Ryan Serhant, Nest Seekers International
Elizabeth Lee Sample, Sotheby’s International Realty
Louise Phillips Forbes, Halstead Property
Maria Babaev, Douglas Elliman
Give us your view of the impact the international buyer has had in the NYC luxury residential market, and what you do as an agent to manage the expectations, perspectives, and needs of such a diverse marketplace of customers?
Ryan Serhant: The real estate market in Manhattan follows the currency market. When the dollar is cheap for one country, we see many buyers from that country buying real estate. Any strong broker in the city follows the FX market and reacts accordingly as it moves. Foreign money provides liquidity for the property market in New York, which allows for faster appreciation, relatively speaking. To take advantage of new investors, we educate them on the tax advantages, process of ownership, and property management (a service we provide in-house for all clients). Very rarely do I call myself a “real estate agent” in front of foreign buyers. To gain their trust, I am an international property investment advisor.
Elizabeth Lee Sample: The International buyer has a different perspective to our market then we do. They see the pricing in other major capital cities and realize the upside potential of NYC real estate. It is also viewed as a safe haven for investment. As a result the competition for premiere properties is evident by our current supply.
Louise Forbes: Just ten years ago the high-price apartments were coops. However, the financial requirements and strict house rules around subletting kept foreign buyers out for the most part. Enter the rise of the luxury condominium. “If you build it, they will come.” This development boom began with buildings like the Time Warner Center in 2003 that captured $3,571 per square foot for the apartment on the 76th & 77th floors and The Park Imperial at 230 West 56th Street, but now includes One Madison Avenue, 157 West 57th Street, 15 Central Park West, 432 Park Avenue, The Plaza, and 50 United Nations Plaza, soon to be home to a $100M apartment. These exclusive buildings, among many others, offer privacy because there is far less financial disclosure required, and they have quickly established a new kind of exclusive club where the only qualification is extreme wealth. As a result the foreign wealth has had a dramatic impact in transforming our market place setting record-breaking prices. The demand has elevated what is being built. These opulent condo buildings provide the ultimate in luxurious living from outstanding amenities to sophisticated finishes and materials in apartments designed by renowned architects. Even the wealthiest and most discerning of New Yorkers have recently aspired to buy a luxury condo and join the ranks of the international elite. It is my job to financially qualify the buyer, educate them accordingly, and introduce them to the wide range of high-end developments citywide.
Maria Babaev: In my opinion, the international buyer has a major impact on the NYC residential market. Specifically in the luxury segment of the market place, we’ve recently witnessed record breaking numbers with international buyers driving the sales. Global buyers continue to invest in real estate, often in second and multiple homes while looking for unique and special properties — limited supply of which attribute to healthy activity and increased prices in NYC. For today’s real estate professional it is extremely important to manage the expectations, needs and wants of international buyer and act as a trusted consultant to provide unique insights into the state of the NYC luxury real estate market. Overall, to have an experience and expertise not only to discuss record and average luxury home prices, inventory, and housing market supply, but also to be sensitive to buying trends, client profiles, and lifestyle amenities that shape the luxury segment of the market.
The outlook on the US financial markets isn’t overly optimistic; how does this impact the international buyer? How deeply do the European or Asian stock markets affect the appetite to invest here in NYC Real Estate, and what other factors have you seen make our market more appealing?
Elizabeth Lee Sample: The US financial markets are not currently affecting purchasers of NYC real estate based on our experience. I feel the overseas financial markets have driven international buyers to live and invest in New York City.
Louise Forbes: The outlook on the U.S. market is always changing… it depends on the day and the news source. But regardless, I don’t believe it has a negative impact on the international buyer. NYC has always weathered volatility better than other international cities like London and Dubai. Even within our own domestic boarders during the recent recession, NYC faired much better and with far less severity than other cities. Additionally, many countries have unstable infrastructure, stringent government regulations including higher taxes and strict guidelines around cash leaving the country, threats of war, etc., so they recognize the long-term value in owning a piece of the rock.
For the past three decades I have watched the ebb and flow of stock markets and witnessed the safe haven of NYC real estate. Owning a piece of the rock is a great place holder for money and protects their investment from volatility in the stock markets. Only 33% of the NYC inventory is available for ownership creating a very healthy efficiency in our real estate market with respect to value. Additionally, at one point, cities like Miami and Las Vegas had an investor profile as much as 62%, while NYC is only 6% investor concentration making it much more appealing.
