In the marble-floored lobbies of Manhattan’s brassiest, newest condominium developments, where the rustling of shopping bags and the clicking of impossibly high heels once kept time with the cadences of a dozen foreign languages all bouncing off the mirrored walls in a merry cacophony, Neoly Lika Williams’ pace has slackened. The Brazilian-born real-estate broker for the Corcoran Group had just returned to Manhattan after a 13-hour flight from São Paolo, and the trip, like most such trips lately, hadn’t gone well.
“I used to hear Portuguese being spoken up and down Fifth Avenue,” Ms. Williams said. “Now I show apartments, but I haven’t finalized any deals yet. It’s just sad times.”
She had hoped to find in Brazil the lucky few who have remained rich enough in the country’s devastated economy to consider buying a condo in Manhattan.
“In 1999, I was selling eight apartments a week to South Americans. But I was only able to find two buyers on this trip,” Ms. Williams said. “A lot of Brazilians just don’t have the money to come to New York anymore. It’s not like it used to be.”
Ms. Williams’ beleaguered sales efforts are just one piece of a larger trend in Manhattan’s $68 billion condominium market. Across Manhattan, as the post–Sept. 11 economic recovery continues and brokers talk about the return of the frenzied real-estate market of 1999, the market has seen an exodus of the international buyers who have traditionally been an engine for growth and profits. While trophy properties such as the gilded triplex at 740 Park Avenue, owned by the famed Noboa family from Ecuador, just hit the market for $28 million, and the sprawling 6,000-square-foot duplex at 770 Park Avenue, owned by the late Giovanni Agnelli, the chairman of the Italian auto giant Fiat, sold for a reported $20 million in September, finding buyers to replace them is proving difficult.
Economic turmoil in South America, Japan’s nagging recession and the political fallout between Europe and the United States over the Iraq war have combined to drive many prospective buyers away from Manhattan.
Historically, the influx of international buyers has been a significant economic stimulus for Manhattan, as U.N. diplomats, executives of foreign corporations and wealthy globetrotters snapped up Manhattan condominiums-preferable to the city’s co-ops and their snobby boards, which frown on corporate purchases and foreign assets-and spent and shopped across the city.
Indeed, New York is one of the world’s biggest markets for foreign-owned residential real estate. Today, more than 2,500 foreign diplomats reside in New York, according to figures from the State Department, and international tourism contributes more than $5.6 billion to the Manhattan economy and more than 40 percent of all tourist spending in Manhattan, according to N.Y.C. and Company.
We Were Big in Japan
During the peak of the Japanese real-estate frenzy, the influx of Japanese investors into the New York market reduced the damage of the late-1980′s economic slowdown.
“The Japanese went wild. They were coming in and paying any price for anything. It’s not like that now,” said Donald Trump. “You don’t have any country with the frenzy of Japan to buy in New York. You have countries looking for a solid investment, but the frenzy is gone.”
“Sales to Japanese real-estate investors actually made the recession of 1988-1989 a soft landing,” said Jonathan Miller, the president of Miller Samuel Inc., a real-estate appraisal firm that issues influential real-estate market reports. But in the post–Sept. 11 world, the specter of terrorism and the slowdown in international business has reduced the number of new potential buyers from abroad and the demand for Manhattan pieds-à-terre . Over the past two years, international travel to New York City was down 25 percent, and the high-profile buildings that had been marketed to foreign buyers have taken the brunt of the loss.
“They’re not here like they used to be,” said Larry Kaiser, the president of Key-Ventures Real Estate, a top Manhattan brokerage. In April, he sold a $1.1 million three-bedroom co-op at 303 East 57th Street to the Panamanian ambassador to the United States, a rare sale nowadays. “The buyers at condominium developments such as 1 Central Park West, CitySpire at 150 West 56th Street and Trump Park Avenue are Americans, whereas five years ago we had a very strong international presence.”
Deed-transfer records do not indicate the nationality of condominium buyers, and buyers routinely purchase apartments behind the veil of a corporate name, so accounts of foreigners’ buying habits really only circulate among the brokers themselves-which is why the current foreign flight is not immediately presented in the well-publicized, optimistic market reports issued by Manhattan’s major real-estate concerns each quarter. Though brokers are not diagnosing generally soft market, they do say that foreign clients who were ready to open their wallets five years ago have gone packing today.
Since Sept. 11, many brokers who were surveyed cite a 25 percent decline in foreign condominium buyers.
Fred Peters, the president of Warburg Realty, said that his company derived 10 percent of its gross income from sales to Japanese buyers alone during the late-1980′s peak, whereas today, the figure for all international sales has dropped to just 4 percent.
