Manhattan’s residential sales and residential rental markets have continued to see a healthy level of activity throughout 2012, to date.
Residential rents have been rising rapidly this year. There is a higher demand for rental housing, in part, because many potential local buyers have found it difficult to obtain financing to purchase an apartment. Banks’ lending practices are strict. Credit is tight. Only the most financially qualified buyers can obtain financing.
Residential sales of condominiums have been robust, especially in new developments. Wealthy foreign buyers (Brazilians, Canadians, Chinese, British, Koreans, Russians) have been buying condominiums for reasons of diversification of investments, for safety’s sake and because the U.S. dollar is weak. Between 15% and 20% of condominium sales are to foreign buyers. Most of these sales are all cash purchases.
Foreigners tend to buy condominiums rather than cooperatives because cooperatives usually have restrictive rental policies and do not permit purchasing in the name of a corporation or limited liability company.
The inventory of apartments for sale (both condominiums and cooperatives) is down 25% from two years ago. Condominium inventory is down 36%. If this trend continues, prices are likely to rise. All the new development condominiums that came on the market during the 2008 and 2009 financial crisis have been sold.
The highest prices are found in new residential condominium development which represent approximately 15% of all residential sales. According to The Elliman Report’s 3Q 2012 Quarterly Survey of Manhattan Co-op and Condo Sales, prepared by Jonathan Miller, the average sales price for a new development condominium is $2,136,881. The average sales price per square foot is $1,422 or $132 per square meters, an increase of 15.5% from one year ago.
There will be approximately 27 new residential condominium developments coming on the market in Manhattan in the fall of 2012 or during 2013 and 2014. This represents less than 1,000 apartments. Given the current demand for new development, this increase in inventory will not be sufficient.
Over the last decade, the residential sales market in Manhattan has shown year-over-year price increases except in 2008 when the market dropped during the financial crisis. The Elliman Report for the Manhattan Decade 2002-2011, prepared by Jonathan Miller, shows the average sales price for condominiums and cooperatives was $617 per
square foot or $57 per square meters in 2002 and $1,087 per square foot or $101 per square meters in 2011. In 2008, the average sales price for condominiums and cooperatives was $1,251 per square foot or $116 per square meters. Manhattan sales prices, on average, are still nearly 15% below the top of the market in 2008.
Great expectations. Opportunity abounds.
This article was written by Harry Chung and his wife and business partner, Mary H. Latimer-Chung, who work and reside in Manhattan. They are real estate agents with Prudential Douglas Elliman in Manhattan. Please click on the web links below to view their full biographies and real estate expertise.