As New York enters the second phase of reopening its economy on Monday, the real estate industry in the Big Apple is also readying for a restart after several months of halted in-person home showings and contract signings.
What the post-lockdown housing market in New York City would look like remains anyone’s guess but some agents are looking to global prime cities, which exited quarantine earlier, for clues.
“Global cities such as London and Hong Kong will be good indicators of how the New York real estate market will perform,” said Susan Landau Abrams, real estate broker with Warburg Realty. “Like New York, these cities consist of dense populations, mass transit systems, a multitude of businesses, tourism, entertainment and a daily flow of workers and residents.”
London experiences price declines amid pent-up demand
In London, in-person showings resumed in mid-May, with housing professionals reporting a three-fold increase in inquiries as pent-up demand finally found an outlet, Mansion Global reported.
“Buyers and sellers had already moved into recovery mode after an uncertain response at the start of the lockdown,” global prime real estate firm Knight Frank writes in a recent report. “The rebound in the number of inquiries via all internet and social media channels in the first week of re-opening was higher than the so-called ‘Boris bounce’ after the general election and the largest figure over the last year.”
The firm anticipates its clients to spend £52 billion on London’s high-end real estate. Having revised down its original forecasts, Knight Frank now says that prices in the British capital will decline by 5% this year before rebounding 8% in 2021.
London may be a good base for comparison because its latest real estate cycle has tracked somewhat similarly to New York’s. As Knight Frank outlined in its 2020 Wealth Report, released earlier this year, after several years of prime price reductions due to regulatory changes in both cities, their upscale housing markets finally started to heat up in the first two months of 2020.
New York City’s real estate gained traction in early 2020
For New York City’s price homes, this observation is also supported by real estate brokerage Douglas Elliman and appraisal company Miller Samuel. Their joint Manhattan report for the first three months of this year shows that the number of co-op and condo sales overcame two quarters of decreases to post a 13.5% gain year-over-year.
After several years of sustained increases (that depressed price growth), inventory across property classes declined. But some of that decrease could be attributed to sellers pulling out of the market due to the uncertainty that existed pre-Covid. Think the slow-down in the global economy, the trade standoff with China and the upcoming, polarizing presidential election.
Hong Kong remains resilient despite political uncertainty
In Hong Kong, meanwhile, pro-democracy protests scared some affluent home buyers, leading Knight Frank to predict a 2% slump in prices earlier this year. (Prior to the pandemic, in New York City, the firm expected a 3% price fall.)
Yet, Hong Kong’s real estate has shown resiliency in the face of a global health crisis and political turmoil that threatens its autonomous status. Having gradually reopened through April and May, Hong Kong saw a 6% jump in transaction volume in April month-over-month, while annualized prices inched up slightly by a little over 1%.
With London registering price drops and Hong Kong small gains, whose lead is New York City more likely to heed?
“I think we will see a short-term dip in contract prices versus asking prices and I think there will be a segment of the market that needs to sell thus creating opportunities for buyers and investors,” said Christopher Totaro of Warburg Realty.
New York City’s listing service StreetEasy’s price index dropped 2% in May in Manhattan, which charted the smallest decline in a year. Brooklyn’s price index registered the largest decrease in the city of 2.7%, meanwhile. This is on the backdrop of historic low levels of active inventory throughout the coronavirus pandemic.
Come Monday, most real estate agents do not expect a surge of new stock. Neither do they anticipate a rush from buyers to tour properties in-person.
“While the summer months may not be as robust as many New Yorkers and tourists delay returning to the city, New York City real estate will ultimately come back,” said Landau Abrams.
How fast that happens would depend on the wider economy and the course of the virus. While historically low mortgage rates may incentivize some buyers in the city, for instance, long-term work-from-home arrangements could push others to permanently relocate away from New York.
Moreover, a potential second wave of infections could dampen real estate transactions, which could further suffer the longer it takes for various businesses and institutions to reopen.
“The outlook is encouraging but we are unique,” said Bill Kowalczuk, real estate broker with Warburg Realty. “We have to wait and see. Schools reopening on time will be, in my opinion, the #1 factor. That’s something buyers and sellers alike can’t ignore. Entertainment, restaurants, public events will be another thing.”