Wednesday, August 6, 2008

Will Dollar Rally Boost Manhattan Real Estate?



The chorus is growing louder, "the dollar has bottomed". Many of my trusted advisors on Wall Street seem to be in agreement. So, if the dollar has indeed hit a bottom, what is the impact on Manhattan real estate prices? While a huge rally would probably be counter-productive in the long run, a gradual move off the bottom could be quite beneficial.

Over the past couple of years, a larger and larger portion of apartments that I have sold have been to foreign interests. Whether it's folks from Dubai, Mumbai, London, or South America, I have found foreign purchasers grow from 10% of my business to nearly 50% over the past year. However, one comment from a group of Irish investors just after the Bear Stearns debacle has stuck with me. The investor, explaining how he was taking a break said "yes, the dollar is cheap, and we've been buying on that basis for the past year, we are just afraid that it is about to get a whole lot cheaper". From that day in mid-March until just a few weeks ago, I heard the same sentiment from numerous others.

Fast forward to today, and the picture looks far brighter. It's apparent that the fed rate cuts are more or less over, and the next move is a trend of increasing rates beginning at the end of this year or the early next year. Beneficial to the dollar, no doubt. Our economy, despite all of our issues has yet to fall into recession and the odds of that happening are now less than 25%. Even if we were to experience 2 consecutive quarters of negative growth, the fed doesn't have many bullets left (with the funds rate at 2%) and would be unlikely to use them. A thriving export market and higher yields on fixed income securities has and will continue to bolster the dollar.

Here's where my theory comes into play. If foreigners, who have cooled to our markets a bit recently out of fear, lose the fear, sense stabilization, and see hope of a dollar rally, I believe this will result in a surge of foreign buying in Manhattan. A dollar rally clearly gives buying Manhattan real estate twice the potential for appreciation.

Manhattan is a blue chip market which has held very well through a challenging national economic and credit environment. So, capital appreciation would be one objective, but a dollar rally brings the bonus of currency appreciation as well. So, if the belief that the dollar has bottomed grows widespread, expect another surge of foreign buying and perhaps a better market than many expect.

This is just my theory, I may have studied economics, but an economist I am not. Make of it what you like.

11 comments:

  1. the government will keep printing money, and the dollar will get weaker, as long as we are in as much debt as we are right now. Electing a socialist president of the US wouldn't help matters any more.

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  2. HAHAHAAA - nice try! A rising dollar convinces foreigners to sell and claim appreciation.

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  3. What appreciation? If they bought in the past 2 months? The dollar has not appreciated significantly in a long time (with the exception of the past couple of months).

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  4. Dear friend,

    Wonderful .
    Accept my sincere thanks and appreciation


    John ,


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    Jobs – companies – real estate – engineers – petroleum company

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  5. This comment has been removed by a blog administrator.

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  6. The current market scenario has brought everyone on his toes. One should be careful before investing in real estate. Do confirm prices by other builders/other sources.
    Idaho Real Estate

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  7. This comment has been removed by the author.

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  8. This is a very interesting article! People want to buy property because the dollar has become cheaper!
    Another fascinating thing is that foreigners buy property in large numbers! I know of a great website which promotes real estate business. People can buy and sell property here! Foreclosure homes are available for sale. You can buy property here at a discount of 60-80%. People can invest money in this company and expect huge profits!

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  9. Manhattan is a beautiful place and I don't see any reason why real estate market can't become a booming business there after the recession is over completely.

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  10. There will be a turn around. Foreclosures deals will lead to success through experience.I checked the website that you mentioned Mc and found it to be really awesome and possessing experienced people.

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