Not so cheap now.

Photographer: Jin lee/Bloomberg

Manhattan Condo Shock for Euro Buyers

Jonathan Miller writes about the housing economy and other aspects of real estate. He began a real estate blog, the Matrix, in 2005, and has written a column for Curbed.com. He is co-founder of Miller Samuel, a residential real estate appraisal company, and the commercial valuation firm Miller Cicero.
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During the past year, foreign buyers have accounted for about a third of all condo deals in Manhattan. It probably won't last. 

Despite the hype about Chinese and Russian buyers bringing suitcases of cash to make purchases, Europeans have been the largest investors in the market. And with good reason: Those who went shopping with euros enjoyed a large discount compared with their domestic counterparts as a result of the weak U.S. dollar.

As recently as three years ago, the euro-to-dollar discount was about 30 percent. But that started to erode in the second half of 2014 and then it plunged in the new year. The anti-euro Greek election results, the announcement of a quantitative-easing program by the European Central Bank and better U.S. economic data have crushed the discount, which now stands at about 10 percent.

Translated, the median discount for a European buyer of Manhattan condos fell to $154,000 from $372,000 just one year ago, and now is the smallest in a decade.

Those who are buying with euros tend to be the wealthy, looking to shelter their assets.  This is a contrast to the mid-2000s, when European middle-class buyers flocked to Manhattan to realize the currency discount. 

Although it is true that much of the Manhattan condo market is beset by low inventory, this may change with fewer European buyers. (And fewer Russians, too, thanks to the ruble's devaluation.) This combination probably will cool the condo market from its hot state for the rest of this year. 

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Jonathan J Miller at jmiller@millersamuel.com

To contact the editor on this story:
James Greiff at jgreiff@bloomberg.net