Maria Babaev: Real estate trends are driven, by global and US Financial Market trends as well as political currents. From the fluctuation of the stock market to concerns regarding global political events, international financial factors affect residential real estate spending. Even with the outlook of the US Financial Markets isn’t overly optimistic – US still remains a “safe haven” for global buyers. In fact, Real estate is one of the most important storage of wealth in the economy. International buyers tend to hold wealth in their homes rather than in stock market.
In addition, the luxury housing market remains insulated from money flows and political shifts, as these concerns are less likely to determine the purchase of a luxury home for the high net worth international buyer around the globe. NYC remains top city on the list in which international buyers feel comfortable investing their money, despite the economic downturn. In that context, luxury residential purchases, even trophy properties, can be considered a conservative investment. Many buyers both local and international are purchasing and enjoying a home instead of counting on return on investment in the stock market. Recent changes to tax laws in some countries have impacted market activity and is just another factor that make our market more appealing.
Ryan Serhant: The international buyer invests in real estate here in New York City for reasons beyond financial return. More often than not, they purchase here to secure a good education for their children or an opportunity for citizenship, as well as to expand their portfolio. If the stock markets are proving to be too unsteady, they will likely move their investments into something more stable and less risky. Even during the midst of the financial crisis, when the entire country’s real estate market was at a collaborative standstill, Manhattan’s market was still performing relatively steady when compared to the rest of the nation. It also was one of the first markets to recover and recover quickly, which is an attractive feat for any investor looking to invest in NYC real estate. As for any investment, investors will always have to assess the risk — the fact that NYC’s market can recover at so quickly certainly provides investors with some level of comfort.
What features make a residence more appealing to one demographic group more than others? For example, this may include feng shui elements such as apartment number or construction to other elements such as home staging or amenities.
Louise Forbes: Some focus on luxurious living in a specific location, while others are more concerned with finding the right space. They tend to prefer apartments and rooms on a grand scale that are fully renovated and they are prepared to pay a premium for it. They aren’t interested in managing a renovation project from afar, they want to buy and move in, which is why they respond very well to nicely staged apartments. Aesthetic is everything!
Ryan Serhant: A lot of my Chinese investors will immediately disregard an apartment that they feel has “bad flow”. An apartment that has good feng shui can be as important to them as its amenities are for us. They firmly believe that an apartment with good flow (whether with the construction or placement of the apartment within the building) will promote good fortune. Apartment numbers or floors can also be a deciding factor. My Asian clients prefer if the numbers three or eight to be attached with the investment that they make. The reason being that “three” is often linked to “health” and “eight” to “prosperity” in the Chinese culture. If it comes down to two very comparable properties and its time for them to make a decision, they will likely lean towards the apartment numbered 1808 than apartment 1809.
Maria Babaev: We do see that certain demographics are seeking specific features, for example Chinese buyers are influenced a lot by the art of fengshui as well as even house or apartment number. I find that international buyers are value-driven and look for luxury homes with large open spaces, a lot of natural light and finished to exceptionally high standards. Prime locations, architectural excellence, latest finishes, incredible views, high ceilings, an en suite bathroom for each bedroom, massive master bedroom suites, a gym, home office, a meditation room, movie theater, balconies, and terraces – just to name a few features that can be found on the requirements list of the global buyers. Overall, the residence must be great for large-scale entertaining but also very comfortable for the simple moments of everyday living.
In the last 18 months I have seen the new wave of international buyers coming into the market place. Most of them have an apartment in Manhattan or Miami, but when they move families out of their countries – they show great interest in luxury suburbs such as Gold Coast Long Island or Greenwich, Connecticut. Proximity to Manhattan, excellent school districts, private golf and tennis clubs, equestrian estates, dining and shopping establishments, fantastic parks and gardens and overall infrastructure — are the driving forces to this market’s desirability.
Elizabeth Lee Sample: That completely varies from buyer to buyer. One may want a grand mansion while another must have a view.
What are a few general challenges an agent will encounter when representing an international buyer and/or seller, and how do you overcome them?
Elizabeth Lee Sample: I feel that the complexities and rules of the cooperatives and condominiums are not fully understood by the international buyer
Ryan Serhant: The language barrier can certainly make things a little more difficult sometimes, but fortunately I work with a multi-cultural team and can always count on their assistance when needed. There are a lot of moving parts involved in a foreign transaction on top of the already intricate nature of Manhattan’s real estate market, so it is critical that I always keep an open line of communication with my foreign buyers and sellers so they can feel more at ease when performing what may be the largest transaction in their life.
