While New York City is almost always a good luxury real estate investment bet, real estate investment expert Marco Kozlwoski recommends investors jump into the New York City market now more than ever. Increasing interest from Chinese investors and easy funding from foreign banks, coupled with low supply and high demand, make NYC a guaranteed success.
New York City real estate often comes with steeper up-front costs than most areas of the country. However foreign banks interested in profiting from foreign luxury real estate, such as the Bank of China and the United Overseas Bank in Singapore are offering record low interest rates – rates as low as 2.5%. Most US banks will not offer interest rates that are any lower than 5%. Other foreign banks financing luxury real estate development in NYC include The Children’s Investment Fund from the UK and its affiliate Talos Capital Limited.
Beyond lower interest rates, foreign banks tend to be less restrictive than domestic banks. Most banks in the US will try to syndicate big loans to ease the risk of their investment. This complicates matters for developers if they ever want to renegotiate their loan. Foreign banks tend to keep the loans completely in-house, making renegotiation simple and easy. Also the crash of 2008 killed investor trust in US banks so many investors are turning to foreign banks for a stronger sense of security.
Investors should make their move on the luxury NYC real estate market quickly because Chinese interest in NYC properties is at an all-time high and is still growing. 2014 already showed record interest from Chinese investors. Recently Chinese investors were given more leniency to make foreign investments. Chinese Insurance groups alone are estimated at having over $1.6 trillion worth of assets to use for making investments. American investors who jump into the market early can capitalize on the Chinese interest, as well as the upcoming drop in supply. Bob Knakal of Cushman and Wakefield estimates that Chinese investors will be putting in at least $50 billion to the NYC market within the next couple of years.
Some critics fear that this push of Chinese interest will be similar to the early 90’s Japanese investing rush. In that instance, prices sky rocketed and then the market collapsed. However, the Japanese investors came into the market with debt that ended up not being supportable by the market. The Chinese investors are making purchases with cash. For example, Chinese company Anbang Insurance recently was able to purchase the historical Waldorf Astoria for $1.95 billion in cash. This means the Chinese will not be trying to drive up prices in an effort to cover interest fees. They can instead keep prices as they are and simply reap the already profitable market.