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First Quarter Market Report - Manhattan apartment sales are up

The first quarter of 2010 saw a healthy return of buyers to the New York City real estate market. Favorable market conditions such as low mortgage rates, more confidence in the economy, extension of home buyer tax credit and stabilized prices helped buyers make the step to purchase a property. As a result, average sale price and average price per square foot of an apartment were up 2 percent versus last quarter. For resales only, these metrics were up 3 percent. Note however, that prices are still significant below the peak prices of 2008. (as reported by Corcoran, Q1 2010 Manhattan Market Report)

3 essential questions to ask before investing in New York property

Yes, the United States have experienced (and are still experiencing) one of the worst economic crisis since the Depression in the 1930s. Real estate prices across America have dropped significantly and New York City real estate has not been an exception. But what should you consider before buying property in the New York?

1.What is your reason for investing?
Many foreigners are currently purchasing property in the United States. There are several reasons why they purchase a property. Often, foreigners are trying to take advantage of the historically low real estate prices. Many wonder whether this is a once-in-a-lifetime opportunity. Others are purchasing the property as they have young children who will (most likely) end up studying in the United States. Others believe in diversifying their investment portfolio and want to add US real estate to their portfolio to hedge against other risks (e.g. the risk of lower stock prices in their home country). Other foreigners are buying a holiday home in the USA to spend their vacations. And lastly, some foreigners are looking for a property in the USA as a "trophy" – an accomplishment for all their hard work…
As such, consider first the reason you want to buy a property in the USA as that will drive the location of the property, the size, the amenities and the purchase price.

2.Why in New York?
Second, you should consider why you want to purchase a property in New York. As anywhere in the world, real estate is all about "location, location, location". Everyone (including Americans) have different opinions on what the best location is. Some people prefer the south such as Florida as they believe in the "sunshine state" – a state in which the weather is relatively speaking nice (except maybe some hurricanes). Others prefer places such as Las Vegas – an up and coming city with many gambling and entertainment facilities. And others prefer a large cosmopolitan city such as New York, Boston, Chicago or Los Angeles as they believe it will continue to attract both Americans and foreigners due to the job opportunities. As such, consider the growth potential of the city you want to invest in, the job market, the demand and supply of apartment and houses, etc.

3.How will you finance this property purchase?
Currently, many Americans face major challenges obtaining financing to purchase an apartment in their own country. Banks are very stringent and will request a lot of information before approving any financing. It is even much more difficult for foreigner to obtain any financing from US banks. As such, you might have to consider using cash to purchase a property. This may or may not affect the size of apartment you can afford. Before traveling to the USA, think carefully about your financing needs so you can optimize your search.

Are foreigners buying property in the United States?

Many foreigners are currently purchasing property in the United States. Based on a report published by National Association of Realtors ("NAR") in September 2009, foreigners buy 9.4% of all USA property sales (for the year ending in May 2009). The report also indicates that of those foreigners who bought property in the USA, almost 50% paid cash for their home. This is mainly due to the stringent lending conditions. The top five countries of origin for foreign buyers of property in USA were Canada with 17.6% of buyers, the UK (10.5%), Mexico (9.8%), India (8.5%) and China (5.4%).

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