NEW YORK CITY—While real estate, at least before the 2008 recession, had been generally considered a prudent investment, this maxim seems to still hold true in some core market cities – particularly in New York where real estate values were relatively less affected by the downturn and have been generally quicker to rebound. Word of the resiliency of New York City real estate has spread across the globe like wildfire, leading to a substantial influx of foreign investors driving the market and changing the landscape of the city.

In Manhattan, for the second quarter of 2014, the median price for co-ops and condos rose more than five percent to $910,000, with the average sales price jumping 17.9% to $1,680,185 when compared with prices from one year ago. These values mean that residential real estate prices have spiked above the previous record highs set in the pre-recession first quarter of 2008. Demand remains high and despite the multitude of new residential buildings currently under development, inventory remains relatively low. A driving force behind these trends are foreign buyers who tend to view such properties as a safe investment and a stable asset amidst uncertain economic conditions elsewhere in the world. In New York City alone, approximately 30 to 35 percent of residential real estate sales since 2013 have been to international buyers, often through investment vehicles such as limited liability companies.

Many of the new housing projects in the city, in particular in midtown and lower Manhattan, are high-rise luxury apartment buildings geared towards buyers in the higher end of the market that includes foreign investors. These buildings are sleek, slender and tall; upon completion, the building at 432 Park Avenue will be 150 feet taller than the Empire State Building with other buildings in development to be even taller. Foreign capital underwrites these acquisitions as investment opportunities rather than primary residences. The net result is that the real estate is either (i) immediately rented out post-closing (which often has a direct impact on increasing rents within the city) or (ii) simply remains vacant with the owners looking for nothing more than temporary usage and equity appreciation in the asset. In support of this last point, the Census Bureau estimates that 30 percent of all apartments between 49th and 70th Streets and Fifth and Park Avenues remain vacant at least ten months out of the year.