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New York City real estate: The world’s ‘ultimate safe haven’

Talking Numbers

New York City real estate: The world’s ‘ultimate safe haven’

It used to be said that the streets of New York are paved with gold. Actually, for those desperate to preserve their wealth, New York City is filled with something a lot more useful: luxury real estate.

The Russian ruble has been battered by plunging crude oil prices and geopolitical concerns, with the currency losing more than half of its value against the dollar this year. And as for the common safe haven move of owning gold, we have learned over the past few years that bullion can lose value as rapidly as it gains it. This leaves pricey Manhattan real estate as one of the few places where Russian millionaires and billionaires feel comfortable parking money.  

“We see a lot of inflows of foreign money coming to New York, especially from places like Russia and China,” said Tamir Shemesh, associate broker at the Corcoran Group. “They know this is the safest place for their investments.”

Of course, Russian billionaires have a lot of choices when it comes to where they invest. But a confluence of factors conspires to make the Manhattan real estate market tops for nervous global investors.

“From a worldwide standpoint, Manhattan real estate is truly the ultimate safe haven. There is liquidity, strong demand, and because Manhattan is an island, a limited supply of future product,” Donald Lutt, senior managing director for financial services at Colliers International, wrote to CNBC.

For these reasons, real estate experts dismiss the common concern that New York real estate has the makings of a bubble.

“Obviously, inventory is going to rise in the city,” but “money is still coming in,” Shemesh said, noting that $120 billion is projected to leave Russia by the end of this year, and $80 billion more by the end of next year.

“I would think and assume that some of this money will come in and be translated into purchases of real estate in New York City,” he said. “It could be residential, it could be commercial, anything.”

And even if interest rates rise, Lutt says,  global demand will keep prices supported. 

“The strong demand and continued appreciation in values should more than counter any interest rate-related decline in values,” he said.

For now, then, in the words of Frank Sinatra, New York City seems set to remain the “top of the heap.”

--By CNBC’s Alex Rosenberg. With reporting contributed by CNBC’s Lawrence Lewitinn.