Despite apprehensions that rising interest rate rises, the collapse of Silicon Valley Bank and fears of a recession will temper buyer sentiment, the unsettled financial and economic environment may actually favour prime property in tier one cities such as New York, and luxury property prices are forecast to increase by 2 percent in 2023, Knight Frank’s New York Market Insight report has said.
Sales rates remain robust. Over 14,500 properties changed hands in Manhattan in 2022, 23 percent above 2019’s pre-pandemic levels, and the city as a whole posted 244 sales above $10 million, more than any other global city in 2022, showed the KF Q2 2023 analysis which is an assessment of current conditions in New York’s luxury residential market including a round-up of the latest data and trends. The report added that with cash buyers accounting for 80 percent of new home purchases in Manhattan, the market is better insulated from rate hikes.
In Mumbai, on the other hand, there was a 46 percent year-on-year growth in high-end property sales. This was for properties priced more than Rs 10 crore, a benchmark for Mumbai’s top 1 percent in value terms and comparable to the top tier of Manhattan’s housing market. “The high-end market in Mumbai is doing extremely well at this juncture and 2022 performance surpassed even that witnessed during the golden period of stamp duty cut window during 2020,” said Vivek Rathi, director, research, Knight Frank India.
Education is the motivation behind 8 percent of all prime property purchases globally, according to Knight Frank’s HNW Pulse Survey. Home to over 200 colleges, including two Ivy League universities, Columbia and Cornell, New York is an academic heavyweight. The city accounts for 12 percent of all international students studying in the US. Over 40 percent of the international students in New York State originate from the Chinese mainland, a figure that falls to 31 percent nationally. Indian, South Korean, Canadian and Taiwanese students complete the top five.
“The reasons for luxury housing in global cities range from education, lifestyle, and culture to political and economic environment. In context to the education factor in New York, it is the parents of such students who are financially able to afford such prime housing,” said Vivek Rathi- Director Research, Knight Frank India.
Manhattan’s luxury market is on a firm footing. While the S&P 500 fell 19 percent in 2022, and estimates suggest crypto plummeted 50 percent, luxury homes in New York registered 2.7 percent average growth, despite the Federal Reserve embarking on its fastest pace of rate hikes since the 1980s, the report noted.
According to Miller Samuel, a leading real estate appraisal and consulting firm, the average price of a luxury Manhattan home stood at $1,948,603 at the end of 2021, a 2.7 percent increase that equates to an average uplift of $52,612 in 2022. Knight Frank forecasts 2 percent growth in 2023, higher than the city’s 10-year average performance of 1.1 percent.
Safe haven inbound capital flight is evident in New York, not surprising given more UHNWIs or ultra-high net-worth individuals reside there than in any other global city. Data from The Wealth Report 2023 confirms 37 percent of wealthy individuals in the US are prioritising capital preservation, higher than the global average of 26 percent.
Although the 30-year mortgage rate has fallen from a peak of 7.32 percent in November 2022 to 7.08 percent in March 2023, it remains high compared to historic levels. Leveraged homeowners are opting to stay put rather than incur a significant jump in mortgage costs, leading to reduced inventory levels.
New York rents continue to climb
The rental market bounced back strongly following the pandemic. Luxury rents are up 49 percent since their pandemic low in Q1 2021, and increased 19 percent in 2022 alone. A lack of stock persists, leaving tenants opting for longer leases, the analysis said.
The number of properties available for rent in Manhattan has shrunk from a high of 41,516 in October 2020 to 14,148 in January 2023. Tenants are also looking to lock in for longer while mortgage costs remain elevated and rental stock constrained. Two-year leases as a proportion of all Manhattan leases have jumped from around 16 percent in February 2021 to 42 percent in January 2023, according to data from Miller Samuel.
At $10,995, Central Park South has the most expensive median rents. The fashionable neighbourhoods of Tribeca and Soho sit in second and third place with median asking rents of $9,500 and $6,395 per month respectively, it added.
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