Manhattan land prices

by on February 20, 2018 at 7:04 pm in Data Source, Economics, History, Law | Permalink

Using vacant land sales, we construct a land values index for Manhattan from 1950 to 2014. We find three major cycles (1950–1977, 1977 to 1993, and 1993 to 2009) with land values reaching their nadir in 1977, just after the city’s fiscal crisis. Overall, we find the average annual real growth rate to be 5.5%. Since 1993, land prices have risen quite dramatically, and much faster than population or employment growth, at an average annual rate of 15.8%, suggesting that barriers to entry in real estate development are causing prices to rise faster than other measures of local well-being. Further, we estimate the entire amount of developable land on Manhattan in 2014 was worth approximately $1.74 trillion. This would suggest an average annual return of about 6.4% since the island was first inhabited by Dutch settlers in 1626.

The article is by Jason Barr, Fred Smith, and Sayali Kulkarni, via the excellent Kevin Lewis.

1 Anon February 20, 2018 at 7:36 pm

….”Manhattan in 2014 was worth approximately $1.74 trillion.”

Was $ 24 ( 60 Guilder) a fair price in 1626?


2 JWatts February 20, 2018 at 8:43 pm

Since the tribe that took the money wasn’t the tribe that “owned” the land, it was a sweet deal to them.


3 IVV February 21, 2018 at 2:25 pm

“Welcome to Manhattan! Hey, you must be new here. Wanna buy an island?”


4 Dain February 20, 2018 at 7:51 pm

“Since the island was first inhabited by Dutch settlers in 1626…”

This won’t go unchallenged.


5 BJ dubbS February 21, 2018 at 6:40 am

It was originally a peninsula. The Hudson river is man-made.


6 BJ dubbS February 21, 2018 at 6:43 am

Harlem River is man-made, the river between Manhattan and Bronx.


7 Anon February 21, 2018 at 2:10 pm

99.9% certain you’re incorrect. Where did you get that idea from? The course of the Harlem river has been altered is all.


8 athEIst February 22, 2018 at 3:34 pm

As the poem says

Only God can make a tree.,..river, whatever


9 Excursive February 20, 2018 at 8:11 pm

From If you accept this, you get an annual return of about 5.6%. Although it’s unclear exactly what this phrase means: “60 guilders in 1626 was equivalent to 734.77 euros in 2011”. I assume it means 734.77 euros in 1626 using 2011 exchange rates, and other debatable assumptions about what happened to the guilder between 1626 and when it was superseded by the euro.

Was Manhattan Really Bought for $24?

One of the most persistent myths in American history is that European explorers really got one over on the Native Americans by purchasing the entire island of Manhattan—where property has averaged $1000+ per square foot over the last few years—for a measly $24 worth of beads and trinkets. It seems like the ultimate bargain, but the truth of the story is more complicated and murkier than that

Nineteenth century historians converted those 60 guilders to U.S. dollars and got what was then $24. That same figure has been repeated for almost two centuries since, frozen in time and untouched by changes to the value of currency—but those guilders don’t stand at $24 today. According to this converter from the International Institute of Social History at the Royal Netherlands Academy of Arts and Sciences, 60 guilders in 1626 was equivalent to 734.77 euros in 2011. The exchange rate to the US dollar varies, but a conversion as I’m writing this gets us $951.08 USD, which puts us more in the ballpark.


10 The Anti-Gnostic February 20, 2018 at 9:08 pm

Yes, and the same could be said for anybody who sold without bothering to check for oil deposits or cashed out of Manhattan before the Industrial Revolution. The current value of Manhattan comes from its subsequent development as a world financial capital, not because of its geographic coordinates.

The Manhattan tribe held or possessed their territory through force. It is not theft or wrong per se, to dispossess one of something he only possesses through force. The law of sovereigns is anarchic, not civil. There’s no higher temporal authority to enforce a “law,” so the law is whatever the sovereign does. Individual or corporate “property rights” only happen when the farmers come and kick the hunter-gatherers off and stake out fees and register titles according to their particular set of legal fictions, which are enforced by the sovereign. What to do with the hunter-gatherers after the farmers show up is a vexing, even tragic problem but it’s only a problem if the farmers bother to worry about it. If you were on the winning hunter-gatherer team you didn’t worry about it.


