New York World’s Wealthiest City for Real Estate — Good for Investors?
A recent study by Wealth-X found that New York City is home to most of the richest people in the world, making it the richest city for real estate. In the past few decades, New York has become one of the most important business and financial centers in the world. No wonder that many of the richest people in the world would also live here. How does this label play out and what is associated with it for the everyday investor?
The rich don’t flee, they buy
New York City actually ranks fourth for the most expensive real estate in the US based on price per square foot. However, the other three more expensive cities of San Francisco, Boston, and Honolulu are not considered hotspots for the ultra-rich.
After coronavirus-related closings and work-from-home orders resulted in thousands of offices and businesses closing their doors or allowing people to work from home, thousands of residents fled the city in search of housing outside of the city center. This squeezed real estate and rents in many Burroughs and put tremendous pressure on everyday investors.
But the richest people seem to be doing the opposite. Instead of consolidating holdings in an uncertain pandemic market, many are doubling up and buying additional homes or real estate, according to a recent report by Wealth-X. At a time when the New York real estate market is spiraling downwards, a penthouse in Central Park South was sold for $ 99.9 million in July 2020.
How it affects investors
The Wealth-X study focused on those with a net worth of $ 5 million or more. Since this super-rich class makes up less than 5% of the US population, most investors in the New York market do not fall into this category. However, their buying habits and behaviors have little impact on everyday investors, in both good and bad ways.
The buying behavior of the mega-rich could drive up property prices in the region, but probably only for the markets they target, which are often located in extremely high-priced neighborhoods anyway. However, if they move outside of these highest priced markets and buy existing real estate as an investment, it can affect the availability of investment agreements as well as the price of real estate.
A high concentration of the super rich means that New York has a lot of money to get around. This can help bring fuel back to the city, help the return of higher rental prices, and potentially increase property values over time. But those who own it will benefit most from it.
In general, as a New York City real estate investor, you still need to know your target market, how to best source your deals, and how to maximize your returns, like you always have.