The real estate issues to watch for in 2015 **Interest rate increase** Interest rates are still at record lows, but it’s widely believed a rate increase is coming in 2015. And while Federal Reserve Chairwoman Janet Yellen hasn’t indicated when, economists point to sometime in mid-June. That prediction means the next six months are likely to be busy. “People are doing deals now as opposed to six months from now, because there’s more certainty,” said Jay Neveloff, a partner at the law firm Kramer Levin Naftalis & Frankel. “No one has a crystal ball,” he said, but everyone realizes rates are at record lows. Among residential buyers, De França said an interest rate change would mainly impact first-time buyers, rather than the luxury market. That’s because in New York City, many luxury sales are all-cash, or a significant amount of cash. Many of those all-cash sales involve foreign investors, who are expected to continue parking their money in New York real estate. “The financial-crisis hangover is still with us,” said Miller. “Investors are wary of financial market investing. They’ve shifted to hard assets.” He said investors snapping up New York City real estate aren’t necessarily looking to make money. “The primary goal is safety, capital preservation. We’re building the world’s most expensive bank safety deposit box. That’s what some of these buildings will end up being.” Another group that would likely be hard-hit by rate hikes are developers themselves. “It’s going to scare some [developers] away, because of the amount of equity that needs to go into these deals,” said Richard Wood, president and CEO of Plaza Construction. He said higher interest rates would prompt developers to set tighter schedules for contractors, in order to maintain profitability. “Developers or investors are now going to have a lot more risk of losing their investment, because a higher interest rate could suck the profitability out of a job if it’s not kept on schedule.” While rising interest rates won’t impact the super high-end buyers or foreign investment, they are likely to slow mid-range condo sales, Wood said. “If something trips the market — maybe interest rates — developers will be holding the bag on a huge equity slug that could end up being lost, or they will have to try to wait it out.” Information provided by E.B. Solomont from New York Real Estate News
Posted on: Wed, 14 Jan 2015 06:12:04 +0000
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