They’re Making Lowball Offers
A report from the Real Deal on New York. “When real estate agent Geovanna Lim’s client went into contract on a $3 million new development condominium in Midtown Manhattan more than two years ago, the pad was an easy get for the Chinese national. He agreed to put $300,000 down and even decided against a mortgage contingency. But late last year, when the developer obtained a temporary certificate of occupancy and began closings, Lim’s client entered crisis mode. Faced with China’s strict new capital controls — which took effect Jan. 1 — the buyer scrambled to find a way to move $2.7 million out of mainland China and into the U.S. in order to pay for the apartment in full.”
“After successfully stalling for a few weeks, the period around Chinese New Year was spent doing everything possible to line up a hard-money loan, according to Lim, a broker and founder of Park Avenue International Partners. ‘He didn’t have time to get his money out,’ she lamented. ‘We signed a no-mortgage contingency contract. We didn’t know we’d need financing two years later.’”
“Designed to curb the massive amount of Chinese investment abroad, the Chinese government’s rule is changing the way investors are looking at New York City real estate — long seen as a safety deposit box for investors from around the world. Some investors, fearful that the Trump administration’s foreign policy could further depress their economic prospects at home, are more eager than ever to safeguard their money in U.S. real estate. ‘Their factories are going to have a slowdown because of the threat of tariffs, so they’re determined to come to the U.S. and establish [a business] here,’ Lim said.”
“Sotheby’s International Realty’s Nikki Field said she’s still seeing high-end buyers — but even ultra-wealthy Chinese clients are focused on value. ‘They identify that our market has softened and they’re looking for good value, strong opportunity and immediate returns,’ she told The Real Deal this fall. Attorney Edward Mermelstein, a partner at Rheem Bell & Mermelstein, agreed. ‘They tend to be much more value-driven and opportunistic, so if they’re not seeing a great deal, they’re heading in a different direction,’ he said. ‘They’re making lowball offers.’”
From Forbes. “When Ivanka Trump purchased her home at Trump Park Avenue in Manhattan back in 2004, the real estate market in Manhattan was soaring. Home prices were rising and demand at the top end of the market far outstripped supply. Now, as the daughter of President Trump lists that same home for sale this month for $4.1m, she is finding a Manhattan real estate landscape marked by softening sales and shrinking demand. The falloff is particularly acute at the very high end where a glut of expensive condominiums has flooded the Manhattan market hindering demand for top-tier properties.”
“The slowdown is unleashing a chorus of doomsday talk among usually bullish real estate professionals in the city and sparking discussion of a correction not seen since the property crash of 2008. Bidding wars for luxury properties are less frequent and fewer open houses have lines around the block, brokers report. Shrinking bank bonuses are further dampening demand.”
“‘No one is predicting an all-out crash,’ says Donna Olshan, president of Olshan Realty. ‘But a number of factors clearly show that the top of the market is contracting.’”
The New York Times. “In December 2016, median rents for one-bedroom apartments decreased in eight of the 10 most expensive American markets, compared with the same month a year earlier, according to Zumper. The decrease in New York City was by far the biggest, at 9.1 percent.”
From Press Connects. “Developers, faced with an undergraduate student body no longer increasing in size and a development rate that may have outpaced that growth, are now wondering what will happen to the luxury living spaces they’ve already built. With five major student housing developments in downtown Binghamton, 710 beds at U-Club, and 562 beds soon to come from the townhouse expansion there, developers worry they’ve surpassed the market’s saturation point.”
“‘At this point, we probably have overbuilt,’ said Ron Kutas, a co-developer of the Chenango Place student housing development. ‘Not probably — we have.’”
“‘At the beginning, there was absolutely higher demand than there was supply. The developers … had a lot of experience in the local market. And then came kind of the rush for everybody else,’ said Kutas, a former BU student. ‘The city and … county … need to look at the long-term vision for the city. Because overbuilding, while it could create short-term economic benefits, could have some (significant) long-term economic effects.’”
“Among the long-term effects he worries about: vacancies; developments struggling to stay open; and, if some of them close, a hit to the city and county’s tax base.”
