5 Things To Know About Today’s New York Apartment Market
Posted by Wei Min Tan on September 3, 2017
The Manhattan, New York property market makes the news often because it’s the U.S.’s most expensive and the media just can’t resist talking about apartments costing upwards of $50 million. Most recently, a $100 million apartment sold at One 57 and that broke the prior record of $90 million.
If you want to know real market conditions, here are key things to note, from a broker who is not representing buyers of $100 million apartments. Or $70 million apartments.
1. Most Priced Below $5 million
About 85 percent of condominiums in Manhattan are priced below $5 million. The average price of a condominium is about $2.1 million or $1,550 per sqft. Very expensive by U.S. standards but not that compared to cities like London and Hong Kong.
2. Prices Surpassed Peak of 2008
The prior market peak was in 2008 when the average price per square foot (condominiums and cooperatives) was $1,184. Current average price per square foot is $1,284. Condominiums, more expensive and stronger demand than coops, have exceeded the prior peak two years ago.
In Manhattan, the vast majority of buyers are purchasing as primary residence. As such, it is not a speculative market with cyclical ups and downs. We explain to investor clients to expect property prices here to outpace inflation by a favorable premium. Not to expect prices to go up 50 percent a year. This means that over time, Manhattan prices go up steadily, without large leaps or drops.
3. Slower Pace Of Sales
In fourth quarter 2014, sales were 17 percent lower than a year ago. The absorption rate, which shows how many months it takes to sell existing inventory, is at 5.5 months. For context, the historical absorption rate is around 8 months hence inventory is still tight. As a buyer’s broker, this is welcome change because a year ago, it was hard for a buyer requiring financing to compete with multiple all cash offers for limited inventory.
4. Shortage of sub $3 million condominiums
Manhattan’s population continues to increase but there is shortage of property inventory. For example, between 2010 and 2013, Manhattan’s population increased by 38,030 but new property inventory increased by only 5,098.
With the current 2014-2016 new development wave, developers are building higher end apartments (mostly $5 million +) to cover expensive land acquisition costs. The shortage of sub $3 million apartments persists, driven by population growth and no new supply.
5. Ultra-luxury Oversupply Along 57th Street
There is a large supply of ultra luxury condominiums coming up along 57th Street with prices at $4,000 to $10,000 per sqft. These would be completed within the next two years. There are two issues with this upcoming supply
(i) they are all along the same area, roughly from 2nd Avenue/ 57th Street to 8th Avenue/57th Street.
(ii) how many more super wealthy buyers are there to absorb this inventory?