While the Covid-19 pandemic does not seem to be slowing down, or resuming as a second wave depending on the location, there are many lessons to be learned, almost six months after the start of the first containment measures.
From a global perspective, real estate has reasserted itself as a safe haven at a time when economic activity is contracting and stock markets are fluctuating nervously, both as a source and consequence of notorious instability.
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As far as New York real estate is concerned, it is interesting to note, once again, the very strong resilience of this market, which has so far had only limited impact. Although historically there has been virtually no room for negotiation, in 2019 and early 2020 we saw the first signs of a “buyer’s market“, i.e. that it was (finally) possible to negotiate a little bit on asking prices, at a rate of a few percent depending on the neighborhood and the property. Since the second quarter, this trend has increased somewhat as demand has contracted in the wake of containment measures and restrictions on international travel. The fact that at the same time the inventory has also been reduced by around 30% (some people have taken advantage of the situation to withdraw their goods from the market in anticipation of better days) has tempered the increase in this margin for negotiation; we are now seeing price reductions of around 5% to 10% in the former.
On the other hand, it is a sector that is particularly affected by the effects of the pandemic, and especially by travel restrictions (especially international travel). These are new programs that are mostly targeted by buyers who do not live in New York, and/or rental investors. Moreover, these new programs have much more impactful scheduling and financing constraints than an individual owner, and they must “sell off their inventory” as quickly as possible in order to honor the commitments made to the various stakeholders, including financing and regulations.
It is on the strength of this observation and the recent negotiations conducted by BARNES New York with various developers, which revealed unprecedented commercial discounts, that we now recommend that wise investors take a close look at this real estate sector. Although this varies by project, inventory and neighborhood, we are relatively confident that we will achieve negotiation targets that go even beyond 15%. In some places, our clients have even been fortunate enough to exceed 25% cumulative discount (price and closing fee concessions). While the New York real estate market has historically, and on many occasions, demonstrated its strong resilience and ability to absorb various economic shocks, the exceptional discounts currently granted (until the health and economic situation in the world normalizes) should translate into as many gains in value in the short to medium term.
Do not hesitate to contact us now so that we can present you with the most relevant options today; as well as to pre-register for the next webinar we will be holding on this topic in the coming weeks.
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Last but not least, which mainly concerns residents more than investors (although), the containment measures and the risks incurred in high-density areas have favoured a significant growth of the residential real estate market in the inner suburbs. Any property located less than an hour’s drive from Manhattan, in a lower density area, with a stock of single-family homes and a satisfactory school offer, has seen its appreciation increase considerably since the beginning of the year. It is still uncertain at this stage what the long-term effect of such an exodus will be: is it for secondary use (weekends, holidays) or for permanent settlement? In any case, “suburbia” has a bright future ahead of it, and this could be more sustainable than the pandemic. With this in mind, BARNES New York is preparing to open an agency in Westchester, as close as possible to the French-speaking communities of Larchmont and Mamaroneck. Although we are already working on this project through our network of agents active in the area, we will be making a new panel of resources and an office available to you by the end of the year.