China's Xinyuan aims lower amid Manhattan's glut in high-end homes
New York
CHINESE developer Xinyuan Real Estate Co is forging ahead with plans for a condominium property on Manhattan's far west side, even as the company's New York-based executive vice-president sees signs of a glut in the luxury-home market.
Xinyuan is distancing itself from the plethora of skyscrapers aimed at ultra-wealthy investors by designing its first project in Manhattan to appeal to dual-income families and other upper-middle-class buyers, both American and Chinese, according to John Liang. Apartments will sell for as much as US$2,000 a square foot, he said. That's less than the US$2,775 average for new-development listings in the borough in 2015, according to a report by Halstead Property Development Marketing.
With a mounting supply of high-end homes, "New York's luxury-condo market is now at a very, very dangerous edge of bubbles", Mr Liang said in an interview. "It's a myth that Chinese buyers all come to US loaded with cash."
Xinyuan completed its US$57.5 million purchase of the site, on 10th Avenue between 44th and 45th streets, this month and plans to start construction on what it calls a boutique, mid-tier property as early as next year. About 30 per cent of the buyers are expected to be Chinese, about the same share as in the Beijing-based company's first New York project, Oosten, on Brooklyn's Williamsburg waterfront, Mr Liang said.
With China's economic growth slowing and its currency, the yuan, depreciating, an increasing number of Chinese investors are seeking dollar-backed assets. More than US$840 billion left China in the first 11 months of last year in an unprecedented exodus, according to data compiled by Bloomberg. The offshore yuan dropped for a fourth day on Friday as investors became more bearish on the currency amid capital outflows.
"The currency uncertainty will actually encourage more Chinese capital to go overseas," Mr Liang said. "We have not seen any signs of waning demand from Chinese buyers."
At about US$2,000 a square foot, a two-bedroom condo in Xinyuan's west side project would cost about US$1.5 million - a price that's "affordable for upper-middle-class New Yorkers", Mr Liang said.
Xinyuan is joining builders such as Extell Development Co and HFZ Capital Group's Ziel Feldman, which are targeting a lower price point with their newest projects as a way of satisfying a shortage in Manhattan. The borough's inventory has skewed towards the high-end after a post-recession development boom produced a flood of lavish condos for multi-millionaire buyers. In the third quarter, the supply of homes for sale in the top fifth of the market jumped 8.9 per cent, according to an analysis by real estate website StreetEasy. For the other four levels combined, listings fell more than 3 per cent.
The median sale price of all condo and co-op sales in the borough reached US$1.15 million in the fourth quarter, the highest in 27 years of record-keeping, according to a report by appraiser Miller Samuel Inc and brokerage Douglas Elliman Real Estate.
Xinyuan entered the New York market in 2012, with the purchase of a 0.8 hectare parcel on Kent Avenue in Williamsburg for US$54.2 million, a deal the company said was the first of its kind by a Chinese firm in the US. Xinyuan expects to sell out the 216 units at Oosten, its seven-storey project named for the Dutch word for east, by the end of the year, Mr Liang said.
While Xinyuan prepares to build its Manhattan condos, the company will look for additional land-acquisition opportunities on the east coast, according to Mr Liang, who is also an architect.
Chinese purchases of New York real estate have surged in the past two years, including Anbang Insurance Group Co's US$1.95 billion purchase of the Waldorf Astoria hotel. Manhattan was the top US area for Chinese commercial real estate investment in 2015, with US$5.15 billion of transactions, according to research firm Real Capital Analytics Inc. BLOOMBERG
