The crisis behind it: Manhattan's real estate comeback

The empty streets, the closed entertainment and tourist sites and the Corona - all behind us.

One of Israelis' favorite housing markets has soared, with rental prices soaring by 25 percent in the past year.

And you thought Tel Aviv was problematic

Amit and Hagar Dror, guest column

19/06/2022

Sunday, 19 June 2022, 09:27

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After a challenging period in New York and Manhattan following the Corona, the empty streets and the closed entertainment and tourist sites, these days one of the most beloved housing markets for Israeli investors overseas is soaring to new heights.

This highlights the low correlation between the tradable capital market and the real estate market, where the low marketability becomes an advantage in such situations.

Against the background of the fact that 2022, until now is a difficult year for Wall Street investors.

The stock markets continue to decline sharply, but it is the real estate in Manhattan that records the best period in years, with the peninsula proving that it has managed to leave the corona crisis behind.

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Manhattan (Photo: ShutterStock)

This past weekend, a report by real estate companies Douglas Aliman and Miller Samuel stated that the median rent in Manhattan soared in May to an all-time high and crossed the $ 4,000 threshold for the first time.

This is an increase of 2% compared to the previous month and a cumulative jump of 25% in the last year.

The report also reveals that apartment prices in the popular district also set new records with an increase of 15% in April, compared to the same period last year, when the median price of an apartment was $ 1.4 million today. This follows a 19% increase in the first quarter These led to the opening of the best year ever, which skyrocketed the average price of an apartment on the peninsula to $ 2.4 million.

The reasons for the boom in the housing market in Manhattan in the past year

The returning residents and unprecedented discounts in the Corona:

During the Corona period the New York metropolitan area experienced significant negative immigration.

Between March 2020 and February 2021, the area experienced massive negative migration, which reached, according to the Melissa real estate platform, the dimensions of 160,000 single-family homes, more than any other metropolitan area in the U.S. and more than 12,000 apartments left empty.

With the restrictions lifted and the closures ended, New York and Manhattan began to recover and get back many residents who had moved to the city suburbs.

Those "returning residents" raised the demand for rent and brought it to record levels.

At the same time, the end of the significant discounts granted by apartment tenants at the time, also led to a jump in prices.

The residents who left return to the city - but not necessarily to the office.

According to the Cassel Real Estate Insurance Company, only 36.6% of New York office workers returned to work in the office as of early June. It is a significant factor that is pushing rents upwards. Indeed, those residents who work from home feel the need to invest more in their living conditions (including increasing living space) - and are willing to pay for it. Jonathan Miller, CEO of research firm Miller Samuel, says the phenomenon This suggests that the demand for housing in Manhattan stems not only from proximity to the workplace, as has been thought over the years.

"A lot of people want to work remotely, but from an apartment on the Upper East Side and not from the suburbs. They are drawn to the cultural possibilities that Manhattan opens up for them, to restaurants, to Broadway, and not necessarily to proximity to work."

Another factor accelerating the rise in rents is the rise in mortgage prices, which is apparently pushing some potential home buyers into the rental market, although Manhattan home buyers seem to be less sensitive to rising interest rates than their counterparts in other cities.

The reason: Many of them have

the means and manage to cope with the rise in mortgage prices not by giving up the purchase, but by financing the purchase with equity, when 47% of Manhattan real estate purchases in the first quarter were in cash.

A sharp drop in housing inventory. Castle Avenue, which accompanies foreign investors in Manhattan real estate investments, notes that the rental housing stock, which stood at 10,000 apartments at the end of 2020, fell to 5,000 housing units in early 2022. According to them, "this is still a market of sellers."

The number of apartments offered for sale also recorded a 5-year low and amounted to 6,

The low stock of apartments leads to world wars for every apartment that goes on the market (sounds familiar?).

According to a Fortune magazine reporter who recently documented his attempts to find an apartment for rent in the city, in one in five new leases signed in Manhattan in April, there was a price war between those interested in the apartment, with some offering to pay more than the desired rent to win.

According to real estate agency Douglas Aliman, which published these figures, tenants are leaving in these cases with an average rent 11% higher than they requested.

Good luck finding an apartment (Photo: ShutterStock)

Amit and Hagar Dror (Photo: Lior Goldsad)

The boom in the Manhattan housing market has not gone unnoticed by investors, and they are voting with their feet.

According to Ariel Properties Advisors, investor activity in the Manhattan housing market continued to grow in the first quarter of 2022, with 88 deals totaling $ 5.4 billion - a 676% increase over the same period last year.

What will happen next?

Despite the great uncertainty that characterizes the economic environment in the current period, at present all parameters seem to support the continued prosperity of the Manhattan housing market, at least for the coming year.

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