Property Buying Opportunities In New York As Sales Drop 20 Percent
By Wei Min Tan, Oct 7, 2016
It’s now official. Consistent with my previous updates about now Manhattan being a buyer’s market, recently published reports show Q3 2016 sales volume down 20 percent.
The market is especially favorable to cash buyers and this is evidenced by the numerous deals, whether pricing or concessions, we managed to negotiate for buyer clients recently.
In Q3, there were 1,327 condominium transactions, a decrease of 20 percent compared to year ago.
Price per square foot was at $2,133, up 18 percent. Average sales price was $2.95 million, a 27 percent increase, while median price was at $1.6 million, a 6.7% increase. The increases were influenced by higher priced new development closings, where contracts were signed 12 to 18 months ago.
“All cash” transactions were 55 percent of all condo sales. The average listing discount was 3.2 percent from asking price. Remember my comment about Manhattan being a highly efficient market and listings are priced accordingly.
The price per square foot of a condo, at $2,133, is 74 percent higher than that of a coop, at $1,225.
The segment that remains competitive
The $1 million and under segment remains competitive. This represents the studio (median price $645,000) and one bedroom (median price $1,066 million) apartments.
Historically low interest rates and rising prices have prompted entry level buyers to act.
New developments – an opportunity
New developments had an average price per sqft of $2,799. Within new developments, the mix is 11.5% sub $1 million, 30.6 percent $1 million to $3 million, 57.9 percent at $3 million+.
In Q3, inventory at new developments increased 27 percent and this does not account for shadow inventory not released by developers.
Due to supply and current buyer’s market, this represents an opportunity for buyers.
I expect developers to be open for negotiation, whether in terms of closing costs, concessions or price.
What to expect
2017 will be the year of the investor. With global uncertainty and zero yields everywhere, investors globally will be moving funds to the safe haven of Manhattan property.
Financing is the cheapest it’s ever been and should remain so in the interest of sustaining the economy.
I expect investor action to start after the Trump-Clinton election.
Small share of condos explains reliable appreciation
As context for the condo demand dynamics: Manhattan has 1.6 million residents and 850K housing units (average 2 people per household).
Out of the 850K, about 10% or 88K units are condos, 20% or 160K units are coops, remaining 70% are rental buildings. The new development boom may increase condo supply by 8K (10% of current condo inventory) but this is skewed to $3m+ apartments so doesn't impact the core market as much.
With a 1% vacancy rate, coupled with only 10% of housing supply being condos, explains why the rate of appreciation is sustainable.