Should You Invest In New York Real Estate?
Quick Hits: If you’re planning to buy a home in Brooklyn or Queens, do it now, because prices are going up for the next few years. Investments in single-family rental properties have weak potential because of high home prices. Apartment developments have the best potential in Brooklyn, Queens and Hudson County, where splitting homes into rental units is also attractive. Mortgages and construction loans have average risk. Best bets for investments in retail or restaurants are in Queens, Brooklyn and the Bronx.
A classic choice of wealth or growth, the suburban counties of Long Island and New Jersey are rich but stagnant, while jobs and people move to Hudson County, Queens, Brooklyn and the Bronx. Two million jobs in finance and business still drive the region – a big exposure to the world economy – but with Manhattan pretty much full, they’re flowing out to cheaper quarters.
The biggest single industry in the region now is healthcare, growing twice as fast as finance, but with jobs that only pay a third as much. Healthcare provides 100,000 jobs in the Bronx, 100,000 in Queens, almost 200,000 in Brooklyn, and is growing five percent a year.
Because of the high proportion of immigrants – forty percent in Brooklyn and Hudson County, fifty percent in Queens – there is a large spread of incomes, and therefore of rental possibilities.
Mortgages are a good investment right now. Because home prices will keep rising the next few years, the equity cushion for new mortgages will grow quickly; yet prices are in balance with local incomes, so the risk of default is just average. Construction loans also will have average risk in the growing counties, especially in Queens – where I expect 45,000 new homes and 70,000 new apartments over the next three years – and in Brooklyn, where I expect 40,000 new homes and 110,000 apartments. In the Bronx I expect modest home construction but 60,000 new apartments.
Investments in retail stores have a better chance for success in Brooklyn and especially Queens, where the population increase has not been matched by more stores. Brooklyn, Queens and the Bronx are underserved compared to the wealthier suburbs – more so than the income differences. The rapid expansion of healthcare jobs in Brooklyn and Queens will create needs for more office space there as well.
Source: Forbes