Based on the latest reports from the major real estate brokerage firms in Manhattan, the real estate market in Manhattan is sending mixed signals. This might be an indication that the property market has reached its top and now going into a stabilization phase.
From a positive side, the Manhattan housing market built momentum in the first quarter of 2017 as the overall number of resale transactions, including both co-ops and condos, increased 7.7 percent year-over-year. Another positive element is that the average sale price, including both new and resale condos and co-ops, rose 2.6 percent to $2.1 million.
However, there are some negative factors in the Manhattan real estate market at the moment. While the average sale price did increase slightly, the median sale price, dropped 3.3% over the last 12 months. Also, it takes longer to sell units in Manhattan. Homes spent an average of 90 days on the market, up from 78 days recorded the same time last year.
While the market overall is sending mixed signals, it is important to look at the condo market in particular as condos are the type of apartments that foreigners will typically purchase. Condos have the advantage of being less restrictive around the sale and renting out of the units. This is a major advantage for foreigners who often do not have the necessary credit scores and documentation to buy in a coop building and also need the flexibility to rent out their unit.
This condo sub market seems to be neutral to slightly positive. Most brokerage firms indicate that the average sale price for condos increased approximately 4%.The median price for condos remained flat over the last 12 months.
Lastly, there is good and bad news for the new development projects in Manhattan. Both average and median prices recording year-over-year increases. The average price rose 23 percent to $4.8 million and the median price increased 4.9 percent to $2.8 million. However, the sales of new development projects dropped more than 25% from last year. Furthermore, units in new development projects spent an average of 241 days on the market — nearly twice as long as last year.
The outlook for the rest of the year is unclear, but sales are unlikely to surge over 2016 — especially if interest rates continue to rise.
Co-ops are not as popular in New York City as they were decades ago. It used to be that 85% of apartments in New York City were co-ops. But not any longer. People in New York aren’t as willing to pay their higher monthly fees — or deal with their persnickety boards.
There are two types of apartments in New York City that a buyer should be aware of, namely cooperative apartments (or called “co-ops”) and condominiums (or called condos). These are basically two types of legal structures for apartment buildings. The main differences are that co-ops usually have many more restrictions when someone wants to buy or rent an apartment. Often co-ops have many requirements that need to be satisfied before a potential buyer or potential tenant is able to buy or rent an apartment. The Board in a co-op building often requires interviews with the potential buyer or renter to determine whether the person is suitable enough to live in the building. Furthermore, co-op buildings are very restrictive in a landlord to rent out their unit, for example many co-op buildings request that the owner can only rent out their unit for 2 years and then the owner needs to move back into their apartment. This is of course a major challenge for investors who are looking to buy an apartment in Manhattan but never plan to live there.
Residents of co-ops aren’t typical homeowners: instead of the individual or family owning the apartment they inhabit, they own shares of a larger corporation — which in most cases, is the building. With it comes a lower price tag but higher monthly payments than other living arrangements and headaches like bigger maintenance fees, and more rules on what residents can and can’t do in their homes and on the property.
Although co-ops still dominate the housing supply in the city, they’re losing out to condominiums, which are units that usually cost more than co-ops initially but come with lower maintenance fees and have fewer rules, experts said. Co-ops make up 75% of New York City’s housing market, while 25% are condos, compared with 30 years ago, when co-ops made up 85% and condos 15%, according to Investopedia.
The co-op market apparently seems to slow down. The co-op inventory in New York City has become so stagnant that the number of unsold properties grew 20% higher in the fourth quarter of 2016 compared with the same time the year before, and asking prices are being cut 10% to 15%, The Wall Street Journal reported.
Despite a decline in the number of sales, the average Manhattan apartment price reached a record $2.1 million in the fourth quarter of 2016. This figure was 9% higher than a year ago. Furthermore, the average price per square foot was up 6% over last 12 months. However, the median apartment price in Manhattan was down between 4% and 9% from 2015’s fourth quarter depending on the report that you are using. Days on the market is increasing. These numbers include prices for condominiums, cooperative apartments and townhouses in Manhattan.
Foreigners should probably only focus on condominium market (and not the coop market). Condos offer more advantages such as flexible rental policies and limited Board approvals required. Average condo sales prices increased 16% over the last 12 months. However, median sales prices decreased slightly – a reduction of 2% over the last 12 months.
New condo developments, a small segment of the entire condo market, continued to do very well. The average sale price of a new condo development was approximately 40% higher than a year ago. The median sales price of new condos was approximately 42% higher. However, the number of sales is going down and is likely continue to slow further in the first half of 2017.
Room for negotiation?
Apartments sold during the fourth quarter spent an average of 88 days on the market, 10% longer than a year ago. Sellers received 98.0% of their last asking price, down from 98.7% in the fourth quarter of 2015. This basically means that Sellers are willing to give slightly more discount on their asking price.
