Manhattan ultra-luxury market slows down
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