Rising dollar sees foreign demand for new york property fall

Photo: DavidYuweb

The US dollar has enjoyed a strong year, as the country's economy improves. The greenback jumped 7.1 per cent in the third quarter of 2014, its biggest quarterly climb since 2008. As well as enjoying rises against against Brazil's real, Mexico's peso and India's rupee, it was recently at a seven-year high (118.98) against Japan's Yen, according to Reuters, its best since August 2007.

The currency's strength has been boosted by news from the Federal Reserve that interest rates are expected to rise next year, with the Fed more confident than concerned about growth.

"The Fed has left the green light shining brightly for further dollar gains, Alan Ruskin, global head of currency strategy at Deutsche Bank, told the news agency.

This growth, though, is causing foreign demand to weaken for real estate in New York, as, combined with rising prices, the value of entering the market has effectively soared.

"The cost of the dollar will increase the buying prices of properties in NYC for foreign investors or part time residence," writes Douglas Elliman broker Brian Meier writes on RealEstate-Report.com, which he argues could redirect investors to less expensive markets.

Indeed, a new condo conversion at 133 Mulberry Street - including a one-bedroom unit $2.895 million - has only seen four of 18 units sell in the past month.

"We should have sold all 18 right away," says Meier, who adds that in the more favourable conditions of several months ago, they definitely would have.

The gradual cooling of interest has seen Canadian and Australians scale back their investment activity, as well as offsetting the recent rise in interest from Chinese buyers, which has been fuelled by both Chinese and European financial slowdowns.

Currency is not the only factor, though: supply is also increasing, which is giving buyers more choice - and more time to consider purchases.

"The foreign investors make up a big part of the NYC buyer pool, especially in condos and high net worth homes," continues Meier. "If this pool is diminished we will see values descend in the luxury and condo markets."