Manhattan Exceptionalism

So, housing prices and sales in the Wayne White Plains MSA are going down like they are in all of them. But, Manhattan's still vibrant, posting one insane increase after another. In my insufficiently substantiated worldview this is mostly driven by

• Bonuses in finance, which I've spoke about at length, and
• Capital flight from Real Estate investments elsewhere in the country - as this is the place where real property continues to appreciate, flippers who survived elsewhere are investing here, in some analog to a self-fulfilling prophecy.

There are other worldviews. One of the common things you hear people who believe the Manhattan real estate market will continue to inflate say is that foreigners are now outbidding one another for housing here. Paul Krugman has a nice recent column on the reliability of foreign capital, but one might reasonably ask what they expect to achieve.

KENNY TIMMONS... a 32-year-old carpenter from County Meath, Ireland... put down 10 percent on a $760,000 studio under construction at 75 Wall Street[, which] he hopes to rent... out for $3,000 a month when it’s finished next year and [to] eventually... sell it at a profit.
...
Manhattan real estate is also benefiting because buyers have lost confidence in other United States markets....
Mr. Timmons is like many of [Dublin broker Kyle Thomason's (who is also licensed to sell real estate in New York)] clients in Ireland who view these properties purely as investments. They typically don’t ask quality-of-life questions — about schools, for instance. “It’s all based on what their rental yield is going to be,” she said.
...
Ana Maria Ruiz, 22, ... is from Bogotá, Colombia.... Her parents, who run a general hospital in Bogotá... [w]ith help from their broker, Jamie Breitman of Bellmarc Realty... found a $499,000 studio at 145 East 48th Street, with a view of the Chrysler Building.... Once her daughter moves out of the apartment, Mrs. Ruiz hopes to rent it for $3,000 to $3,500 a month.
...
Brokers say that Korean families who are buying Manhattan apartments typically use them for relatives to live in rather than as rental investments.... Youngchul Kim and his wife, Namjoo, first began looking for a Manhattan apartment in 2003 when their middle daughter, Yoojung, 31, began working as an architect here.... This summer, the Kims helped [their 26-year-old youngest daughter] Heekyung buy a $1.5 million two-bedroom at the Avery with views that rival their views of the Han River from their apartment in Seoul. Their oldest daughter, Yeonjung, 32, may relocate from Korea to live with her.
...
Dr. Nick Kotsomitis, a 39-year-old orthodontist from Brisbane, Australia... [w]ith help from a family friend, Jimena Yudi, a broker at Citi Habitats New York... chose a $1.885 million studio at the Plaza ....
He felt that an apartment at the Plaza would hold its value better than larger apartments in lesser-known buildings....
When Nick Ayer moved to Manhattan from London, he was looking for... a way to invest a £500,000 inheritance (about $1 million).... His agent, Andrusha Bohackova of Bellmarc, helped him find a $668,000 one-bedroom condo at 230 Riverside Drive. He moved into the apartment in April and says he’s happy with his investment — for now. He hopes to sell the apartment eventually, move to France or the Amazon and live off the profits. “My money increased 100 percent by just coming over here,” he said.

The point here, if it were too dull, is that the foreigners are also expecting rents and real estate values to keep increasing. Ireland, Australia and Korea are all in their own bubbles. I don't know about Columbia. But, there's trouble brewing.

Thanks to all of our foreign friends who have decided to take some of this on.