NEW YORK CITY—As the city, and the nation, settles into a new year—and life under a new US President, real estate professional Donald Dye, founding partner, Sky Lake Partners, examines the impact of inflation, and the value of the dollar on real estate pricing amid these shifts in this EXCLUSIVE interview with GlobeSt.com.

GlobeSt.com: In a recent report, you said that inflation—as indicated by the Consumer Price Index—will be a greater determinant of the city's residential prices rather than the value of the dollar. Why?

Donald Dye, founding partner, Sky Lake Partners: I looked at the relationship between the level of the dollar and i nflation versus New York real estate prices. One can see very different graphs , and therefore very different relationships.  In the case of the dollar versus real estate prices, the graph is scattered with very little discernible pattern , appear ing almost random. Yet i n the graph of inflation versus New York r eal e state prices , there is a pronounced and linear pattern—higher inflation corresponds to a higher level of real estate prices.

Intuitively , this makes sense. The dollar does not move uniformly against all currencies; it may strengthen against some and weaken against others. Specific government policies or political developments in another country may determine the level of that country's currency , and therefore its value relative to the dollar. 

A country's individual political or economic climate may drive foreign buying, regardless of the level of the exchange rate.  Take, for example, Brazil. For the past several years the Brazilian currency has weakened versus the dollar, which has strengthened. Yet , Brazilian investors have been buyers of property in New York as well as Miami. The government of China, on the other hand , has allowed its currency to strengthen and Chinese investors have been regular buyers of New York property.  Even the Russians, who se currency has dropped under the dual strains of low oil prices and sanctions , continued to buy property in the US .

Moreover, global buyers are not only composed of the Chinese, Brazilians and Russians. Further , “non-exchange rate factors , ” such as investor desires to have investments offshore in safe havens like New York and specific programs such as EB5 , among others, also can fuel foreign buying interest.

Although foreign buyers may buy for many reasons beyond the level of the dollar, rising inflation lifts all real estate prices equally. There is only one level of prices in the US and its rise impacts property uniformly.

GlobeSt.com: Your report also states that—based on other research—recessions generally occur when a Republican is president. Why is this and what indicators should investors be on the lookout for in the coming months?

Dye: I am not a political scientist ; therefore, I can only refer to the Binder Watson study to address this issue in more detail. F or several administrations, it seems that recessionary development w as driven by exogenous factors or problems that had built up over many years.  Nixon, for example, faced the brunt of OPEC and the resulting crisis, developments that crippled the U S economy , w hile G eorge W. Bush faced the twin challenges of September 11th in the middle of his term and the housing and resulting banking crisis at the end.

GlobeSt.com: How do currency exchange rates impact residential prices?

Dye: C urrency effects may be less a function of the level of the dollar , and more driven by what happens with individual currencies or economies.  The Chinese, for example, have been significant buyers of real estate at a time of increasing value of the Renminbi relative to the dollar.

Despite weaker currencies compared to the dollar , Brazilians and Russians have also been buyers of US real estate. Additionally, global buyers are composed of many more people than just the Chinese, Brazilians and Russians. Non-exchange rate factors , such as investor desires to have investments offshore in safe havens like New York and specific programs such as EB-5 , among others, can also fuel foreign buying interest.

NEW YORK CITY—As the city, and the nation, settles into a new year—and life under a new US President, real estate professional Donald Dye, founding partner, Sky Lake Partners, examines the impact of inflation, and the value of the dollar on real estate pricing amid these shifts in this EXCLUSIVE interview with GlobeSt.com.

GlobeSt.com: In a recent report, you said that inflation—as indicated by the Consumer Price Index—will be a greater determinant of the city's residential prices rather than the value of the dollar. Why?

Donald Dye, founding partner, Sky Lake Partners: I looked at the relationship between the level of the dollar and i nflation versus New York real estate prices. One can see very different graphs , and therefore very different relationships.  In the case of the dollar versus real estate prices, the graph is scattered with very little discernible pattern , appear ing almost random. Yet i n the graph of inflation versus New York r eal e state prices , there is a pronounced and linear pattern—higher inflation corresponds to a higher level of real estate prices.

Intuitively , this makes sense. The dollar does not move uniformly against all currencies; it may strengthen against some and weaken against others. Specific government policies or political developments in another country may determine the level of that country's currency , and therefore its value relative to the dollar. 

A country's individual political or economic climate may drive foreign buying, regardless of the level of the exchange rate.  Take, for example, Brazil. For the past several years the Brazilian currency has weakened versus the dollar, which has strengthened. Yet , Brazilian investors have been buyers of property in New York as well as Miami. The government of China, on the other hand , has allowed its currency to strengthen and Chinese investors have been regular buyers of New York property.  Even the Russians, who se currency has dropped under the dual strains of low oil prices and sanctions , continued to buy property in the US .

Moreover, global buyers are not only composed of the Chinese, Brazilians and Russians. Further , “non-exchange rate factors , ” such as investor desires to have investments offshore in safe havens like New York and specific programs such as EB5 , among others, also can fuel foreign buying interest.

Although foreign buyers may buy for many reasons beyond the level of the dollar, rising inflation lifts all real estate prices equally. There is only one level of prices in the US and its rise impacts property uniformly.

GlobeSt.com: Your report also states that—based on other research—recessions generally occur when a Republican is president. Why is this and what indicators should investors be on the lookout for in the coming months?

Dye: I am not a political scientist ; therefore, I can only refer to the Binder Watson study to address this issue in more detail. F or several administrations, it seems that recessionary development w as driven by exogenous factors or problems that had built up over many years.  Nixon, for example, faced the brunt of OPEC and the resulting crisis, developments that crippled the U S economy , w hile G eorge W. Bush faced the twin challenges of September 11th in the middle of his term and the housing and resulting banking crisis at the end.

GlobeSt.com: How do currency exchange rates impact residential prices?

Dye: C urrency effects may be less a function of the level of the dollar , and more driven by what happens with individual currencies or economies.  The Chinese, for example, have been significant buyers of real estate at a time of increasing value of the Renminbi relative to the dollar.

Despite weaker currencies compared to the dollar , Brazilians and Russians have also been buyers of US real estate. Additionally, global buyers are composed of many more people than just the Chinese, Brazilians and Russians. Non-exchange rate factors , such as investor desires to have investments offshore in safe havens like New York and specific programs such as EB-5 , among others, can also fuel foreign buying interest.