The big "party" thrown in New York recently was held at the Jacob Javits Center. Every year the center hosts the International Retail Exhibition. This year, daunted by the COVID-19 pandemic, the center has been converted to a huge vaccination site. The New York real estate industry is watching closely, hopeful and expectant as if its salvation lies in the immunized herd.
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Last year ended in a major decline in rent prices on residential properties in central Manhattan, with prices in some cases dropping 30%. The scope of investments in Manhattan real estate shrunk by 51% in 2020 compared to 2019, and a similar drop was reported in New York's income-producing real estate market. This constitutes a record drop, surpassing that of the 2008 Great Recession by 20%.
At the end of 2020, 14.5% of properties in Manhattan stood vacant. This situation shifted the balance between landlords and tenants, with the latter now taking the driver's seat. For now, it is unclear when the New York real estate market will bounce back to its thriving, pre-pandemic levels and when property owners and tenants will resume negotiations.
Whatever happens in New York is the archetype for Tel Aviv. The "city that never sleeps" is currently in a coma. Many tenants have left, leading to a 61% rise in the number of available apartments in the third quarter of 2020. Property owners have suffered a loss of income, with rent prices dropping about 9%.
Property owners in New York are preparing for "the day after," planning to reorganize and offer properties that are a blend of home-office-balcony, which will fulfill three needs: work, privacy, and social distancing.
In Tel Aviv, that kind of thinking is almost inconceivable. Real estate investors have already proven that they rent out apartments in any condition and at any price. Moldy, with leaking faucets, washbasins doubling as kitchen sinks, toilets in the stairwell, loose ceiling boards – these are just some examples of the incompetence of apartment owners in the maintenance of their properties.
In the meantime, many property owners in Israel and in New York have been following the news religiously, regularly checking the number of infected and recovering patients and the effect of vaccines, and awaiting the green light that will signal a return to normal. But who can say if that light will ever shine?
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Will Tel Aviv regain its former glory? Will it again become a refuge for the young, for single mothers, gays, lesbians, and other homogenous communities? Lacking places for leisure, recreation, commerce, and employment, it is not at all clear whether all the special populations that have flocked to the city in recent years will return.
In the stable real estate sales market, which previously reported rising prices, the coming years will be marked by sales of investors' properties – mostly those who had used mortgage funds to invest in an apartment. The coronavirus may thus achieve what the government has not been able to do in years – drive investors away from the city. A little justice will do no harm.
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