Mr. Kaiser cited recent economic crises in Brazil, Argentina and Venezuela as prime factors keeping the South American buyer away, and political wariness over Iraq on the part of the hesitant French and German buyers.
But some brokers puzzle over the matter. Surely investment in a stable economy like the U.S. is preferable to keeping assets in a country where your checking account could go belly-up with the local branch? Surely for some with the money to spend, or invest, finance trumps politics?
“Yes, South American markets are in turmoil-that’s exactly why buyers with disposable income want to put money in Manhattan,” said Warburg’s Mr. Peters.
“New York is perceived as being a good bet, and a safe bet,” said Mr. Trump. “There are certain areas like South America who have pulled back, but it’s never like the entire world comes here at one time. You have pockets of strength and pockets of weakness. But the market as a whole is strong.”
But the condominium market has never been supported by investors. The conventional wisdom in real estate is that buying and flipping apartments without ever moving into them purely for fun and profit is just no longer a significant factor in the market.
“In the past, people would come to New York and buy condos purely as investments. We just don’t see that anymore,” said Patricia Cliff, the director of European sales and a senior vice president at the Corcoran Group. Ms. Cliff estimated that the market for international buyers is down 25 percent since Sept. 11. In 1999 and 2000, Ms. Cliff used to advertise her listings from high-profile residential developments, such as the Metropolitan Tower at 146 West 57th Street and the Trump International Hotel and Tower at 1 Central Park West, in international publications like the International Herald Tribune , Germany’s Allgemeine Zeitung and London’s Financial Times , but she decided to pull the advertisements due to a lack of interest. “It just wasn’t worth it,” she said.
Michael Shapot, an associate broker at Coldwell Banker Hunt Kennedy who specializes in corporate relocation for Fortune 500 companies like Microsoft and Citigroup, has seen a decline in foreign relocation that largely reflects the downturn in the international economy. “Between 2002 and 2003, I went from doing 120 transactions a year to 100,” said Mr. Shapot. “There has been a broad decline in people relocating for business across the board. I think it’s symbolic to business in general and not just international buyers.”
Of course, there will always be those wealthy enough to remain insulated from economic crises in their own countries, and who have the capital to continue to buy.
“There’s always money everywhere, even in down markets,” said Leonard Steinberg, a top broker at Douglas Elliman.
But how much? That’s the question that developers of new signature condominiums in New York are asking themselves.
“With the signature properties, the international buyer is extremely important,” said May Wong, the vice president of international marketing at the Sunshine Group. “These buildings, such as the Time Warner Center and One Beacon Court, cater to a global clientele with properties all over the world. At Time Warner Center, we have done exhibitions in London to market the property abroad and capitalize on the European buyers.”
At Trump Park Avenue, the new development at 59th Street and Park Avenue, only 50 percent of the apartments have been sold since the sales office opened in October, and with final construction being completed at the Time Warner Center at Columbus Circle, 65 percent of the apartments are spoken for.
Alan Rogers, the chairman of Douglas Elliman, sees anti-American sentiment from European buyers weighing on New York’s condominium market.
“Part of the decline in international buyers is a post–Sept. 11 wariness,” Mr. Rogers said. “If you’re traveling overseas, the strength of anti-American sentiment is palpable. In the 1970′s and 1980′s, people were wowed by New York, there was a certain trophy element to buy in New York.”
If Manhattan seems less a home away from home for Europeans, the city may yet capitalize on the flip side of wartime America’s love affair with New York City. American buyers of Manhattan real-estate have taken advantage of historically low interest rates, a Dow that is up more than 29 percent this year and confidence in an improving job market to push the average price of a Manhattan apartment to record highs.
In new condominium developments like One Beacon Court at 151 East 58th Street, the Time Warner Center at Columbus Circle and Trump Park Avenue at 59th Street and Park Avenue, Americans today make up more than 80 percent of the buyers, according to brokers.
During the late 1980′s, at the height of the Japanese economic bubble, when fears over Japanese hegemony spawned films like the 1993 Sean Connery techno-drama, Rising Sun , international buyers bought approximately 50 percent of the apartments in high-profile condominium developments, according to brokers.
“Now foreign buyers have become a little protectionist, and it’s not as cool as a foreigner to buy in New York,” Mr. Rogers said. “In the signature condominium properties, the buyer profile is more New Yorker, more American.”
Whether those buyers’ patriotism will do what the Japanese did for the real-estate market in the early 90′s remains to be seen.