Who Is Today's New York City Luxury Real Estate Buyer?
Who’s buying these big-ticket New York City homes? In San Francisco, it’s the Silicon Valley people. Conventional wisdom has it that when the IPOs go through, all the newly minted multi-millionaires will upgrade their homes in the city by the bay, making that enormously expensive real estate market even more enormously expensive. In Los Angeles, it has mostly always been show business and music that have continued to fuel the mansion market, a market in which the discerning observer can recapitulate the world history of architecture within the space of two blocks.
The identity of New York ultra-luxury buyer has tended to be a more elusive target. During the 1980s it was traders, investment bankers, and leveraged buyout specialists. During the run-up to the recession of 2008/2009, it was venture capitalists and, once again, the traders, many of whom were hawking mortgage-backed securities. And after the recession – the hedge fund guys (as with Silicon Valley, hedge funds have tended to be something of a boys’ club.) But who’s buying New York now? And is that population of prospective purchasers large enough to make a dent in the ballooning inventory which Manhattan, Brooklyn, and Long Island City now hold?
There are no more Russian buyers in New York City. The oligarchs exited the market a number of years ago, as the reign of Russia’s 21st-century czar Vladimir Putin became more entrenched and defying him in any way became more overtly dangerous. The escalation of the trade war rhetoric between our two countries has also reduced the number of active Chinese buyers, as has their economic slowdown and the increasing difficulty of moving money out of the country. And South and Central American buyers still concentrate their sights primarily on Miami.
According to data from several of the top recently built condominium sales offices, Americans make up 70% or more of recent buyers. Many of these are pied-a-terre buyers from other parts of the country, all of whom are rushing to close before the Mansion Tax rates go up on July 1. Finance people no longer have a monopoly. As we all know, hedge fund magnate Ken Griffin bought the most expensive home ever sold in the United States at 220 Central Park South, but many other lines of work play prominently among our buyers. We have our share of tech entrepreneurs. Real estate people remain an important buying group, as do entrepreneurs from such diverse industries as aviation and gaming.
We can draw some conclusions. First, our luxury market no longer depends as heavily on foreign money. An increasing number of wealthy Americans are drawn to owning a part-time home in New York, and the appeal to full-time residents of a perfect new apartment needing no renovation cannot be overstated. Second, the buyer pool comes from an increasingly diverse set of industries nationwide and worldwide. New York is no longer the finance industry’s company town. Third, the city can expect an overhang of unsold inventory for years to come. New units reach the market every month, increasing the oversupply which has made developers anxious and negotiable. Supply exceeds demand.
The good news is, men and women from all over the U.S. wish to live here, at least for part of every year. Their desire to have a property in New York, not as a tax or money laundering strategy but to enjoy the unique cultural and entertainment benefits found only here, provides a testament to the diversity and vibrancy which are the city’s lifeblood. Each year the U.S. becomes less of a rural and more of an urban nation. As that happens, the increasing breadth of diversity in New York’s buyer group has made both the market and the city better and more stable as an investment choice.