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The Perennial Question — Will Bonuses Boost Manhattan Real Estate?

Despite incurring billions of dollars in losses this year as a result of the turmoil in the credit and housing markets, Wall Street firms are expected to dole out a record $38 billion in bonuses this year, according to Bloomberg. That’s an average of $201,500 per person, when divided among the 186,000 workers at Goldman Sachs Group Inc., Morgan Stanley, Merrill Lynch & Co., Lehman Brothers Holdings Inc. and Bear Stearns Cos., Bloomberg says. Bonuses from these five firms totaled $36 billion last year, Bloomberg says.

Will the bonuses bolster Manhattan’s already seemingly Teflon-coated residential real-estate market? It’s a question that crops up each year during bonus time. Here’s a look at the range of answers that we’ve received and seen:

We called Jacky Teplitzky, managing director for Prudential Douglas Elliman. The boost in bonuses is “a piece of good news” for Manhattan’s residential real estate market, she says. She adds that while Manhattan’s housing market is not solely driven by Wall Street, positive bonus seasons have traditionally correlated with gains in the sector.

With the chance that at least some of the bonus money will flow into the housing market — and potentially raise Manhattan’s real-estate prices — those who’ve held off on buying in the hopes of seeing price cuts may jump into the market now that such price decreases seem less likely, she says.

We also called Stan Ponte, president of Coldwell Banker Previews New York, the international luxury marketing division of Coldwell Banker Hunt Kennedy. His response: “We are arming our battle stations.” This year’s record bonuses should spur both buyers and sellers, resulting in more sales, he says. Much of last year’s bonus money went into Manhattan real estate, he says, adding “there is $38 billion being paid to people who work on this tiny island and a big portion will go into real estate.”

Meanwhile, a New York Observer article published on Oct. 29, says that the “bonus bounce held sacrosanct by many brokers and analysts” can’t always be expected and that great Wall Street bonus seasons haven’t always spiked sales in Manhattan. The article includes a chart of Manhattan real-estate sales from 2000-2007, with results that show that high bonus seasons don’t always correlate with a similarly sized jump in apartment sales. Mr. Acitelli does note, however, that “bonuses do often affect home prices, however, particularly at the higher end.”

And in an Oct. 31 post on New York Magazine’s Daily Intelligencer blog, responding to news about a predicted 10% drop in bonuses, Andy Gerringer, who heads new development marketing for Prudential Douglas Elliman, was quoted as saying: “Bonus season, as nice as it is, has minimal effect on our market in general,” adding: “It’s not like 500 financial professionals decide to buy a home all at once — many of them already have nice homes.”

Any Manhattanites out there? Will news of this year’s bonus payouts affect your decision to either buy or sell? Do you expect the bonus season to produce a surge in homes sales and prices? — Lauren Baier Kim



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