Market Conditions: The Europeans are Buying Manhattan, What About Chicago?
The New York Times has an article today discussing the influx of European buyers in the Manhattan condo market.
The number of foreign buyers has doubled in the last two years, according to data from the research firm Radar Logic. In just the last 18 months, they have bought one-third of all new condos that were up for sale, said Jonathan J. Miller, an executive vice president at Radar Logic and its director of research.
“We’d have had difficulty absorbing the elevated level of new development coming on the market without foreign buyers,” Mr. Miller said. “They are a key source of demand for new development.”
Why aren’t they buying here in Chicago? Or are they?
The article goes on:
Diane Ramirez, president of the real estate brokerage Halstead Property, said foreign buyers would make up about 20 percent of the firm’s sales transactions in 2007 in terms of dollars spent compared with nearly 15 percent in 2005. Ms. Ramirez said that five years ago, there were no apartments for foreign buyers because the market was made up mainly of co-ops whose owners would not welcome them into their buildings.
If you’ve been on Michigan Avenue lately, I’m sure you’ve noticed all of the foreign accents. Why aren’t they walking from the Gap, to say, 550 N. St. Clair and buying up a condo? Our real estate is even more of a “deal” than that in Manhattan (at the current exchange rates.) And we have condo towers galore and fewer co-ops.
Once again, the “foreign buyer market salvation” myth. Of course, all things being equal I prefer the knife-catchers to be foreigners. Nothing can compare to foreign money being lost here in regards to cushioning the collapse. Remember how that worked out for the Japanese commercial buyers in the US in the early 1990s, including in Chicago?
Did you see the example in the article of a $1.7M purchase that they will market for rent at $7500? And how these “Foreign buyers often purchase quickly because they largely view these apartments as investments like a bond or a stock?” As if uninformed buyers don’t have an awful lot to do with a bubble? Then again, they are the stuff of Realtors’ dreams.
I also loved this statement: “The number of foreign buyers has doubled in the last two years”. Could that have anything to do with the total number of Manhattan co-op/condo sales for the first 2 quarters of 2007 (latest data I could find) totaling 7,413 as compared to a total of 4,299 for the same quarters in 2005? No, it isn’t different in Manhattan, it is just still in the bubble phase.
G: I saw that part about renting out that nearly $2 million unit for only $7500 a month and laughed. At their exchange rate- maybe they feel like that makes sense. But it means the condo is way overvalued.
This was the quote about those investors: “They’re not really sophisticated investors,” Ms. Somekh said. “But they thought, ‘Where else can I put my money?’”
Yes- where else indeed?
You’re right. The party isn’t over yet in Manhattan.
I’m still surprised there aren’t SOME foreign buyers in Chicago. Outside of hearing about a bunch of Irish investors investing in The Lexington in the South Loop about six months ago, no agents have told stories of greeting European investors at O’Hare and taking them on tours of all our great towers.
Maybe it’s because our bubble has already burst?
Let’s be honest, folks, Chicago is not NYC. If you are a rich European, you aren’t going to impress your friends by telling them you have a condo in Chicago. These are trophy properties for wealthy foreigners, they aren’t likely to ever buy in Chicago. The foreign buyers we do get will likely be people doing business in Chicago, so we will get some foreigners but nothing like NYC.
D
agree with Deacon
Agreed, Chicago just isn’t on their radar. Orders of magnitude more foreigners in NYC.
hold on….you mean that no one in Chicago will be impressed that I have a place in Frankfurt?
I would agree that Chicago is no NYC. But you’d think we’d get SOME foreign buyers just because it’s much more of a bargain than NYC or San Francisco. And, frankly, O’Hare connects us to quite a few more European cities than most other cities (with the exception of NY with JFK and maybe Atlanta.)
You draw the comparison of Chicago to Frankfurt. Perhaps someone might be impressed you own in Frankfurt, but let me ask you….if you are going to buy a pad in Europe where does Frankfurt rank on that list? It certainly isn’t going to get the respect that a London, Paris, and so on would.
Chicago isn’t Manhattan, that’s all there is to it. Manhattan is now an “international city.” Chicago isn’t there yet, and might not ever be. Also, people view the suburbs vs urban areas differently in the Midwest.