Manhattan property’s weak first quarter 2018
Posted by Wei Min Tan on April 13, 2018
According to the Elliman Report, Manhattan property first quarter 2018 sales volume was the lowest in six years. The weak first quarter numbers is due to:
(i) Changes in the federal tax law. The Trump tax law decreased mortgage interest deduction from $1 million in principal to $750,000 in principal. Also, state and local tax (SALT) deduction allowance is now limited. These changes affect people buying for self use (primary residence buyers).
(ii) The end of legacy new development contracts. This refers to new development contracts signed 1-2 years ago when a building was in pre-construction stage. New developments have higher prices per sqft than resale property hence increasing average numbers. These new developments have since closed which lowers the averages.
(iii) Increasing mortgage rates.
Condominiums
Specific to the residential condominium market, the Elliman Report shows average price per sqft of $1,989, a 1.2 percent increase from Q4 and a 21.8 percent decrease from a year ago (Q1’2017). This is driven by removal of the legacy new developments, which are all condos. Sales volume of 948 units was 33 percent lower than a year ago. The average price of a Manhattan condo was $2.67 million, 10.9 percent lower than year ago.
Studios make of 11.7 percent of sales at a median price of $630,000. One bedroom 35.7 percent of sales, $1.1 million. Two bedrooms 31.9 percent of sales, $2.3 million. Three bedrooms and larger apartments make up the rest.
Is the market changing?
Over the past 3 weeks, I have witnessed bidding wars and heavy traffic in the studio condominium segment. We got outbid on two apartments. Investors are the beneficiaries of the tax law change and perhaps they are coming in now to take advantage of the slow market.
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