SPECIAL REPORT: PROPERTY MATTERS
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Jones Lang LaSalle's International Property

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New York leads US property recovery

Wary of false hope, analysts are daring to bring tidings of a revival, with New York at the forefront

PUBLISHED : Wednesday, 29 August, 2012, 12:00am
UPDATED : Friday, 07 September, 2012, 11:37am

It takes a brave soul to call the bottom of a property cycle. But the rumour mill in the United States is beginning to grind with other than the predictable voices of real estate agents.

The National Association of Realtors is leading the charge, reporting that in the first quarter of 2012, the median existing single-family home price (or final sales price) rose in 74 of the 146 metropolitan areas tracked, compared to a gain in 29 of the same markets in the fourth quarter of 2011. In other words, as forbes.com interpreted, "51 per cent of the major cities across the US have welcomed price gains".

The latest Fiserv Case-Shiller home price index cautiously flags that "after years of large declines, the housing market is showing signs of stabilisation". Using data from the Federal Housing Finance Agency, David Stiff, Fiserv chief economist, deduced that the end is nigh. "The recovery this spring and summer will be driven by investors, who buy primarily in lower-cost markets," he said in a statement. "We expect that home prices, which generally lag changes in sales activity by nine to 12 months, will stabilise by the end of this summer and then rise at an annualised rate of 3.9 per cent over the next five years."

CoreLogic chimed in, on the back of its findings that home prices are on a measured climb. "The recent upward trend in US home prices is an encouraging signal that we may be seeing the bottom of a housing cycle," says Anand Nallathambi, president and CEO.

CoreLogic points to New York as one of the markets where recovery is already taking hold. This assertion is supported by StreetEasy.com which shows the median listing price for homes in Manhattan increased by 3.8 per cent in the six months to June this year, and by 10 per cent year-on-year. There is an 80 per cent increase in contracts signed during the year.

New York is also one of the most popular areas with Chinese investors, according to data from real estate website Trulia. The firm's Allison Cooper says: "Currently, Chinese investors are a driver, but New York has always had strong demand from foreign property investors."

She says that the city's main hub, Manhattan, may be the most expensive property market in the US, but, "globally, Manhattan is actually cheap". "At US$1,500 per square foot, Manhattan is ranked a lowly 10th in a Citi Private Bank and Knight Frank report - even Hong Kong, ranked fourth at US$2,000 per sq ft, is more expensive than Manhattan," Cooper says.

According to the Knight Frank report, New York has experienced an influx of overseas money pushing prices ever higher. "The Chinese market opened up rapidly in 2011, with buyers from there joining other wealthy investors in targeting the US$1 million to US$3 million Manhattan market," says Jonathan Miller, head of New York property analyst Miller Samuel.

Writing in his Douglas Elliman Report, Miller found consistency in the Manhattan market for the past few years and through the second quarter of this year, noting that "economic uncertainty abroad and the weak US dollar brought more foreign buyers looking for an investment safe haven, resulting in a higher frequency of high-end 'trophy' transactions".

With markets contracting in Asia amid cooling measures and the threat of a double-dip recession, Savills had already flagged New York as a market to watch this year. "We think that the old world cities - particularly those long established as safe deposits of wealth, such as London, Paris and New York especially, may sustain pricing over the coming year, with the influx of global wealth in an uncertain world still having some time to run," Yolande Barnes, head of Savills residential research, wrote in a March 2012 report.

"New York is a city to watch. It recorded growth of 2 per cent, correcting first-half-year falls. Its residential real estate now looks extraordinarily good value and a relatively stable 'buy' opportunity within a global investment context."

As the year progresses, Singapore-based Julian Sedgwick, director and head of business development at Savills, sees a consistent trend.

"From the last few inspection trips I have taken to New York City in the last 12 months, I would agree recovery has already taken shape. We are also seeing stronger demand from our Asian investors looking to diversify their investment portfolios and there is strong demand for prime NYC stock in Asia."