Time to Invest in Manhattan Real Estate!

This may surprise you: Manhattan residential real estate has performed better than the broader U.S. real estate market and comparable major cities such as San Francisco and Los Angeles.

For potential buyers, now is the time to shop. The Dow is at 10,000 without justifying fundamentals, unemployment is at 10%, and the dollar is weak and inflation is coming. Relative to the stock market and comparable major cities, Manhattan has performed well.

Cities like Los Angeles and San Francisco have seen their real estate prices decline more than 40% from their bubble highs while prices in Manhattan have taken a significantly smaller hit.
The Manhattan market is showing signs that it is starting to find its bottom. Third-quarter 2009 data show prices declined at a lower rate while transaction volume surged 46%. Experts predict that it will decline another 10% with an eventual U-shaped recovery. However, the duration and the magnitude of the decline have been less than for comparable major cities.

According to The Wall Street Journal, Wall Street firms are expected to pay a record $140 billion in bonuses this year because of the resurgent stock market, an easing in credit markets, an increase in deal-making and government programs. This is despite the recession and despite an unemployment rate of 10.3% in New York City. These bonuses may be undeserved, but regardless, their payday will boost Manhattan real estate prices.

Manhattan is a landlocked island. While developers in most cities keep expanding outward, developers in Manhattan do not have this alternative.

Manhattan is a global must-see destination. Emerging markets like Brazil and China are creating wealth at a very high rate and churning out millionaires and Manhattan is often the first international destination they want to visit. It's also one of the first places where they want to buy investment property.

Manhattan is full of diverse industries. Besides finance, New York has media, hospitality, advertising and professional services like law and accounting firms. These industries will be serving emerging-market economies and will benefit the local New York economy in terms of job creation and housing demand.

The city's unemployment rate was at 10.3% in August. If not for the diversity of the current New York City economy, the unemployment rate would be even higher. While the finance industry lost jobs, sectors like education, health, leisure and hospitality gained jobs.

Manhattan provides top quality of life. The air in Manhattan is pristine compared to air in other global metropolises like Hong Kong. Transportation, although via a 100-year-old subway system, is still efficient and dramatically reduces commuting time for those living in Manhattan. The legal system is established and there is a better work-life balance compared with countries like China. These are major considerations for attracting global talent.

It's time to invest. Manhattan residential real estate has a net rental yield of 4% and still benefits from rental income and price increases. Real estate prices and rental income will increase with inflation.

For the primary residence buyer who is still renting, the value of your saved dollars is getting weaker. The Dollar Index is now at 75, down from 88 in March, reflecting the world's pessimism about our currency. Rents will increase. So start shopping for real estate. It's better than sitting on a pile of cash with weakening buying power.