11 Anon February 21, 2018 at 2:15 pm

Let’s dispell with this fiction that the farmers don’t know what they’re doing. They know exactly what they’re doing. They are undergoing a systematic effort to change our home and make America more like Europe.


12 OneGuy February 20, 2018 at 8:51 pm

They should subdivide Central Park and build high rise apartments.


13 Transnational Pants Machine February 20, 2018 at 9:45 pm

Close, but not quite — they should fill it wall-to-wall with low-income housing, and then fill that housing with DACA recipients and “Syrian” “refugees.”

Honestly, based on the Mayor’s rhetoric, nothing would make NYC residents happier.


14 Anon February 21, 2018 at 2:24 pm

Put a referendum to vote. Either sell the park off with unrestricted zoning, or pay taxes that equivalent to what the auctions would bring in, over the next 30 years or something like that. Multiple choices, so they could choose to pay taxes for a park of partial size to the current one. Maybe a fill in the blank number… Everyone says how much they’re willing to pay, with the required amount to keep the whole park specified on the ballot. Then take the median value and auction off however much equates to the remainder.


15 Ray Lopez February 20, 2018 at 11:38 pm

Good statistic, goes into my file. I bet DC has a similar statistic. And that fool Taleb says not to be a rent-seeker?


16 John February 21, 2018 at 12:44 am

6.4% is actually not very impressive since surely getting into Manhattan real estate in the 17th century should have been the most prescient real estate buy of all time.


17 Ray Lopez February 21, 2018 at 3:57 am

But, keep in mind a lot of better investments went to zero (Czar Russia bonds for example, or some Japanese company in 1930s Manchuria).


18 athEIst February 22, 2018 at 3:46 pm


The japanese(and some slave labor) heavily industrialized Manchuria(Manchukuo) in the 1930s. Does any of that remain or was it destroyed…or carted off to Russia)?


19 rayward February 21, 2018 at 6:35 am

Are rising asset prices, especially for land, the cause or the consequence of rising inequality? Rich people are concentrated in Manhattan and in the Bay Area, and land prices in those two places have risen the fastest, which suggests that rising land prices are a consequence of inequality not a cause of it. Either that, or all those rich people are creating wealth by selling land to each other. As Cowen points out, the average annual rate of return on land in Manhattan over a long period isn’t extraordinary; rather, the average annual rate of return ebbs and flows as the overall economy ebbs and flows. Of course, “average” is probably the most deceptive word in the dictionary, one that economists and hucksters in particular seem to enjoy using. Land prices are prone to bubbles, which means they are subject to rapidly rising prices and, alas, rapidly falling prices. Timing is everything when it comes to investment in land. And investment in assets generally. Sure, over the long-term the average annual rate of return on assets is attractive, but people aren’t “average”. We’d all be rich if we invested all our savings in Apple stock, right? Take a look at a graph of Apple stock prices over time. “Average”, it’s what gives investors confidence that prices of assets will always rise, and is proof that people will believe anything. Indeed, if not for “average”, smart people would put their money in a safe place, like in Florida swamp land or in Bitcoin or, better yet, under the mattress.


20 spencer February 21, 2018 at 11:47 am

we estimate the entire amount of developable land on Manhattan in 2014 was worth approximately $1.74 trillion.

I’m curious about this. I would presume that most of this is land with a building already on it so what you are really estimating what buildings are worth destroying to build something more valuable on the plot. I would really like to see how they came up with this estimate.

Is it like proven oil reserves where you should think of it as an inventory that can be developed at current prices and technology?


21 Tyler Fan February 21, 2018 at 11:02 pm

And the wars in Iraq and Afghanistan are going to cost $2.4 trillion.


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