudential Douglas Elliman]
The Elliman Report: 3Q 2012 Miami Sales [Douglas Elliman]

Tags: Prime Global Cities Index, London, Brazil

Comments Off on [Knight Frank] Economic Uncertainty Pushes Price of Luxury Bricks and Mortar Higher

There is a 9.5 foot wide townhouse in Manhattan at 75 1/2 Bedford Street, that is supposedly the narrowest.

The townhouse with the smallest width I have inspected was 12 feet wide and that seemed pretty tight. Figuring about 1 foot for wall thickness on either side in the house I inspected, the occupant is left with 10 feet to move around in.

Here’s the kicker. A 1 meter wide house in Brazil (2 meters wide in the rear). Claustraphobia comes to mind and a firetrap.

….and a narrow house in Seattle, WA San Francisco, CA.

Tags: Brazil

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