Did you know that the island of Manhattan, whose current land value is estimated at $1.4 trillion, was first purchased for $24?
You read that right — just $24.
The long and rich history of New York City’s real estate market begins in 1609 with its first European settlement. In 1626, the Dutch purchased the island of Manhattan, then known to the Dutch as New Amsterdam, from the indigenous Lenape tribe for 60 guilders’ worth of beads and buttons — famously estimated at about $24 in modern currency.
While something may have been lost in translation between the Dutch and the Lenape about owning land versus owning the right to use the land’s resources, both parties were satisfied with the deal.
At the time, Venetian glass beads were as rare and valuable as today’s diamonds, especially in the New World. And what’s more, the land of Manhattan was granite bedrock surrounded by salt marsh — making it largely unsuitable for farming or living.
So how did the land of New York City go from a group of unwanted islands to one of the most valuable real estate markets in the world?
For that, we must jump ahead to the 1900s.
Manhattan in the 1900s
While New York City underwent major developments in the 300 years between European settlement and World War I, it was the early 1900s that saw Manhattan’s major surge in demand for housing.
In the 30 years before, Upper Manhattan had transitioned from farmland and single-family houses to population-dense tenements and apartment buildings. With its population peaking at 2.3 million in 1910, the average price per square foot of a Manhattan apartment was $8 and average rent about $40 a month.
At the same time, a demand for office space as America’s expanding workforce shifted from industry and agriculture to white-collar work led to a wave of skyscraper construction across the city.
In the roaring twenties, development in New York City pressed eastward. By 1929, Douglas L. Elliman & Co., Inc. reported that prices along Park Avenue had risen by 44%.
Like every other major U.S. city, New York City struggled during the Great Depression. But unlike other cities, New York City bounced back faster — by the mid-1930s, the rental market was already beginning to improve and there was a 22% increase in leases on the East Side.
In the 1940s, New York City faced a housing shortage as soldiers returned home from World War II. This drove a housing boom that pushed the price per square foot of New York City apartments to $12 and rent to $60 per month in the 1950s.
In the 1960s, apartment sale prices doubled and rent leapt up to $200 per month with a zoning resolution and the construction of the first condo building. Sale and rent prices continued to rise through the next two decades — at a dramatic rate. By 1980, both sale and rent prices had increased by over 400%.
The next twenty years saw apartment sale prices doubling once again, until the events of 9/11 in 2001 shocked the world. Despite this tragedy, the housing market took less than two months to restart, and New York City entered one of the greatest periods of growth in modern times.
Which brings us to today — across Manhattan in 2018, prices were up by 0.6%, new leases increased by 5.2%, and marketing time decreased by 15 days on average.
And that’s just Manhattan — in Brooklyn’s Brownsville neighborhood, gross rental yields for 2015 pushed as high as $124,378, and in Fort Greene in 2017, average sales prices increased by a stunning 67%.
So what is it that makes New York City’s real estate so consistently valuable?
The scarcity effect in action
The scarcity effect theorizes that limited availability enhances the value and desirability of any commodity.
Researchers studying supply and demand have determined that when a commodity, such as the cookies used for their experiment, were made scarce instead of abundant, their test subjects perceived the cookies to be more valuable and therefore in greater demand.
Real estate in New York City is the perfect example of the scarcity effect in action. New York City is a group of islands — this means buildings can only be built out so far before they have to go up, and their height is also determined by feats of engineering and zoning laws.
The very land of New York City limits its real estate, which makes it both scarce and consistently in demand.
It’s this scarcity effect that has driven the land value in New York City to record-breaking amounts and will continue to make New York City one of the highest-yield real estate markets in the world.
Real estate will never be the same
New York City Real Estate Coin (NYCREC) is starting a new chapter in the rich history of real estate in New York City.
To be a part of this incredible investment opportunity, you don’t need Renaissance-era glass beads and you don’t need millions of dollars. Just join our Telegram group to learn more.
