WHY THE REAL ESTATE IN NY IS NOT GOING VERY WELL?

Getting the opportunity to do an internship in an Italian Real Estate in Manhattan, New York, during my master program about MIB (Master of International Business) at Hult International Business School, in Cambridge, MA, I could start to understand how New York, especially regarding the Real Estate Market, is actually working.

Well, I feel that most of you would be convinced that this place is a perfect market and thus, a perfect location to work with a lot of opportunities. In other words, everything would go very well.

Of course, I can claim that New York is really dynamic and at the same time, there are a lot of opportunities because most significant companies have their offices in this place, especially in Manhattan. However, let me say one thing! Maybe you would not believe me! But I try to explain to you not only with words but also with my personal analytical analysis. New York is not spending the best moment and right now it’s in trouble basically regarding the Real Estate Market. Indeed, nobody is buying, nobody is selling and nobody is investing in an apartment, especially in Manhattan. Consequently, most brokers are in a serious difficulty because there are few opportunities to sell just a simple apartment. So, why this is actually happening and why in last years this kind of market had not any particular issue? To answer these questions, I right now answer all your doubts by my own analysis.

As you can see I decided to take into consideration some of the apartments, all of them Condo as the type of Building, in Manhattan, exactly in NoMad Area. The Common Charges, in annual terms, are not high. Indeed, its average price is less than $2,000. Despite this, just taking care of the RETAX (Real Estate Taxes) is significantly expensive, which an average people spend monthly $2,315 in this specific area of Manhattan. However, the main reason for this market’s issue in New York is the House’s Price.

As you can already see, I converted square foot (ft²) into square meters (mq) and thus, I then converted dollars into euros. This not only to make easier this analysis but also to let all European, especially Italian like me, to understand better this analytical research. Firstly, you must understand that each square foot corresponds 10 square meters. That’s why I divided each square foot by 10. Moreover, be careful about the currency between euro and dollar. When I did this analysis, that currency was at around 1.16. While right now it’s at around 1.15 and in this last period was more or less at around 1.14. Well reporting all these information with basic statistical calculation, it would possible to see that the unit price, $/ft², of this area of New York, is equal to $2,150.25 and thus, with square meters the average unit price ($/mq) is more than $20,000, which is exactly equal to $21,502.48. So, in euro and square meters terms (€/mq), the unit price is an average equal to €14,334.99.

Consequently, as you can understand, the price is really too much! A good example of it, a Condo located at 277 Fifth Avenue with just 2 beds and 2 baths, which its size is 1434 ft², thus, cosponsoring 143 mq, the price market is $3,960,000!!! And so, in according to these considerations, it’s equivalent to €3,208,695.65!! Therefore, $25,484,.34 per each square meter and so almost 20,000 euros as the unit price. And all of this after only 69 days of Market!! Crazy? Yes definitively!!

To summarize, what’s happening?

The answer about that is very simple! During all this time American Building Development built a lot of houses, especially Condos and thus, a lot of Skyscrapers in New York, especially in Manhattan. So, right now there is not any relevant space to invest in new Buildings. Therefore, they are moving significantly in Brooklyn with more space. This is one of the reasons which the price continues to rise. Other observations: all of these houses are built to guarantee the rebuilding after several years. This because in the US it’s considered important to finish early constructions but without monitoring significantly the quality. Therefore, after relevant years the price keeps high without going down and at the same time, investors cannot see their returns declining. That’s why many investors, especially European, are planning to invest in this sector in other countries or just going back to their local countries.

For sure, the US system must be ca about this situation in NY and it should adjust Houses’ Market Prices because with this amazing and concern level price the New York, the Economy regarding the Real Estate will keep inflexible and most subjects as brokers and investors will be in dramatic conditions and thus all the Real Estate in New York will suffer a lot. So, in my personal opinion, they would reduce prices and starting to reduce prices and restrictions to let this kind of Market move the Economy.