The Luxury market is defined as the top 10% of closed sales in terms of price. As of the fourth quarter 2016, the luxury market threshold was $4.2 mm. The reports indicate that more than 50% of all luxury sales are done in downtown Manhattan. Prices indicate a mixed story – median prices were down slightly while average prices increased a bit.
Overall, the Manhattan condo market seems robust and Agents are reporting a healthy number of transactions and negotiations. There is certainly a bit more room for negotiation but 2% discount on the asking price still looks like a very tight market. While interest rates are expected to go up, the increase will be gradual and have little effect on the market. The start of the Trump Administration is reported to be a good thing for the New York real estate market. Based on the long history of continued increasing prices, an investment in Manhattan is probably a safe thing no matter what interest rates and Trump eventually will do in 2017!
Elliman, Corcoran, Rutenberg, Wall Street Journal and East-West Property
Prices for top-end real estate apartments in Manhattan have dropped about 5-7 per cent from a peak last September, and they will probably keep falling for a while. Developers talk about a series of reasons for this trend: faltering flows of money from China, Russia and Brazil; the recent expiry of a citywide tax abatement program; and frequent calls to the banks from the regulators, telling them to rein it in a bit.
The result is that banks have pulled back from providing construction finance.
The core problem is too much supply. There were about 5,250 apartments available to buy in Manhattan this week which is the most since 2007. But analysts expect stocks to double by next year, as more buildings reach completion. That keeps apartments on the market for longer. Apartments in the $1m to $3m bracket are now taking more than 50 days to sell — twice the average last year.
In the super luxury bracket — $10m and above — there are currently 531 apartments to choose from. For $85m, for example, you can buy an eight-bed, eight-bath condo on West 42nd St, which includes a million-dollar yacht with docking fees for five years as well as two Rolls-Royce Phantoms (one convertible, one hardtop).
However, Gary Barnett, CEO of Extell Development, a major luxury builder is not worried about this. The firm has started construction at Central Park Tower but has yet to secure construction financing. It’s being advertised as the Tallest Residential Building in the Western Hemisphere, and is due for completion in 2019. Mr Barnett says: We think that is going to be the trophy, top-quality building for the next five to ten years,” he says. “It’s just made it more challenging, so only the best, most conservative projects will get financed.”
Chinese billionaire Liu Yiqian paid $23.5 million for a three-bedroom pad at One57. According to the Wall Street Journal, the billionaire acquired the 4,500-square-foot unit on the 62nd floor for what he called "a good price."
The apartment was originally asking $41 million in 2014 before going through several price drops to its most recent asking price of $25 million.
The luxury real estate market in Manhattan has been soft due to a large supply of new luxury condos all over the city.
Williamsburg in Brooklyn is the hipster center of New York City. However, new condo buildings next to the waterfront and where apartments can sell for $1,600 per sq ft indicate that this area has changed significantly over the last 10 years.
The average price of a condo in Williamsburg is now more than $1 million, according to Corcoran (a real estate agency). That price point is almost at similar levels as condos in Manhattan, where condos are selling for about $1.1 millino in the second quarter.
While the main avenue in Williamsburg, Bedford Avenue, is still full of art galleries and boutiques, there are big hotels and chain stores in place of industrial buildings and row houses just a block away from Bedford Avenue. “The era of a gritty hipster hang-out is essentially gone,” says Jonathan Miller, president of real estate appraisal firm Miller Samuel. No district has seen sharper price rises over the past 10 years than Williamsburg, Miller says.
The increase in prices is due to the developers that construct evermore expensive condos. Williamsburg is duly in the midst of another building boom, with hundreds of condos in the pipeline.
In recent months however, home prices have been falling and the supply of new condos could cause trouble for the neighbourhood. The average price of a condo in Williamsburg decreased 13 per cent over the last 12 months, according to a survey from Corcoran.
Much of the new construction is happening alongside the East River waterfront. New buildings include the Oosten, a 216-unit development that occupies a full city block near the river. One-bedroom apartments start at around $1.1 million. The project is 75 per cent sold. Another waterfront project Austin Nicols House with 338 units is under construction a few blocks away, and asking prices for studios to three-bedroom condos range from $535,000 to $3 million.
However, one of the biggest potential challenges facing the new developments could be the New York subway system. The L train — a critical link between Williamsburg and Manhattan — is set to be temporarily shut down for 18 months, beginning in 2019. The city needs to repair damage left over from Hurricane Sandy in 2012. This upcoming halt in service of a critical subway line halt has left some business owners and real estate brokers worried about what will happen to the real estate market in Williamsburg.
It is getting tougher to find a home in the suburbs around New York at the moment, with buyers going after all the same homes.
CBS2, a major news agency in New York, had some tips to proceed if you find yourself in a home buying bidding war.
Real estate agents said anyone shopping in the superheated New York suburban home market this season had best be prepared for the bidding war.
“Around here, you can get a listing on Friday, and by Sunday go to multiple bids,” said real estate agent N. Elsas.
