Curzon Blog

Brexit, Tipping Points, and More

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A few big things happened this week...

Wednesday March 29th - the withdrawal process of the UK from the EU officially commenced, triggering Brexit.

Thursday March 30th - members of the Curzon team were privileged to speak at Ed Cohen's Global Business News Conference, touching upon the recent upheaval and how it'll affect property in New York and London. 

Curzon Real Estate's Managing Director Paul Soley shared his views and expertise on what to expect in the tumultous times ahead; read on for his expert advice.

With Brexit contributing to instability in Europe, many people are looking for security and they’re looking at America - New York in particular. Let’s take a quick look at what’s going on here.

Stability:

Job creation continues a strong trend beginning around 2011. The unemployment rate started dropping from a high around 10% in 2011 and has dropped consistently ever since and currently stands at 4.7%. Similarly, the stock Market, which stood at 6443 in March of 2009, has steadily gained, closing at 20,626 on March 29, 2017. In December, a committee in the House of Lords concluded that financial services that decide to leave London are more likely to move to New York than elsewhere in the EU. The committee highlighted the fact that New York already has a highly evolved finance "ecosystem," second only to London, and says businesses feel it would be easier to become part of New York's scene than try to replicate a rival ecosystem in a city like Paris, Frankfurt, or Dublin.

New York Real Estate:

The book on 2016 closed on a strong note despite previous year’s price gains and bidding wars cooling down. Super luxury buildings - part of the "race to the sky" - have been coming online at an incredible pace the past few years. The tallest residential building, 432 Park at 1396 feet, which opened just over a year ago, will soon be surpassed by Central Park Tower at 1550 feet. All this high end construction has led to what Jonathon Miller of Miller Samuels referred to as a slowing of the frenzy of “aspirational” pricing on luxury apartments. Brooklyn maintains its title of hippest city in America, and Queens has development projects everywhere. The state of the market is strong, expected to remain strong, and continues to attract a great deal of foreign investment.

Political Alliances:

With Brexit compounding apprehension of the viability and future of the EU, America scuttling trade agreements such as the Trans-Pacific Partnership and suggesting that NATO is obsolete, the status quo has been turned on its head. U.S. relations with long time allies such as UK, Germany, Australia, Mexico (and the list goes on) have been strained while it appears that closer ties with an emboldened Russia are being forged. Nationalism is on the rise as a backlash to terrorist attacks in many countries. Free trade, the EU, and NATO have arguably been the linchpin to peace and prosperity in Europe for the past 70 years. There is a lot of concern throughout both America and Europe regarding a reordering of traditional alliances. Certainly more questions than answers at this point.

Immigration:

As per Scott Fitzgerald, partner at Fragomen:

"For the U.S., it's still early days, but the difficulties that the Trump Administration has encountered with implementing their travel ban (and tying to repeal Obamacare) are instructive. It's easy to propose populist ideas, but much more difficult to bring them to fruition through governance and legislation. I would predict that the Trump Administration will meet a similar level of opposition against their efforts to de-fund Sanctuary cities and build the Wall. Therefore, substantial changes to US employment-based immigration policies resulting in much lower levels of high skilled immigration and relocation may be harder to achieve than they first envisioned. For the UK, there is no doubt that a populist backlash against immigration, especially from Eastern European accession countries (e.g. Poland and Hungary), was a primary factor in Brexit. However, it remains to be seen whether the UK will be able to negotiate favorable trade terms with the EU if they attempt to close their borders to skilled and unskilled immigrants from EU member countries. The UK may end up in a place where they lose some of the benefits of EU membership (and indeed some of the costs), while still allowing the influx of large numbers of immigrants, both skilled and unskilled."

Immigration, as always, is a critical aspect of the relocation industry. A less rosy outlook for US immigration would point out that a protectionist mood is ascendant in Washington and may affect, for example, the H1B visa program. How will a border wall - if built - or travel ban - if it is ever implemented - be perceived by people in other countries? Will companies still see the US as a safe place to invest? Will the best and brightest students still choose America? All this too, remains to be decided.

Populism:

An "America First" ethos evidenced by pivoting from free trade, offering protectionist policy prescriptions with threats of tariffs to discourage cheap imports, policies directed toward a return to manufacturing and nonrenewable energy, are a change in direction from the past several decades. What impact will these changes have on corporate relocation? Also - to be decided.

In the Future:

There is a lot of uncertainly in the world right now. Let’s take a look at ways to use data to analyze how to make the best decisions in turbulent times, from the standpoints of both an investor as well as a transferee in the process of relocation.

The "Tipping Point": In unstable times, the US - and New York - are seen as a stable investment. Rent versus purchase comparisons in NYC neighborhoods give a good idea of the strength of the market. That information, along with other factors a transferee should take into account when selecting a neighborhood or town (e.g. schools, desired lifestyle, commute tolerance, and budget), can be dificult to parse - that's where your friendly neighborhood Curzon agent comes in. A great tool for for the rent versus buy equation comes to us from Bloomberg.  Using data from Streeteasy, this interactive map of neighborhoods and their 'tipping points' - 31 years in SoHo versus 2.2 in Canarsie - gives a great glimpse at market factors, with some surprising numbers that disprove the common notion that buying in New York is unrealistic.

Conclusion: Whether in the UK, EU, or the good old US of A, business as usual is clearly not the rallying cry of the moment. In these unstable times, more questions than answers abound. That's what we're here for; reach out today. 

Tags: bloomberg, Brexit, Curzon, International, New York, News, Rent, Resources, Trends

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