The New York real estate market is one of the most dynamic and attractive in the world. It attracts many investors, tenants and buyers each year, looking to take advantage of the diversity, wealth and influence of the city. But how is this market doing in 2023? What are the trends, opportunities and risks to consider?
According to data from the Laforêt network, the New York real estate market slowed down at the end of 2022, after several years of euphoria. Prices fell by 1.43%, remaining just above €10,000 per square metre on average. This decline can be explained by several factors: the sharply slowing US economy, the geopolitical situation in Europe, and the reduction in the number of foreign buyers. However, the market has balanced itself out and has not experienced a crisis, notes Michele Tecchia. On the contrary, it picked up in the spring of 2023, with an increase in transactions and prices.
The New York real estate market therefore remains a solid, stable and profitable market over the long term. It offers many investment opportunities, especially in new developments in up-and-coming areas such as Westchester and Connecticut, says Michele Tecchia. The rental market is also very buoyant, with prices having increased by 30% since last year. Buying in New York is therefore a long-term strategy, which allows you to realise a capital gain later on.
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Michele Tecchia explains the factors that influence the New York real estate market
The New York real estate market is influenced by several factors, such as the US economic situation, the geopolitical situation in Europe, taxation and interest rates.
The US economic situation has a direct impact on the New York real estate market, as it affects the purchasing power of potential buyers, investor confidence and the value of financial assets. In 2022, the US economy experienced a sharp downturn, with rising interest rates, soaring inflation and a depreciation in stock market values, particularly in the tech sector. These factors led to a decrease in the number of buyers in the New York market, but not to a decrease in prices, as the market balanced itself out.
The geopolitical situation in Europe also has an impact on the New York real estate market, as it influences demand from foreign buyers, who make up a large part of the New York market. In 2022, the fall of the euro and the war in Ukraine led to a decrease in the number of European buyers, who preferred to postpone or cancel their real estate projects across the Atlantic. In contrast, Asian and Middle Eastern buyers continued to invest in New York, attracted by the stability and resilience of the New York market, notes Michele Tecchia.
Tax and interest rates are factors that influence the cost and profitability of a real estate investment in New York. Taxation is relatively high in New York, with local and federal taxes reaching up to 50% of rental income. Interest rates are also a key factor, as they determine the cost of home loans and the level of savings. In 2022, interest rates rose in the US, making home loans more expensive and savings more attractive. These factors have acted as a disincentive to some buyers, but have also created opportunities for those with cash or looking to diversify their portfolios, explains Michele Tecchia.
Michele Tecchia compares the different types of properties to buy in New York
If you are considering buying a property in New York, you need to know the specifics of the New York real estate market, which is one of the most expensive and secure in the world. Depending on the type of property you are looking for, you will face different constraints and opportunities. Here is a comparison of the three main types of real estate in New York: condominiums, co-ops and townhouses.
Condos are apartment buildings where each owner has a share of the common areas proportional to the size of their flat, says Michele Tecchia. Condos are generally newer and more luxurious than co-ops, and offer more freedom to buy, rent and resell. You don’t need a board of directors’ approval to buy a condo, or to rent or resell it. This makes condos ideal if you want to make a rental investment or if you are looking for a place to stay while in New York. On the other hand, condos are also more expensive than co-ops: in 2019, the price per square metre in New York City was USD 14,106, about 10% more than co-ops.
Co-ops are buildings administered by a co-operative of owners: each owner owns shares in the co-operative society according to the size of their flat. Co-ops make up about 75% of New York’s housing stock, and are generally older buildings than condos, notes Michele Tecchia. Co-ops are more restrictive than condos: you’ll have to get board approval to buy a flat in a co-op, and there are strict rules about renting or having guests. In addition, you will have to pay additional fees related to the transaction, such as property transfer fees or lawyer’s fees. Co-ops are therefore best suited to those who are moving to New York for the long term, or who can show strong financial and personal credentials.
Townhouses are free-standing townhouses, which can be 3 to 4 stories high and offer plenty of space. Townhouses are rare in New York, and are usually located in residential areas such as Brooklyn or Harlem. Townhouses are very expensive: it can cost several million dollars to buy a house of this type. Townhouses are suitable for those who are looking for a quieter, more family-oriented living environment than in apartment buildings, and who have a large budget. Townhouses also have a high potential for appreciation, as they are very popular with wealthy buyers.