Westchester County, a neighbourhood with good schools around, in particular is bidding war territory, with real estate agents setting the bait for multiple would-be buyers. “I find that if you list it a little bit low, you’ll get multiple offers” and spark the war, said real estate agent D. Turner.
One house in Bedford that Turner just sold went to sealed bids from three would-be buyers. Turner cautions people not to hold back when it gets to that point.
“I’ve had buyers call me after the conclusion of the bidding war and saying: ‘Can I go a little higher now? I’ve decided I really want it and I didn’t go high enough,’” Turner said. “Generally, there’s not that opportunity.” Turner said bidders should be bold, but not impulsive. Also, they should know the appraisal value of the property, especially if they are financing the deal as most people do.
“The bank is going to decide what the value is, and if it doesn’t appraise for the contract price, the buyer’s going to have to make up the difference in cash,” Turner said.
The other big items are to be pre-approved for financing before you start, and to have the property inspected before you bid on it if possible. Rye agent Elsas said buyers should try not to be difficult, but it could cost them the house.
“If I’m selling my house, I’m not waiting for somebody to get their mortgage. I’m not waiting for somebody to quibble about this little bit and this little thing in the house,” Elsas said. “We want somebody who’s raring to go, and those are the people who get the houses.”
In short, the advice is to bid high, have your financing pre-approved, know the appraisal, pay for inspections, and be nice but have nerves or steel — or stay home.
Agents said it is also not uncommon for bid winners to have morning-after remorse, realizing the bid was more that they could afford. The bottom line – it’ ain’t easy out there.
Based on the latest report of Douglas Elliman, a major brokerage firm in Manhattan, median real estate prices for condo apartments in Manhattan jumped 35.2% over the last 12 months (as of March 31). Average price per square foot for condos increased 34.7% to US$ 2061. The new condo construction market saw an even higher appreciation with a whopping 60% increase in median sale price over the last 12 months.
While the high numbers can be partly explained by the heavy number of closings of luxury apartments, the data shows a strong demand of local New Yorkers and out of town investors.
However, the number of sales have slowed. Though the total number of sales grew 8 percent compared to the same quarter last year, they slipped 3 percent compared to the fourth quarter of 2015. On a year-over-year basis, the number of sales has fallen for the past seven quarters. Meanwhile, listing inventory increased 5 percent over the year.
While the very top of the market — apartments priced at $5 million or more — has slowed, the core market of apartments priced at $1 million to $5 million remains strong.
"What you have is the super-luxury high-end of the market, which started changing a year ago and is clearly slowing," said Jonathan Miller, president of Miller Samuel appraisal firm. "But in the rest of the market, demand is still elevated." And Jonathan Miller also said that overall inventory of resale apartments — which make up the bulk of the market — is about 10 percent below historical norms.
The Manhattan ultra-luxury condo market appears to be slowing down. The luxury real estate market is defined by apartments valued at more than US$ 5 million. Currently, prices are estimated to be 25% down from the peak. There are two major reasons for this trend. The first reason is that over the last few years, many developers have been adding more luxury buildings in the market and as a result, many options are available for those who are looking for the most expensive apartments. Experts indicate that the ultra-luxury market has a major surplus in inventory. The second reason is that economic challenges in foreign markets such as Latin America, Russia, Middle East and China are preventing buyers to continue buying at the same rate.
The result is that many sellers of these prime luxury apartments have to cut their asking price in order to compete with the supply of new constructions units. There is a recent example of a developer who decided to split a US$ 45 million apartment into three apartments instead and sell those three apartment separately. Other developers are also indicating a slower market.
The mainstream market (defined as apartments selling at approximately US$ 1 million) continues to do well. Lack of inventory of apartments in this segment is a challenge for local and foreign buyers.
It has to be seen for how long the softness in this ultra-luxury segment to continue.
Source: CNBC, March 11 2016 and East-West Property Advisors
The median price of a Manhattan apartment has jumped 17.3 percent from the previous year, to $1.15 million, according to a recent Douglas Elliman report. The average price now stands at $1,948,221, a 12 percent rise compared with last year. The average price per square foot is at $1,645 which is a 28.1 percent increase compared with the same period last year.
It does pay off to look a bit more closely at the data. The median price of a brand new construction property was up 15.4 percent to $2,059,411. On the other hand, the median price for resales saw a much more modest jump of 8.1 percent to $960,000. In other words, most of the price increase came from an unusual number of luxury condo sales that closed in the past three months.
Despite those nuances, though, New York buyers of any apartment are in a difficult situation. Banks have been tight with their lending standards during this boom. The tighter rules now make these numbers even more remarkable. In fact, this quarter, “50 percent of the deals were cash,” says Elliman president Dottie Herman, adding that an apartment in Manhattan seems like a better investment than the stock market or a mutual fund.
Inventory did actually finally grow this past quarter but only a small growth.
So is there any bright spot for buyers of New York apartments? Maybe a small one. Corcoran’s report shows the number of contracts signed — which will likely translate to closed sales these first three months — to have fallen by 12 percent. So maybe January will be a little cooler.