New York City, with its charm and uniqueness, offers a special connection to every individual. This connection can be business-related, touristy, or sometimes love at first sight in the enchanting and distinct city composed of five main boroughs: Brooklyn, Queens, Bronx, Manhattan, and Staten Island. Currently, nearly 9 million people reside in the city, and it attracts over 60 million tourists annually.
For many, New York is the heart and economic center of the U.S., constituting about 7.9% of the national economy. It is one of the central cities globally, with Wall Street, the sacred ground of the financial world, at its core—the place where dreams turn into reality. As a business hub, the real estate sector in New York plays a crucial and essential role. Despite economic crises and euphoria, it has always managed to reinvent itself. Throughout generations, the real estate sector in the city has risen again, resonating with the rhythms of American capitalism.
In the last two years, inflation in the U.S. has surged, prompting Federal Reserve Chairman Jerome Powell to adopt a new policy of interest rate hikes to achieve economic balance. This marks a departure from the “near-zero interest rate” policy of the past decade. Recently, the Federal Reserve began adjusting its policy due to inflationary pressures, signaling a potential graded decrease in interest rates. In other words, the Federal Reserve suggests that it expects three interest rate cuts by 2024, leading to a significant reduction in the cost of loans and credit in a simple equation.
This trend may be observed in other countries worldwide, like Israel, where a 1.5% decrease in interest rates is anticipated. However, this depends on various factors, including inflation, geopolitical events, and political stability, all of which may play their cards. Interest rates directly impact the world of finance and real estate. A decrease in interest rates will leave the public with more “disposable income,” and as interest rates decline, we may see an increase in demand, higher yields, and attractiveness of properties in areas currently stagnant, regions experiencing relative decline, and areas undergoing demographic changes and infrastructure upgrades.
So, what does the real estate forecast for 2024 and beyond in New York suggest, and are there opportunities?
After a slowdown of four consecutive quarters, we are beginning to see a revival in the New York real estate market, particularly in areas like Brooklyn. From the beginning of the year and following the policy led by the Federal Reserve, we witness movement in the New York real estate market, with companies like Madison Realty securing $180 million for the construction of 473 apartments on Dupont Street in Brooklyn, an area that was previously industrial.
In recent days, fashion giant Gucci acquired a commercial property on Fifth Avenue for an unprecedented $963 million, following significant deals in the shopping street where another fashion giant, PRADA, purchased a property for $835 million. In the private sector, New York is not lagging behind, as a 44-story tower is set to rise in the heart of Brooklyn, aiming to be an environmentally friendly electric skyscraper as part of the global green trend. The property will include 441 high-quality finished apartments, attracting a new population, addressing existing residents, and developing additional upscale real estate circles.
In summary, the New York real estate market is starting to recover and show signs of growth. Smart investors are returning to the market, significant deals are happening in both the business and private sectors, and there is growth in funding and investment in real estate funds directly and indirectly. One of the main reasons investors are returning to the American real estate market is risk diversification, as the U.S. economy is ultimately anchored in the vast economic ocean. Moreover, alongside managing traded assets, investors are looking for alternative investments unaffected directly by fluctuations in financial markets, and real estate provides a kind of anchor in the overall asset portfolio.
How should one expose themselves to such real estate investments? There are several ways; first and foremost, every investor can purchase a property or provide funding independently. However, in many cases, this method proves to be the least suitable for investors lacking the experience, knowledge, and resources to manage such properties. Therefore, the best solutions for exposure to real estate investments are specialized investment funds, providing legal, financial, and professional guidance, purchasing shares of real estate companies holding portfolios in the U.S., or joining investor groups.
Every investor has different needs and preferences, and therefore, each individual must choose the most suitable and correct path for them, after a professional examination and comparison, taking into account the general assets and risks the investor is willing to bear.