Maria Babaev: I find that the biggest challenge an agent will encounter when representing an international buyer is to serve not just as a real estate broker facilitating a transaction but to be the link to the entire team of professionals such as real estate attorneys, inspectors, designers, tax advisors, immigrations attorneys, etc. For an international buyer the purchase of a property is so much more than just a standard closing and title search, – it’s a lifestyle change and adaptation to the new country and its customs and ways of doing business. So I am, as a real estate broker, always act as a trusted advisor and the source of the source of the entire chain of qualifies professionals to provide the best experience to the buyer thru the international real estate transaction.
Louise Forbes: Sometimes language and culture can be challenging so occasionally I use translators to make it a more comfortable and productive experience. Additionally, foreign buyers often have pre-conceived ideas (that are usually outdated) about New York real estate as it relates to neighborhoods. For example, they will want to live in a five block radius of Madison Avenue because they think that’s the only high-end shopping area. They aren’t aware of how the city has evolved in almost every segment. So one of the first things I do is emphasize the importance of the education process to establish realistic expectations. In order to obtain a successful transaction, they have to understand their financial qualifications for coop vs condo, investment vs primary residence, accessibility to cash and guidelines for removing it from their country, etc. And just like American buyers, I have to find the balance between priorities. One partner tends to be more focused on value & investment, while the other is concerned with proximity to schools & shopping.
Do you find certain international buyers prefer to purchase in certain seasons, and is there a time of year when buyers tend to be more domestic?
Ryan Serhant: Unlike the rental market, which is always significantly more active during the Summer months, I work with active purchasers all year round. Historically, there is always a spike in market activity in the Spring, but I would attribute that to the seasonal affect on personal behavior rather than the internationality or domesticity of a transaction. I’ve taken clients on tours in the middle of a blizzard to see apartments the same way as I would in the spring or summer time. Serious international buyers will fly in and want to see apartments despite what the weather is like.
Louise Forbes: Based on my experience, international buyers are most active between March & August, especially the Europeans, who are focused late spring/early summer. For real New Yorkers, with respect to buyers, July & August is usually a reprieve from pounding the pavement, which makes the fall season extra exciting. Interestingly, the cycle has shifted since the recession. November & December are now one of the most competitive and active times of the year. In fact, this past December I was managing seven contracts during the week of Christmas! As a result of the 2010-2012 shift in bonus payments and adjusted cash distributions on Wall Street, moving from 50-90% cash to 30% cash, deferred income through restricted stocks weighs heavier.
Elizabeth Lee Sample: Our Fall and Spring seasons are the busiest as are the auction houses. That goes for international as well national clients.
Maria Babaev: Frankly, I don’t see pronounced purchasing seasons anymore, not even for domestic buyers. However, in the last few weeks right after Chinese New Year I had a lot of activity and showing requests from Chinese buyers and brokers as a lot of families are visiting New Year for a Chinese New Year celebration and they are actively looking for properties both in Manhattan and the luxury suburbs.
If you can, share the most interesting experience you¹ve ever had working with an international client.
Louise Forbes: I had a particularly interesting deal that was also an eye-opener with respect to post-contract management of a deal for a foreign buyer. Most recently I worked with a gentleman from India who purchased an $11M condo. Because it was new construction, we had a delayed closing. After the contract was signed, I had limited access to my client once he returned to his home country, and the exclusive agent had moved on to other deals. It became my responsibility to protect my buyer from a temperamental developer and project manage the completion of his apartment, which included multiple appointments with his designer. There is a lot of hand holding and going beyond the usual scope of work when the buyers are not living full-time in the United States, but if you are willing to commit to the extra time, the advantages can be very fruitful. This buyer was so pleased with how we managed the deal completely from start to finish, he has since recommended several new clients.
Ryan Serhant: They’re each interesting in their own respect. I’ve worked with clients who would fly into New York City every couple of months and bring a different group of friends and colleagues with them each time who are all interested in purchasing here, each group larger than the last up to the point where I had to rent a bus to accommodate them. I’ve also worked with clients whom I closed a deal with while they were still overseas and not meeting until months after the fact and I get to introduce to them the multimillion dollar home they purchased for the first time. I just did a deal through Instagram with a business man in South Africa. (The deal was done by email via attorneys, but the initial meet and greet was all on Instagram.) Each experience is definitely a learning experience for me and I continuously look forward to next one.
Maria Babaev: I think that the most interesting and rewarding experience while working with an international client is once you earn their trust, they become your client for life and not just in your immediate market place. They expect that you can provide professional guidance for their purchases in other parts of U.S. and abroad. I also find that for some international buyers their first purchase is a “trial one,” and most of them will buy a bigger and better, more expensive property shortly after the first transaction. So it is extremely important to provide exceptional service, to become a trusted advisor and develop a great business relationship to get the client for life.