A New York Times investigation into foreign ownership of New York property has cast a very dark shadow over the industry this week. The 8000 word investigation makes a number of allegations regarding the identity of real estate investors many of whom are able to hide behind shell companies and not legally obliged to reveal their identities. The article cites a number of alleged investors and is also highly critical of US tax laws in the state of New York.
The allegations are very serious and will no doubt catch the eye of many politicians across the US although whether any action can be taken by the authorities remains to be seen. This now begs the question, are wealthy investors using real estate hotspots and relatively lax foreign ownership regulations to invest anonymously?
Will this shake confidence in the real estate market?
Time and time again international real estate markets have come under scrutiny amid suggestions that areas such as London, and indeed New York if this investigation is correct, attract more than their fair share of foreign investors. Indeed the UK government has recently been forced to amend laws governing the ownership of real estate via foreign registered companies which can often mask the underlying owners. Whether these changes have had any material impact on the ground is debatable but they do give the impression that the London real estate market is perhaps more transparent.
It will be interesting to see how the US authorities react to this 8000 word investigation by the New York Times and the very serious allegations made. Indeed the publication goes as far as to name individuals whom it believes own property in New York via an array of shell companies. We can only assume that the newspaper is certain that it claims will hold water in a court of law although many of the wealthy individuals mentioned may prefer to let the allegations blow over.
Is real estate now the number one safe haven?
There is no doubt that real estate markets such as those in London and New York have attracted more than their fair share of foreign investors in years gone by. Indeed various authorities have attempted to increase taxes, milk foreign investors to fund their budgets and introduce more transparency. It is debatable as to whether these changes have had any material impact upon the investment criteria of investing in popular real estate hotspots with the intention of protecting investment funds in times of trouble.
In years gone by gold was seen as the number-one safe haven although it has lost its shine somewhat in recent times. When you look at real estate markets such as London and New York they bear little or no resemblance to other markets in the region. While they have taken short-term hits during times of economic trouble these “troubled times” do not seem to last very long and the markets often rebound very quickly. It would be interesting to see the underlying investors in these markets to once and for all prove whether foreign investors really do hold massive influence over these real estate goldmines.