Last week’s media reports of a buying “frenzy” taking in Manhattan real estate and driving prices to dizzying records had the industry abuzz. But what should we read into these developments? What are the long term implications for buyers, real estate investors, and for the industry as a whole?
We asked our Founder and CEO, Arvind Raghunathan, for his thoughts. Here’s what he had to say.
What’s causing Manhattan real estate prices to skyrocket?
Real estate prices rose everywhere during the pandemic as people realized that working from home meant they needed more space. However, Manhattan prices lagged the national trend to some extent.
This was because of a couple of reasons: (1) people realized that working from home meant they didn’t need to live in an expensive city, and (2) high-rises have less space, and you need to share facilities like elevators and parking. Additionally during the pandemic, factors like crime and safety also induced some people to reconsider buying or leave cities altogether.
Now that the pandemic seems to be receding (at least in most parts of the U.S.) and life is slowly returning to pre-pandemic normalcy, Manhattan real estate is roaring back. It is interesting that people are putting aside their concerns and buying up luxury properties, so they can enjoy the pleasures of city life. I think people are also buying because they are worried that prices will rise a lot higher than what they are seeing now, as the economy bounces back from the weakness caused by Covid-19.
How will this help or hurt our businesses?
We don’t lend much in the borough of Manhattan. However, healthy real estate markets are good for us.
What aspects of this trend do you want to keep a watch on, say over the next 6 months?
We’re getting reports that there is a slowdown in New York’s suburbs, just as Manhattan is picking up. Since we lend extensively in the suburbs, we definitely need to watch this trend carefully.
As a New Yorker yourself, are you worried about any societal implications of rising prices in Manhattan? Could this change the character of the city?
New York is resilient. New York will always recover. So many naysayers have prematurely mourned the impending death of the city. They did the same after other crises like 9/11. We all know what happened then, and expect the same thing to happen again. The trends we are seeing seem to be less about gentrification or people being priced out, and more about people who have had a “Covid windfall” investing in very high end real estate. The sky is definitely the limit (both literally and figuratively) for Manhattan penthouses!