Low Interest Rates, Capital Gains Spike, Could Spur Sales: Massey Knakal

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Still the numbers pale in comparison to the boom years. In 2006, $44.5 billion of deals were done and 2007, the most prolific year on record for New York City’s sales market, $62.19 billion of deals were completed, according to Massey Knakal figures. Mr. Knakal didn’t think that dollar volume would swell in 2012 to that level but predicted the market could see between $41 to $45 billion of sales activity.

Pricing on average per square foot appreciated by 6.1 percent across property types in 2011 the company said. While that figure was lower than the wild uptick in value that occurred as the market skyrocketed during the boom years of 2005 to 2007, Mr. Knakal said that the appreciation level was compelling compared to other investment classes. “I think our expectations are skewed by the fact that during the boom years there were huge gains and when the market fell there were big losses, the scale of expectations has been kind of exaggerated,” Mr. Knakal said. “But six percent is very solid. Warren Buffett always says that ten percent returns are outstanding. I think that in a market where treasuries are low, six percent returns on real estate make it a desirable asset class.” Mr. Knakal predicted that prices could outpace 2011’s increase, rising by as much as eight percent on average per square foot in 2012.

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James Nelson, an executive at Massey Knakal who participated in the company’s presentation supported Mr. Knakal’s point that real estate was attractive to buyers because it offered compelling returns and stability during a period of continued economic uncertainty.

“Real estate benefits from the trend of investors wanting hard assets,” Mr. Nelson said. “People want something they can touch. Besides gold, real estate is one of the few hard assets and it cash flows.”

DGeiger@Observer.com