New York State of Mind

As property prices in Dublin continue to rise and those in London remain steady despite a slowdown in sales and a marked decrease in transaction volumes, our quest for value has pushed us further afield. South Hill Capital Director Philip Brainin has spent this last month in New York looking for investment opportunities and the early signs are very encouraging.

Real estate in New York has been undergoing a price correction over the past two years, most notably in the multi-family market. Changes in the political landscape have shifted public policy dramatically in favour of tenants, increasing both the cost and complexity of holding residential property. Meanwhile, slow but steady interest rate hikes have subdued property price rises in spite of the country’s strong economic performance.

Demand for residential property on the other hand is still high, albeit against a backdrop of plateauing rental values. The result is that net yields of 5% are now achievable in certain areas of Manhattan, with the prospect of 6% on the cards after intensive asset management. This compares very favourably with London (4%), Vienna (2%) and Berlin (3%), especially given the current political turmoil in Europe.

When you consider that lenders across the pond offer longer debt terms at fixed rates and with lower amortisation, and that property depreciation and interest payments are both fully tax allowable by the IRS, it becomes clear that America, and New York in particular, is indeed the land of opportunity.