Real estate market in Costa Rica: Manhattan as the representing symptom? 65,000 layoffs on Wall Street this year, according to the Department of Labor, and uncertainty in credit market leave less cash for the real estate market not only in New York but also in traditionally attractive real estate markets like Costa Rica A prolonged slowdown in sales indicates future price reductions, especially as current homeowners lose their financial security and can no longer wait out low-ball offers. New York is the last major city in US to experience a slowdown in transaction volume, following Charlotte, N.C. Through 2007, as housing markets around the country slipped, those two cities held up. In fact, in both cities, prices rose through the first quarter of 2008. Ironic, as these two cities are America's investment banking capitals and invented the first financial instruments that hurt markets around the country. Will prices rise further? No more. The Manhattan multi-million dollar luxury condo market--the investment banker special which has been the focus of developers for the last five years--now looks weak. Just last month, luxury properties have been sitting on the market 79% longer on the Upper West Side (10024) and 75% longer in the 10028 section of the Upper East Side. In days, that's a shift to 146 days in September from 82 days in March for the UWS. For the UES, the average luxury listing has changed from 100 days on the market to 190 over the same period of time. While Wall Street's shake-up might not directly affect the overall real estate market, the possibility for a widespread psychological contagion could slow buying in all sectors. After all, for the last two years--while national markets have slipped-brokers, bankers and writers in New York have called the Manhattan luxury real estate market unscathed, unmarked and immune. When those sorts of assurances turn out to be false, buyers in all sectors and all markets pull back from the bargaining table. Another symptom is the slowdown in European buys. Last quarter, Europeans accounted for approximately one-third of Manhattan luxury purchases. Recent failures of Bradford & Bingley in the U.K. and Fortis in Belgium, the Netherlands and Luxembourg and trepidation about recession across the Eurozone, suggest that Europe is increasingly catching the cold from America's sneeze. An economic stall in Europe means fewer individual Europeans with the scratch to pick up multimilliondollar apartments in New York or buy even bargains in Costa Rica. Normally, job growth would be able to revive a sagging housing market. Of course, that's not expected anytime soon. But even if unemployment suddenly fell, the weak credit environment makes it difficult for those in less-affected industries to close deals--even if they wanted to. Hence, the recovery of the credit markets, combined with a healthier outlook on the job sector is essential to a more positive attitude towards real estate bargains abroad. Even though the prices have not fallen in Costa Rica in comparison with the US market, the demand for properties have weakened sharply, mostly due to psychological effects of a global economic down-turn. Though, the real estate markets have survived any major global crisis in the last 140 years. One thing is for sure: Prices of properties will hit a new all-time high again. However only those, who have the patience and afford it to overcome the stagnation, will be the winners at the end.
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